Giant civil trial of gas line enters second week
A civil lawsuit over the TransColorado pipeline, with potentially the largest claim in Garfield District Court history, concluded its first week of trial Friday.
The case involves two partners in the pipeline’s construction, Questar Corp. and KN TransColorado, which is a subsidiary of Kinder Morgan.
Questar and KN joined forces in 1990 to construct the 297-mile pipeline to carry natural gas from the Piceance Basin north of Rifle and from the Uintah Basin in eastern Utah to the San Juan Basin in northern New Mexico.
Each company agreed to pay half the cost of construction.
KN TransColorado, which initiated the suit, alleges that while the TransColorado pipeline was being built, Questar built its own pipeline, Mainline 104, which carries gas from the Uintah Basin in direct competition with TransColorado.
Questar countered that KN reneged on its contractual obligation by refusing to honor what is called a “put” clause in their partnership agreement. The clause allowed Questar to demand that KN buy out Questar’s share in the partnership, valued at $121 million, if Questar wanted to pull out of the contract.
According to KN’s complaint, the two companies disagreed over the timing of construction. In 1996, Questar, believing the market for natural gas was not economically viable, notified KN it intended to invoke the “put” clause.
Although originally estimated to cost about $220 million to construct, the pipeline ended up costing $340 million, court documents said.
In essence, Questar wants the court to uphold its claim that KN is obligated to honor the `put” clause and buy out its share.
KN, on the other hand, wants that claim invalidated. KN is asking damages that could go as high as $500 million, said KN attorney Mike Beatty, of the Beatty Law Firm in Denver.
After opening statements on Monday before Judge Thomas Ossola, KN TransColorado began calling its slate of witnesses, which could number between 30 and 40 by the time its side of the case is presented, Beatty said. Four witnesses were called last week.
They were questioned about the background of the pipeline project and the negotiations that occurred over the formation of the partnership, he said.
“We’re happy with where we are,” Beatty said Friday, after concluding the first week of the trial. “There’s a lot to be done in a month-long trial.”
Beatty also praised the court’s efforts to help the case run smoothly, such as finding office space for the many lawyers involved in the case.
“The court personnel have been incredibly gracious, especially in light of the stress put on the system,” he said.
“We’re very pleased with the attention the judge is giving to the case,” said Sandy Karp, partner in the Glenwood Springs law firm of Leavenworth and Karp, which is the local counsel for Questar in the suit. “He’s spent a lot of time and effort on it.”
Karp pointed out that most cases involving business practices are settled out of court. But not this one.
“Questar doesn’t believe it did anything wrong,” he said.
At one point during the week, Karp said, KN tried to introduce testimony from witnesses on videotape rather than calling them in person.
“They were attempting to try the case by sound bite … The judge ruled against the video clips,” Karp said.
Karp said he expects KN to complete presentation of its case next week and that Questar will begin presenting its case the following week.
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