Knowles sides with BP

State to join oil companies in court battle as FTC tries to prevent mega-merger

Posted: Thursday, February 03, 2000

Alaska will help BP-Amoco fight the Federal Trade Commission's decision to block the oil giant's merger with Atlantic Richfield Co.

Gov. Tony Knowles announced today the state will intervene on BP's side in a court case the FTC intends to file to stop the $29 billion merger. He said he believes the FTC's contentions about the merger's negative effect on competition are wrong.

``We are prepared to strongly counter the FTC's position,'' Knowles said.

The FTC voted 3-2 Wednesday to direct its staff to seek a federal court injunction that would block the merger, concluding the new company would have too much clout in Alaska oil production and West Coast gasoline markets.

An Arco buyout would lessen competition in the production and sale of North Slope crude to West Coast refiners, the FTC said. Together BP Amoco and Arco account for about 70 percent of the state's oil output.

Richard Parker, director of the FTC'S Bureau of Competition, also charged BP with using Alaska oil exports to restrict supply to the West Coast and thereby keep crude prices unreasonably high.

``This deal will cement that market power and harm competition by creating a significant risk that crude oil prices would be higher on the West Coast than they would be without the deal,'' Parker said.

In a joint statement, BP Amoco and Arco disputed the FTC view.

``Any suggestion that there is a special West Coast market for Alaskan crude oil that functions independently of world crude prices is without foundation,'' the companies said.

Knowles, a Democrat, said the state has ``closely reviewed the FTC's reasoning. We believe it is flawed.''

An agreement between BP and the state - that included divestiture of North Slope assets to other oil companies among other provisions - ``clearly ensures a robust competition on the upstream side,'' he said.

The Knowles administration also countered the FTC's position that BP is manipulating West Coast oil prices.

A recent General Accounting Office report found that allowing export of Alaska North Slope crude had no impact on West Coast oil prices, Attorney General Bruce Botelho said.

Botelho would not say exactly how much Alaska is prepared to spend on the case. The state will use money appropriated for oil and gas litigation and will have sufficient resources, he said.

Investments in Alaska's oil industry have been put on hold by the delay in deciding the merger, hurting the state's economy, Knowles said.

Intervening in the case will give Alaska a voice in the court case or in negotiations to settle the issue, he said. ``We will work hard to defend Alaskans and get Alaskans back to work.''

The fact that Washington and Oregon have decided to intervene on the FTC's side is not an indication that Alaska's stance on the merger is wrong, he said.

``They don't have a clue about competition in Alaska,'' he said. ``They don't have a clue as to what competition is on the North Slope.''

State Rep. Beth Kerttula, a Juneau Democrat, disagreed with Knowles and praised the FTC's decision.

``I think it's a good step forward. It's an interesting decision and they definitely focused on Alaska issues as well as those downstream, which is a really good sign.''

Kerttula serves on a legislative committee reviewing the BP-Arco merger that criticized its impacts on Alaska, but did not issue formal comments to the FTC.

``I frankly still think the (merger) committee as a whole should meet and put out its findings,'' she said. ``Alaska and the public as a whole deserve to get the benefit'' of that work.

Others opposed to the merger also praised the FTC's decision.

``It's a great day for Alaska and Alaska's future,'' said Jim Sykes, executive director of the the Alaska Public Interest Research Group. ``It's not the final step, but it's a major, major victory.''

Former Gov. Walter Hickel, also a foe of the deal, said, ``We got the North Slope going because of competition, and to get where we want to go, we need both strong players.''

Industry groups sided with Knowles and BP.

Karen Cowart, executive director of the Alaska Support Industry Alliance, said the FTC's action means ``a longer time of inactivity on the North Slope. . . . If there's uncertainty in the oilpatch, longterm decisions won't be made.''

The Associated Press contributed to this report.

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