Legislature's consultants say state benefits from existing BP, Arco competition

Experts argue for blocking merger

Posted: Wednesday, January 19, 2000

The status quo is the best way to go, said merger experts hired by the Legislature.

They testified Tuesday afternoon before the Joint Special Committee on Mergers about the proposed $27 billion merger between BP Amoco and Atlantic Richfield Co. They said the merger would undermine Alaska's interests.

Alaska would be best served, the experts said, if the merger is blocked by the Federal Trade Commission and if the two companies continue to compete on the North Slope.

``The status quo is preferable,'' said David Scheffman, one of the three experts who testified.

The way competition in the oil industry works, especially in Alaska, is highly complicated, he said. With BP and Arco, he said, Alaska has strong competition. Companies that buy any assets let go by the merged company would likely be in a far weaker position to challenge BP than Arco is, he said.

``It's not two gas stations across the street from each other, but it is competition nevertheless,'' Scheffman said. BP and Arco could work together to improve efficiency and don't need to merge, he said.

For Alaska, a company as strong as Arco would need to emerge to keep competition viable on the North Slope, he said, and that would be very difficult.

Last week, BP and Arco started a legal clock that gives the Federal Trade Commission 20 days to decide whether to approve the merger or go to court to block it.

Gov. Tony Knowles, a Democrat, has been pushing for approval of the merger. He has said the charter he signed with the two companies gives Alaska, which relies to a very high degree on oil taxes to pay for government, adequate protection from any potential anti-competitive behavior by the merged companies.

Bob King, Knowles' press secretary, said the Legislature's experts are off base. The administration carefully picked over the merger as well, he said.

``We fundamentally disagree with their assessment,'' King said. The charter agreement, he said, gleaned ``major concessions'' from the oil companies.

Among the terms of the charter agreement are divestitures by the merged company of production, oil fields, oil field leases and partial ownership of the trans-Alaska oil pipeline.

Alaska would also see some $2 million from the merged company every year for the University of Alaska, and would see the cleanup of some environmentally damaged areas of the North Slope.

Today, the committee will listen to BP representatives and the Knowles administration on their take of what the merger will mean to the state. The committee is charged with reporting its findings to the full Legislature.

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