Energy Transfer Partners (ETP) and Enterprise Products Partners entered into an unwritten partnership in April 2011 to market the construction of a new pipeline linking the traditional US crude oil hub of Cushing, Oklahoma to the Gulf Coast of Texas—completing the last link in the economic chain tying Alberta crude oil to the largest of North America's refining complexes on the Texas Gulf Coast. In August 2011, ETP/ Enterprise attracted a major oil company, Chesapeake Energy Corp., to sign onto their venture. Almost simultaneously, however, and without consulting ETP, Enterprise announced the dissolution of that venture to pursue a similar project with Enbridge, Inc. ETP immediately filed suit in Texas court to recover damages due to Enterprise's breach of its fiduciary duty in abandoning its original pipeline venture.
ETP retained NERA Senior Vice President Dr. Jeff D. Makholm to assess pipeline markets in the region, the value of first-mover status in the changing crude oil markets in North America, and the value the lost opportunity for ETP if a jury found that fiduciary duties had been breached. Dr. Makholm is NERA's long-time expert on the economics of gas and oil pipelines. Among other writings, Makholm published his monograph, The Political Economy of Pipelines: A Century of Comparative Institutional Development, to describe how institutional factors in various parts of the world—with which Dr. Makholm has first-hand experience—affect pipeline development, economics, and pricing.
Dr. Makholm and his team performed an economic analysis of the first-mover link in that region, finding the entire project as eventually modified and expanded by Enterprise/Enbridge to be worth more than $2 billion. He also determined the value to ETP of the alleged breach, presenting both economic valuations to the Dallas jury. An important element in Dr. Makholm's evidence was the value of the “anchor tenant” represented by Chesapeake and the potential for that opportunity to bode well for a successful ETP/Enterprise pipeline venture.
In a decision that the Dallas Morning News (4 March 2014) called a “potential landmark verdict,” the jury, in a 10–2 decision, ordered Enterprise to pay ETP $319 million in damages for violating “the corporate version of a common law marriage.” The jury computed the size of the award on the “anchor tenant” value of the Chesapeake commitment to what they found to be a valid ETP/Enterprise joint venture.
This case redefined the characterization of a partnership between firms in Texas, while also setting a precedent for the size of a Texas jury award in a major case involving the modern movement of oil and gas in competitive North American energy markets.