El Paso, Coastal Consolidate Pipeline Staff

El Paso Energy and Coastal Corp. announced plans yesterday to relocate more 
than 1,200 employees and retain only satellite offices at the El Paso Natural 
Gas headquarters in El Paso, TX, and the ANR Pipeline headquarters in 
Detroit, MI, once their merger is approved by the FTC, which is expected 
sometime in the fourth quarter. No final decision on staff reductions has 
been made, an El Paso spokeswoman said. 

The companies intend consolidate the operations of their five pipeline 
systems into three organizations, collectively led by John W. Somerhalder II. 
Under the consolidation plan, the combined company's nationwide pipeline 
system will be consolidated into three regional operations. The western 
region will consist of El Paso Natural Gas Company and Colorado Interstate 
Gas Company and will be headquartered in Colorado Springs, CO. The eastern 
region will consist of ANR Pipeline and Tennessee Gas Pipeline and will be 
headquartered in Houston. Southern Natural will make up the southeastern 
region headquartered in Birmingham, AL. 

John Somerhalder will continue as the executive vice president of the El Paso 
Pipeline Group. Patricia A. Shelton, currently president of El Paso Natural 
Gas, will lead the consolidated western region pipelines. Jay Holm, currently 
responsible for El Paso's Australian pipeline assets, will return to the 
United States to become CEO of the eastern region. Reporting to Holm as 
presidents of Tennessee and ANR will be Stephen C. Beasley and James J. 
Cleary, respectively. The southeastern region will be led by James C. 
Yardley, who will continue as president of Southern. Shelton, Holm, and James 
Yardley will report to Somerhalder. 

"This consolidation will create the most effective organization for El Paso's 
pipeline system," said El Paso CEO William A. Wise. "Our upcoming merger with 
Coastal will create an interstate transmission system that spans the nation, 
border to border and coast to coast. This consolidation represents a highly 
disciplined approach to managing this system, allowing us to strike a proper 
balance between customer focus and operational efficiency. It also 
facilitates a company-to-company exchange of expertise across our system and 
speeds the merging of separate company cultures." 

While the companies will be organizationally merged, the five pipeline 
systems will remain separate with separate tariffs and separate names. Though 
many back office functions such as accounting and gas control will be 
consolidated and relocated to the new headquarters, field functions and 
related activities will remain in their current locations. In addition, some 
employees will remain in the El Paso and Detroit locations. The company will 
ask affected employees whether they want to be considered for relocation. 
Those employees who elect not to relocate will be given severance packages. 
Most moves will occur during the first half of next year, and the majority of 
the plan is expected to be implemented by mid-2001. 

The companies announced their $16 billion polling-of-interests transaction in 
January (see Daily GPI, Jan. 19). The merger is expected to be accretive to 
El Paso's earnings per share (EPS) immediately and add more than 5% to EPS in 
both 2001 and 2002, Wise said at the time of the merger announcement. 
Overall, the two companies expect $200 million in cost savings. By 
comparison, the El Paso-Sonat merger created more than $100 million in 
savings and more than 600 people lost their jobs. 

The combined interstate transmission system of the new company will consist 
of over 58,000 miles of pipeline, by far the most of any pipeline company in 
North America. The system will transport more than 20 Bcf/d of gas through 
existing pipeline infrastructure, but will have sole or part ownership in 
three other new or proposed major pipelines, including Alliance, Gulfstream 
and Independence. The company also will be the second largest gatherer of 
natural gas in the United States and the third largest U.S. producer of gas. 


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