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economically suitable to ship LNG between Alaska and the other
four domestic locations. Throughout the period under
consideration, it was not economically suitable to domestically
ship LNG where it is accessible in gas form through a pipeline.
Trunkline LNG Co. (Trunkline), a wholly owned subsidiary of
Pelmar’s parent, was organized to purchase LNG from Algeria and
to arrange for its transportation to Lake Charles, Louisiana, for
U.S. distribution. On September 17, 1975, Pelmar’s parent
entered a contract (LNG contract) with an Algerian national gas
producer to purchase 7,700,000 cubic meters of LNG annually for
20 years. The purchaser was required to provide trans-Atlantic
transportation for 3,200,000 cubic meters of LNG each year. On
January 2, 1976, the contract rights and obligations were
assigned to Trunkline.
Trunkline contracted with Lachmar (transportation contract),
on May 7, 1976, to transport LNG from Algeria to Louisiana over a
20-year period beginning in the first quarter of 1980. On May 7,
1976, Lachmar entered into two contracts with GENDYN for the
construction and purchase of two LNG tankers to transport the
LNG. Because of the combined 60-percent control by Morgas and
Pelmar, GENDYN did not control Lachmar, so the transactions
between GENDYN and Lachmar were on an arm’s-length basis. GENDYN
manufactured the LNG tankers in the ordinary course of its
business for sale to Lachmar. The LNG tankers were to be
delivered on December 4, 1979, and March 18, 1980. On May 7,
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