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transportation of crude oil from Freeport, Texas, to
Cushing, Oklahoma. Pipelines owned by entities other than
Seaway connected the Cushing, Oklahoma, terminal with the
refinery facilities of Seaway's shareholders. The
pipeline was operated as a common carrier under Federal
law. The stockholders intended to use the pipeline to
carry imported crude oil part of the distance from
Freeport to their refineries. At the time of construc-
tion, the shareholders expected that they would be the
principal users of the pipeline, and that nonshareholders
would account for approximately 21 percent of the
pipeline's usage.
The total projected cost of the Seaway pipeline was
$204.4 million. Approximately 10 percent of the cost was
to be financed by equity capital contributed by the
shareholders. The remainder was to be financed through
the sale of commercial paper and long-term debt through
private placements. By December 31, 1977, Seaway had
issued long-term debt in the aggregate principal amount of
$167.6 million.
Pursuant to an agreement among the Seaway shareholders
dated July 22, 1974, petitioner contributed $2,299,595 to
Seaway as consideration for the issuance of Seaway stock.
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