El Paso Corporation was a provider of natural gas and related energy products and was one of North America's largest natural gas producers until its acquisition by Kinder Morgan in 2012. It was headquartered in Houston, Texas, United States."Corporate ." El Paso Corp. Retrieved on May 5, 2009.
Prior to the takeover by Kinder Morgan, the company owned North America's largest natural gas pipeline system which traveled from border-to-border and coast-to-coast. The pipeline system included Colorado Interstate Gas; El Paso Natural Gas; Southern Natural Gas; Tennessee Gas Pipeline; Cheyenne Plains Pipeline; Mojave Pipeline; Elba Express Pipeline; Young Gas Storage; Wyoming Interstate Company; and Ruby Pipeline. The El Paso Corporation also owned fifty percent of Great Lakes Transmission and Florida Gas Transmission and employed 6,000 people. Florida Gas is part of Southern Natural Gas. In 1999 the company doubled in size when it merged with Birmingham, Alabama based natural gas giant Sonat. It went on to acquire Coastal Corporation in 2001.
The company's major offices were located in Houston, Texas; Birmingham, Alabama; and Colorado Springs, Colorado. The company's CEO at the time of sale to Kinder Morgan was Douglas L. Foshee.
History Source: The Pipeliners: The Story of El Paso Natural Gas, by Frank J Mangan, January 1, 1978,
The company was founded in 1928 by Houston partners attorney Paul Kayser and H. Gordon Frost Sr. [(cattleman/rancher)], who identified the city of El Paso, Texas as a good market for natural gas transported by pipeline from Jal, New Mexico.They started with one employee, H. Gordon's wife Nell Streeter Frost ([secretary)] (not including the two principals), a tiny office, and a telephone. It was the world's first natural gas pipeline company.
El Paso owned, operated and developed the first in the world and one of the largest natural gas transmission systems in North America. Its more than 17,000 miles of pipeline connected major gas supply regions throughout the American West and Mexico in the early 1990s and supplied about seven percent of U.S. natural gas demand. In 1992, El Paso was spun off from Burlington Resources, which had operated the company as a subsidiary since 1983.
Paul Kayser, a young Houston attorney, and H. Gordon Frost Sr., 2nd generation Texas brahman cattle rancher, founded El Paso Natural Gas in 1928. In 1929, they obtained a franchise from the El Paso City Council to sell natural gas to the city. He proposed construction of a 200-mile pipeline that linked El Paso with natural gas wells located near the city of Jal, New Mexico. After obtaining financing for the ambitious project, they immediately began hiring work crews and securing equipment and supplies.
Pipeline construction methods at the time were crude in comparison to techniques developed during the mid-1900s. The lines were built by hand and the men who worked on the lines had to be extremely tough. Difficulties related to building Frost and Kayser's pipeline were amplified by the fact that his pipes would cross some of the most difficult terrain in the southwestern United States. The pipeline had to cross 200 miles of rivers, mountains, and deserts and it had to be built to withstand all types of natural disasters. Although the work was tedious and time-consuming, Frost's and Kayser's crews pioneered new methods of welding, ditching, and crossing unique terrain. The line was finished and put into service in 1930.
Unfortunately for them and their fledgling start-up, the Great Depression began shortly after the building of the pipeline. El Paso generated profits of $283,000 during the pipeline's first year of operation but the Depression-era economy threatened to quash the venture. Fortunately, the city of El Paso continued to buy Frost's and Kayser's gas. The company was able to pay its debts and to expand its pipeline system during the early 1930s. The company built new lines extending to the copper mining areas of southern Arizona and northern Mexico and in 1934 extended service to Tucson and Phoenix, Arizona.
During the late 1930s, El Paso enjoyed steady growth. It built new pipeline systems extending throughout the oil- and gas-rich Permian Basin in south Texas and extended lines north and west to accommodate growing regional demand. By the late 1930s, the company was generating revenue of about $5 million annually and was beginning to post strong profit gains. Expansion slowed during World War II as the nation's labor and resources were steered toward the war effort. Following the war, El Paso benefitted from strong demand for natural gas in the growing southwestern United States. As the postwar economy and population boomed, cities throughout the region demanded energy sources to fuel growth and development.
El Paso experienced explosive growth in the late 1940s. Gains during that period were due in part to the completion of a 700-mile pipeline reaching from El Paso's Permian Basin operations to California. El Paso began supplying gas through a 26-inch pipeline and also began construction of new, larger pipelines aimed at the burgeoning California market. As a result of those efforts, El Paso's assets rose from about $23.5 million in 1945 to $285 million in 1950. Meanwhile, sales increased from $9 million to $41 million and net income climbed to a record $9 million in 1950.
During the early 1950s, El Paso continued to post steady gains as demand for its natural gas increased. It built or purchased pipes reaching as far north as Ignacio, a small town in southern Colorado, and continued its westward expansion, bolstering its feeder pipes going to California and increasing sales throughout Arizona and New Mexico. By 1955, El Paso captured nearly $30 million in profits annually from about $180 million in sales. By the early 1960s, those figures had risen to more than $40 million and $400 million, respectively.
El Paso's big gains during the late 1950s were partially attributed to its 1957 acquisition of part of the operations of Pacific Northwest Pipeline Corporation. The acquisition gave El Paso a presence in several western and northwestern states, with pipelines reaching as far as Washington and connecting to other companies' networks in Canada. In addition to geographic expansion, El Paso began to diversify during the 1950s into related oil and chemical businesses. It created El Paso Products Company as a subsidiary to manufacture chemicals from natural gas derivatives. Despite forays into other industries, El Paso remained focused on buying, transporting, and selling natural gas.
After 35 years, El Paso's founder left his chief executive duties during the early 1960s. The company's president, Howard Boyd, replaced Kayser. Kayser had transformed his company from a tiny start-up supplier with 200 miles of pipeline to a $500 million corporation with 20,000 miles of pipe delivering gas throughout the western United States. Throughout his reign, he remained committed to the pragmatic development of natural resources and sound business practices. "There is nothing more vital to our economy than the orderly, wise, and free use of our precious natural resources developed under practical, intelligent conservation policies," Kayser stated in 1954.
El Paso continued to grow at a rapid pace during the late 1960s and early 1970s. Although natural gas industry profits were generally cyclical, El Paso's overall sales and earnings grew during the period. By the early 1970s, El Paso operated one of the nation's largest pipeline systems. It stretched from northern Mexico to the northeast tip of Washington, with extensions throughout the Southwest and reaching into Wyoming, Idaho, and Oregon.
Although federal regulators kept El Paso from operating its own pipes in specified regions, its lines connected with those of other operators to give El Paso access to markets in California, Kansas, Oklahoma, and Nevada. Partly in an effort to minimize its exposure to cyclical gas markets, El Paso diversified during the late 1960s and 1970s. By 1974, non-gas operations contributed about one-third of El Paso's annual $1.3 billion in revenues. The company's largest non-gas division was its petrochemical business, which manufactured a variety of chemicals used in the growing synthetics industry. El Paso also became heavily involved in the fiber and textile industries, particularly nylon, rayon, and other synthetics. Other of El Paso's subsidiaries were involved with mining, gas and oil exploration, insurance, copper wire, and real estate development.
One of El Paso's most intriguing and promising ventures during the 1970s was a venture into liquefied natural gas. In 1969, El Paso reached what it termed a "historic agreement" with Sonatrach, an Algerian national oil and gas company. Under the arrangement, the Algerian company would deliver a billion cubic feet of natural gas in liquid form daily to El Paso Natural Gas. El Paso would then distribute the low-cost gas through its pipeline network. The ambitious project required the construction of a nine-ship fleet of special tankers to be owned and operated by El Paso, as well as the construction of storage terminals on the East Coast and in Algeria. El Paso moved 230 employees to Algeria for the project. Liquified gas deliveries commenced in 1978 and made a significant contribution to El Paso's bottom line.
Although El Paso's liquified gas venture represented an important success during the 1970s, its non-gas-related operations were generally less fruitful. El Paso jettisoned some of those operations and posted losses from major activities like chemical and fiber manufacturing. To make matters worse, El Paso was harmed by a Supreme Court decision in 1974. For several years, federal regulators had been trying to renege on their decision in the late 1950s to allow El Paso to acquire its northern operations. El Paso fought their efforts, but was defeated. In 1974, El Paso was forced to divest the holdings, effectively terminating its natural gas operations north of New Mexico and Arizona.
Despite some setbacks, El Paso managed to sustain long-term growth during the 1970s. Sales dipped following the 1974 divestiture but surged back up to $1.15 billion in 1975, rising to more than $2 billion in 1978. Earnings, however, fluctuated around $50 million to $60 million annually. El Paso's huge revenue gains during the late 1970s reflected turbulence in energy markets.
El Paso benefitted from the Natural Gas Policy Act which was passed in 1978. That act basically allowed El Paso to begin competing with other Texas companies for the purchase of natural gas reserves. El Paso greatly increased its reserves after the act was passed, building up a sizable reserve base near its Permian Basin pipeline operations as well as in other regions of the country. It simultaneously boosted its output capacity to meet the expected surge in demand during the 1980s.
As a result of strong natural gas markets and El Paso's increased output capacity, sales topped $2 billion in 1978, rose past $3 billion in 1980, and then increased to nearly $4 billion in 1981. In 1981, El Paso reported record earnings of $147 million. Unfortunately, El Paso's profit gains were short-lived. During the late 1970s and early 1980s, industry competitors had hustled to boost natural gas output capacity with expectations of strong demand. But a weak economy and a newfound emphasis on energy conservation slowed market growth. Supply outstripped demand in 1982 and natural gas prices dropped. Furthermore, El Paso's chemical businesses suffered major setbacks in 1982. Although El Paso's sales rose to $4.3 billion in 1982, its net income dropped to $53 million.