Investigation of Chaos in China’s Shangqiu Pipeline Gas Market: Illegal Business Legalization

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Shangqiu, referred to as “Shang”, is a prefecture-level city in Henan , China. In Shangqiu, a local spoke about Shangqiu Kunlun Gas Co., Ltd. (hereinafter referred to as Shangqiu Kunlun), which has not yet obtained a legal pipeline gas operation license, is accused of “illegal operation”.

Although Shangqiu Kunlun was repeatedly shut down by the government, no one could actually defeat Shangqiu Kunlun. In the adversity of “illegal operation”, Shangqiu Kunlun is still “growing bigger and bigger”, so that some officials try their best to put on a legal coat for it.

Government documents become a useless letter

On September 6, 2015, the Shangqiu Urban Management Bureau issued a “Notice of Stopping Pipeline Natural Gas Operations” to Shangqiu Kunlun, which clearly pointed out that Shangqiu Kunlun did not obtain a pipeline gas concession license and belongs to an illegal operation of urban pipeline gas enterprises. Kunlun immediately stopped the operation of pipeline natural gas.

Tianyan Check reveals that Shangqiu Kunlun was established on May 2, 2013 with a registered capital of 40 million yuan. The shareholders are two natural persons, Wen Xin and Wang Xiuqin. As a small and micro business, the actual controller is Huang Qifeng. Business scope of the company: gas wholesale and retail (limited to branch operations); pipeline engineering construction; sales of gas equipment, materials, gas appliances; wholesale and retail of pre-packaged food. There is no such content as “city gas transmission and distribution, supply and sales; gas engineering construction management” in the business scope. The shareholders of the company are not part of PetroChina, and both Wenxin and Wang Xiuqin are natural persons. The legal representative of Shangqiu Kunlun was originally Huang Qifeng, but later changed to Zhou Mingwei, the same person as the legal representative of Henan Hongtai Gas Company. Hongtai Company was established on June 20, 2012 with a registered capital of 20 million yuan. The shareholders are two natural persons, Wenxin and Huang Rong. The company has been cancelled.

In fact, Shangqiu Kunlun with the PetroChina Kunlun logo has no relationship with PetroChina Kunlun Gas Co., Ltd.

On September 16, 2015, the Shangqiu City Administration Bureau reported to the Shangqiu City Safety Committee in the form of a document (Mall Management [2015] No. 95) that the two gas companies in Shangqiu had major safety hazards and implemented rectification. In the work implementation section of the report, it was pointed out: In response to the case of Shangqiu New Austrian Gas Co., Ltd. reporting the illegal operation of pipeline gas by Shangqiu Kunlun Gas Co., Ltd. The case was transferred to the public security department. In response to the problem that Shangqiu Kunlun Gas Co., Ltd. did not obtain a pipeline gas operation license to illegally operate pipeline gas, it was required to shut down on September 10.

On October 12, 2015, the Safety Production Committee of the Shangqiu Municipal People’s Government reported to the Safety Committee of the Henan Provincial People’s Government in the form of a document (Commercial Security Committee [2015] No. 13) that the two gas companies in Shangqiu have implemented rectification of major safety hazards. Once again pointed out that Shangqiu Kunlun was operating illegally and demanded a full shutdown.

However, Shangqiu Kunlun Gas Co., Ltd., which was determined by the Shangqiu City Administration as illegal and has been suspected of constituting an illegal operation crime, has not been shut down in full in accordance with the requirements of the Shangqiu City Government, and continues to operate pipeline gas business. All the rectification and implementation measures of the Shangqiu City Administration Bureau and the Shangqiu Municipal People ’s Government Safety Committee have become a useless letter, and the credibility of the local government has been greatly affected.

Give a green light to “illegal business company”

Kunlun Company has not yet obtained the pipeline gas business license. According to Article 15 of the “Regulations on the Management of Town Gas”, the state implements a licensing system for gas operations. It is impossible to obtain gas supply from upstream gas supply companies when the company does not have a license to operate pipeline gas.

However, what is surprising is that the supervisory unit of the Shangqiu pipeline gas market, the Shangqiu City Administration Bureau, has issued documents to the upstream gas supply enterprises for many times in a row, so that Kunlun Gas has successfully obtained upstream gas supply.

In March 2015, the Shangqiu Urban Management Bureau gave a green light to the “illegal operation company” and sent a letter to the PetroChina West-East Gas Pipeline Company saying that the Shangqiu Kunlun Pipeline Natural Gas Operation License is being processed, and the same letter also appeared in May 2017  and February 2019.

Blurred “Shangqiu City Planning Area”

“Shangqiu City Planning Area” was originally a very clear concept. However, after Shangqiu Kunlun entered the Suiyang Industrial Cluster, this clear concept became increasingly blurred in Shangqiu, and eventually became the focus of the current dispute between Shangqiu New Olympics and Shangqiu Kunlun.

Since the Shangqiu Municipal Government contacted Xin’ao Gas in 2002, after several years of negotiation and coordination, in October 2004, under the witness of the Shangqiu Municipal Government, Shangqiu Xin’ao acquired the former Shangqiu Gas Company for 55 million yuan. On December 27, 2007, with the authorization of Shangqiu Municipal People’s Government, the original Shangqiu Municipal Public Utilities Administration (now known as Shangqiu City Administration Bureau) and Shangqiu Xinao signed the “Urban Pipeline Gas Franchise Agreement”. The agreement stipulates that the franchise is valid for 30 years, from August 28, 2004 to August 28, 2034, and states that the concession area shall be exercised within the urban planning area of Shangqiu  and the business scope shall be “pipeline gas”. And in a document issued by the Shangqiu City Administration in 2005, it was clearly stated that Xinao Gas Company had the exclusive right to develop and operate urban gas within the scope of the Shangqiu city planning area, and other city pipeline gas projects were stopped within the scope of the Shangqiu city planning area. Construction behavior. And the scope of the urban planning area determined in the “Shangqiu City 2005-2020 Urban Master Plan” is: the administrative division of Suiyang and Liangyuan and Jiazhai Town, Guwang Township, Chengguan Town, Xiaohou of Yucheng County Township, Gushu Town, Mangzhongqiao Township, Kongji Township, Zhaocun Township, and Qiaolou Township in Ningling County, with a total area of 2165 square kilometers.

As early as October 2010, the Shangqiu City Administration wrote in a letter to the Suiyang District People’s Government on the issue of the right to operate pipeline gas in the Suiyang Industrial Cluster and the investment and construction of a gas station in Henan Wuzhou Energy Development Co., Ltd. : “On December 27, 2007, the municipal government authorized our bureau and Shangqiu Xin’ao Gas Co., Ltd. to sign the”Urban Pipeline Gas Franchise Agreement” and the area of concession rights exercise was within the urban planning area of Shangqiu .”

The final conclusion of the reply is: “In summary, our bureau believes that the urban pipeline gas concession business scope owned by Shangqiu Xin’ao Gas Co., Ltd. already covers the Suiyang industrial cluster. As a competent authority of the industry, our bureau will follow relevant regulations, No approval will be given to the filling station built by Henan Wuzhou Energy Development Co., Ltd. and the laying of pipeline networks in the Suiyang Industrial Cluster. “

The result of the same problem is the opposite of Shangqiu Kunlun.

On December 26, 2013, the Shangqiu City Administration Bureau no longer adhered to the “Shangqiu City Planning Area Containing Suiyang Industrial Cluster” in the “Inquiry on Dealing with City Pipeline Gas Disputes” to the Shangqiu City Government. Instead, the city government is required to designate the Shangqiu City Planning Bureau to redefine the scope of “within the urban planning area of ​​Shangqiu”.

At the same time, while the position of the Shangqiu Urban Management Bureau has undergone subtle changes, it has also stepped up efforts to investigate and deal with Shangqiu Xinao.

Later, Shangqiu City Management Bureau began to settle their dispute, hoping that the two companies could merge into one company. After several negotiations, it finally failed because the gap between the two parties’ appeals was too large, .

On December 5, 2019, the Shangqiu City Administration Bureau issued the “Notice of the Opinions on the Coordination and Handling of Disputes between Two Gas Enterprises” in the dispute between Shangqiu Xin’ao and Shangqiu Kunlun (Mall Management [2019] No. 294, hereinafter referred to Circular 294). The core content of Circular 294 is to limit the franchise area of Shangqiu Xinao to 56 square kilometers in the center of the city. The area beyond 56 square kilometers is divided into two areas of north and south according to the ratio of 6: 4, taking the city road center line of Shangqiu as the boundary. 29791 hectares in the north, accounting for 60% of the urban planning area of Shangqiu, is operated by Shangqiu Xinao Company, and 13339 hectares in the south, accounting for about 40% of the planned area, is managed by Shangqiu Kunlun.

This proposed plan was a great victory for Shangqiu Kunlun. From forcibly entering the Shangqiu gas market, being blocked from work, being declared illegal by the government agency, and being prosecuted, Shangqiu Kunlun finally saw the “dawn”after seven or eight years of struggle. Once the proposed plan is implemented, it also means that Shangqiu Kunlun has completed the conversion from “illegal operation” to “legal operation”. Such a situation is unreasonable and should be corrected.

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