Billionaire Warren Buffett tried to buy it but later bowed out. Billionaire Carl Icahn thinks buying it is a dumb idea — and has launched a tender offer and proxy fight to stop it. The long and winding road leading Southwest Gas Holdings to its planned $1.975 billion acquisition of Questar Pipeline from Dominion Energy started more than a year ago and touches on a number of hot-button topics in today’s energy industry: the divestiture of natural gas assets, the ongoing energy transition, concerns about antitrust regulations, activist investors, and infrastructure. In today’s RBN blog, we look at the sale itself, the current state of natural gas production and pipelines in the Rocky Mountains, and how that gas fits into the nationwide picture.
The made-for-HBO story behind the Questar Pipeline sale begins with Dominion Energy’s decision to sell a broader set of its natural gas transmission and storage assets to Buffett’s Berkshire Hathaway Energy in July 2020. The $9.7 billion deal, which included the assumption of $5.7 billion in debt, was part of Dominion’s plan to focus more on renewable generation and move toward its goal of net-zero greenhouse gas emissions across all its operations by 2050. Dominion said at the time that it expected up to 90% of its future earnings would come from its state-regulated electric and gas utilities in North Carolina, Ohio, South Carolina, Virginia, and Utah. The deal also included a 25% ownership interest in the company’s Cove Point LNG terminal in Maryland, as well as assets in Appalachia.
The sale of Dominion Energy Transmission, Carolina Gas Transmission, a 50% stake in Iroquois Gas Transmission System, and Dominion’s legacy gathering and processing operations to Berkshire Hathaway passed regulatory muster, as did the sale of Dominion’s Cove Point stake. But the part of the deal that included Questar Pipeline posed a potential antitrust issue. Berkshire owns Kern River Pipeline (pink line in Figure 1, below), which transports gas from the Rockies to Southern California — and is a direct competitor of Questar (green lines). Regulators said at the time that Dominion and Berkshire should have known the deal was likely to raise concerns because they had previously opposed a similar combination between the two pipelines in 1995, well before Questar was acquired by Dominion and Kern River was bought by Buffett’s energy company. Dominion and Berkshire decided to terminate the Questar sale in July 2021 over lingering concerns that the deal would be held up by the Federal Trade Commission (FTC). Those concerns didn’t scuttle the whole arrangement — both companies said the other parts of the transaction were not affected — but it did put Questar back on the block.
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