Oily Deals: Pattern Emerging in Questionable Arkoma Gas Transactions

by Wythe Walker Jr. and David F. Kern  on Monday, Mar. 31, 2014 12:00 am  

A version of this article originally appeared in Arkansas Business on April 9, 1990. It is being republished as part of Arkansas Business' 30th anniversary issue. You can access the digital edition for free here.

Jerry Jones has always pleaded innocent in the controversial 1982 Arkla-Arkoma gas deal, a deal worth at least $174.8 million when the final numbers were tallied last fall.

This January, a ratepayers’ class-action suit declared the deal an insider’s rip-off for Arkansas gas consumers who got stuck with an $80 million overcharge bill that went straight into Jones’ bulging bank account.

Depending on whom you believe, the Jones’ Arkoma deal is either the “best deal” Arkla Gas ever made (ex-Arkla Chairman Sheffield Nelson) or a brazen ploy for Nelson to “stuff his pockets so full of money his pants fell down” (U.S. Rep. Tommy Robinson).

Arkansas has never seen anything quite like this gas deal with its bitter feuding that pits the state’s most powerful political family, the Stephenses, and their new protégé, Robinson, against their one-time protégé but now bitter enemy Nelson and Robinson’s old friend Jones.

Most readers faced with deciphering the bewildering arcane gas-field lingo of “farm-out,” “farm-in,” “MCF” and “take-or-pay contracts” spewed out in newspaper articles over the past six months have given up trying to understand who’s lying and who isn’t in this Texas-sized battle of oil tycoons.

But beneath the reams of newsprint a disturbing and surprisingly simple pattern emerges:

Jerry Jones has gotten in tight with major utilities’ gas purchasing officers — the men who buy the gas from suppliers like Jones’ Arkoma Production Co. — and those relationships are under investigation in Arkansas and California and are now being questioned in Canada. To Jones’ accusers, his relationships with gas purchasing agents give him an inside track on sweet deals and big bucks, going well beyond friendship into potential kickbacks and payoffs.

• In Arkansas, Jones had numerous business ties to Arkla’s Nelson and to B.E. “Billy” Harrell, chief gas purchasing officer for the utility when the Arkla-Arkoma deal was signed. Between the two of them, Nelson and Harrell carried enormous influence over what gas Arkla would buy and at what price.

• In California, Jones’ name was linked last fall to Eugene E. Satrap, a gas purchasing agent for Pacific Gas & Electric of San Francisco, who had visited Jones in Little Rock many times. Satrap also shares a Texas oil and gas partnership with Jones’ right-hand man, Mike McCoy, in violation of PG&E rules. An investigation is underway.

• Now add Canada to the list with recent allegations by George R. Walsh, who says he was fired last September from his $139,000 job as a gas purchasing agent for Alberta & Southern Gas Co. because he refused to go along with his boss’ plan to play favorites with Jones.

In February, Jones defended his business relationships with gas purchasing officers to The Dallas Morning News in this way: “Do I have a problem with having personal relationships with the people I do business with? No.”

 

 

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