Thank you.  Pretty interesting.

 -----Original Message-----
From: 	Cantrell, Rebecca W.  
Sent:	Monday, September 24, 2001 10:42 AM
To:	Allen, Phillip K.; Black, Don; Calcagno, Suzanne; Courtney, Mark; Dasovich, Jeff; Ermis, Frank; Fulton, Donna; Gay, Randall L.; Grigsby, Mike; Hewitt, Jess P.; Holst, Keith; Kaufman, Paul; Kuykendall, Tori; Mara, Susan; McMichael Jr., Ed; Miller, Stephanie; Nicolay, Christi L.; Smith, Matt; Sullivan, Patti; Superty, Robert; Tholt, Jane M.; Tycholiz, Barry
Subject:	

FYI, in case you haven't see this yet:

PLAYING AN 'UNUSUAL' ROLE, LANGDON PICKS THROUGH EL PASO RECORD
Handed the unusual task of independently assessing the strength of El Paso Corp.'s defense in the
California capacity complaint case, Washington attorney Jim Langdon for weeks has been searching for
relevant issues that may have been ignored or overlooked by the litigants. And he thinks he may have
stumbled onto a critical matter involving substantial volumes of storage gas that sat unused during the
critical months of the California energy crisis.
What Langdon suspects is that the complainant in the case (RP00-241), the California Public Utilities
Commission, may have only itself to blame for some of the pressure that built up in the gas market during
the months of the controversial large-volume capacity contract between El Paso Natural Gas Co. and
affiliate El Paso Merchant Energy Co.
Langdon, a partner in the Washington office of Akin, Gump, Strauss, Hauer & Feld LLP, in late July was
hired by El Paso President and Chief Executive William Wise to conduct a separate legal analysis of the
record in the case (IF, 27 Aug, 1). The idea was "not to second-guess the lawyers litigating the case," but
rather to "think dispassionately about the events of last year" and give Wise "an independent view" of the
behavior of the El Paso companies before and during the 15-month contract for 1.22 Bcf/day of capacity to
California, Langdon explained last week.
Wise's decision to hire Langdon was eye-catching on a few levels. In his many years in law practice,
Langdon had never been retained to conduct the type of assessment Wise has asked for, Langdon told
Inside FERC, acknowledging "this really was a little bit of an unusual request."
Also drawing attention in this highly politicized case are Langdon's substantial administration connec-tions.
He was a major fundraiser for the Bush presidential campaign and his brother is Jerry Langdon, who as
a FERC commissioner in the early 1990s hired Chairman Pat Wood III as an adviser.
Is it fair to suggest that Langdon was brought on board by El Paso simply for name recognition
and the possibility that he may have some positive, collateral impact on the commission's ultimate
decision in this case?
That possibility "didn't escape me" at the time, Langdon admitted. "I'll not pretend to be unaware
that there are these other connections with Wood and the president," he allowed, adding that "that's
something that impacts everything I do. But what can I do? I have to practice law." And, "for the
record, I barely know Pat Wood."
And how can this be considered an independent, third-party assessment if El Paso is paying for
Langdon's services? "I recognize that there are critics and cynics" who would suggest that Langdon is
simply a hired gun, "but at the end of the day, . . . I'll have to stand behind" the report. He vowed to
"call it the way I see it."
His final report to Wise won't be ready for several weeks, but Langdon shared some of his initial
thoughts and findings.
Langdon has been looking hard at the circumstances surrounding the operation of three Southern
California Gas Co. storage facilities - the Montebello and Aliso Canyon fields in Los Angeles County
and the La Goleta field in Santa Barbara County. During the period that roughly coincides with the El
Paso/El Paso Merchant contract, SoCal Gas had been pressing the CPUC to approve the release of large
volumes of storage gas from those fields, said Langdon. The state commission finally granted the requests
in June 2001, the month after termination of the contract, he related.
Release of working and cushion gas from the Montebello field and cushion gas from the Aliso
Canyon and La Goleta fields - an aggregate total of 41 Bcf - would have contributed more than 100,000
Dt/day of deliverability to the California gas market "without adding any intrastate pipeline capacity,"
said Langdon. Characterizing California as a cul-de-sac on the interstate pipeline network, he stressed that
"storage is huge" in moderating the market. When pipeline capacity is constrained, "storage is a way to
take care of . . . these problems."
And yet, the SoCal Gas applications "clearly languished" at the CPUC. "There may be very good reasons"
why the state commission took so long to allow release of the gas, but so far "I don't understand how the CPUC
sits on a storage application like that during this time period when it's as significant as it is."
For its part, the CPUC has argued during the case that El Paso Merchant caused gas prices at the state
border to skyrocket by withholding some of its firm capacity on El Paso and that the pipeline dragged its
feet in developing the Line 2000 conversion project (IF, 14 May, 5). "I'm trying not to sound like an
advocate in this thing," said Langdon, but "I don't understand the CPUC's position in the case, . . . when
right in their own back yard they've got these storage issues."
As for the allegations that El Paso and El Paso Merchant rigged the open season that led to award of the
contract and subsequently "withheld massive amounts of capacity" from the market, "we've reached the
conclusion that we don't see that kind of evidence in what's been presented" so far in the proceeding, said
Langdon. His team of lawyers is looking closely at "the maze of engineering issues" that could hold the
answer to the capacity withholding issue.
Langdon all but dismissed the affiliate-abuse charges as the product of badly outdated regulations
colliding with unreasonable expectations about how integrated companies should operate in the evolving
energy market. Order 497, the marketing-affiliate rule, was first promulgated in 1986, he noted.
In most industries, such conflict-of-interest rules are constantly revised to keep pace. But here, the
gas industry has "been turned on its head more than any industry I can think of, and yet these rules are the
very same ones" that have been in effect largely unchanged for nearly 15 years. "They absolutely need to
be updated, end of sentence, end of paragraph," said Langdon.
Despite statements during the hearing by Chief Administrative Law Judge Curtis Wagner Jr. about
the strength of the El Paso case, Langdon said he was "not at all concerned about the company not
getting a fair shake" at the commission. Much of what Wagner had to say "has been sensationalized to
a degree" in the press, he said, adding that "what happens in the press and what happens at FERC are
two different things."
Langdon admitted that he would be "a little concerned" about Wagner's remarks "if I were litigating
the case." The judge has used some "pretty strong language" to suggest that the El Paso companies were
out of line. But FERC "historically has been a very record-oriented tribunal," and "in this case, the record
looks very sound," he said. - Chris Newkumet