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Merger Summary

Last Updated:              May 4, 2000

On April 1, 1999, BP Amoco and ARCO confirmed reports that the two oil giants were negotiating a merger agreement. The announcement created vast controversy about the impact the new organization would have in Alaska and nationally.

From the outset, the Administration and the oil companies engaged in secretive negotiations on an accelerated time schedule with minimal opportunity for public input. The Legislature created a Joint Special Committee on Mergers to monitor merger developments by analyzing information from the Administration, the two oil companies, industry and legal experts, and the public.

In early November 1999, Governor Knowles announced that he had reached an agreement with BP for a "Charter for Development of the Alaska North Slope." After considerable criticism by the public, individual legislators and legal experts retained by the Merger Committee, the governor announced in early December an "Amended Charter Agreement."

In January 2000, the Merger Committee scheduled a week of hearings to discuss the details of the Amended Charter Agreement. Testimony was taken from the oil companies, the Administration, and an extensive body of legal and industry experts.

On February 8, 2000, the Merger Committee rejected the Amended Charter Agreement because it did not require BP Amoco to divest a sufficient portion of ARCO's assets to provide for competition by a vertically integrated company that would be the functional equivalent of ARCO in its ability to participate in the same level of competition in all phases of operations.

Echoing the Merger Committee's concerns, as well as the nationwide implications, the FTC sued BP Amoco in federal court to enjoin the merger. This March, in eleventh hour negotiations to avoid costly, long-term litigation, the FTC announced that it would seek to put the court action on hold. Shortly thereafter, BP Amoco announced that it would sell all ARCO Alaska's assets to Phillips Petroleum.

With all its antitrust concerns resolved, the FTC gave its blessing to the merger. The divestment requirement of all ARCO Alaska's assets to Phillips also addressed the concerns of the vast majority of Alaskans and the Merger Committee by paving the way for a vertically integrated competitor to replace ARCO on the North Slope.

It is notable that under the sales agreement to ARCO Alaska, it is not anticipated that any ARCO Alaskan jobs will be lost. Under the Governor's Charter and Revised Charter Agreements, however, BP announced the probable loss of several hundred ARCO Alaskan jobs.

On April 26, 2000, Phillips Petroleum announced that it had formally completed the acquisition of ARCO Alaska's assets.

The BP Amoco/ARCO Merger
A Chronology of Significant
Dates, Events, and Quotes

April 01, 1999: Merger confirmed by BP & ARCO. Deal valued at $26.8 bill. 400 layoffs expected in AK (2000 worldwide); Gov. announces formation of task force consisting of Attorney General Bruce Botelho, Department of Revenue Commissioner Wilson Condon, and DNR Commissioner John Shively.

Knowles quote: "While mergers and consolidations are increasingly common as oil companies seek to be more competitive, the proposed merger of BP and Arco could have significant impacts on Alaska jobs and families. The merger also presents an opportunity to build on the accomplishments we have made with industry over the past four years .... We need to ensure that Alaska's interests are protected in any such major consolidation."

April 12, 1999: Open letter from BP Exploration Alaska and ARCO Alaska executives promising:

  • BP will invest $5 bill in North Slope development over next 5 yrs;
  • BP will increase financial support to community organizations by 50% over BP's & Arco's current level;
  • BP will make Alaska the centerpiece of its global gas activities to commercialize North Slope gas;
  • BP will honor all current agreements w/ ARCO's contractors & suppliers;
  • Organized labor will play important part in slope construction activities;
  • BP will work cooperatively & collaboratively w/ all levels of government;
  • BP will continue its efforts to provide jobs & business opportunities for Alaskans whenever possible;
  • BP will be composed of equal numbers of BP & Arco employees.

April 13, 1999: In an AP story written by Paul Queary, the Administration announces its task force has six major areas of concern: (1) price of oil: Knowles concerned prices will be kept down b/c BP would own Arco refineries; (2) marine transport (only 2 companies would have control of most tankers); (3) 70% ownership of TAPS; (4) concern over development of other fields; (5) commitment to natural gas development; and (6) 500,000 acre oil lease cap (state law).

April 16, 1999: Legislature forms Joint Special Committee on Mergers to analyze merger. The Committee is chaired by Senator Rick Halford (R-Chugiak).

Porter quote: "The fact that one company would control so large a portion of Alaska's oil and gas resources puts our state in a completely different position."
Pearce quote: "It's too early to know the acquisition's real long-term impact on Alaskans, but not too early to examine the ramifications this acquisition will have on Alaska properties, Alaska jobs, and resource development."

June 11, 1999: Merger committee hosts meeting for status report to the Legislature and the public from Bruce Botelho, BP and ARCO and takes public testimony.

June 24, 1999: Senator Pearce travels to Washington D.C., meets with the FTC. She also testifies in front of the Senate Energy and Natural Resources Committee.

June 25, 1999: In a letter drafted by counsel retained to study merger, Merger Committee issues first written request to the Administration to prepare and provide a detailed analysis of the revenue impacts that the Administration anticipates will occur as a result of the merger.

July 29, 1999: Merger Committee hosts FTC Director of Competition William Baer to educate the public on the process in the FTC. Economist Gus Fliakos discusses economic impacts and Bill Britt, DNR, discusses pipeline issues. Public testimony is taken.

September 24 & 25, 1999: Merger committee meetings to educate the Legislature about the process to date; public hearings to get status report from Bruce Botelho and discuss economic issues. Merger consultants available telephonically.

October 18, 1999: Senator Halford and Representative Kertula go to Washington D.C. to meet with the FTC.

November 1, 1999: Saying it has substantially complied with antitrust reporting requirements, BP triggers 20-day deadline rule for completing the merger. Governor Knowles issues a press release threatening to oppose the merger. BP waives the 20-day rule.

Nov. 5, 1999: Governor announces he has reached acquisition agreement w/ BP "Charter for Development of the Alaska North Slope."

Knowles quote: "This agreement makes Alaska a stronger and more competitive player in the world oil market. It achieves the important goals Alaskans agree on when it comes to development of Alaska's resources: increased competition, environmental protection and corporate commitment."

Knowles announces 2-week public comment period to conclude Nov. 22. State negotiators will conduct series of public hearings in AK the week of Nov. 15. In an effort to create more opportunity for public input and to provide a forum to get information to the public, the Legislature scheduled a weeklong series of public hearings at its Anchorage LIO, which included telephonic participation from LIOs statewide. Merger Committee makes oral request to Administration for a detailed analysis of the financial impacts of the proposed merger.

Plan Highlights include:

  • Divestiture of $175,000 barrels of North Slope oil production & ownership (including parts of Alpine & Kuparik);
  • BP divests 400,000 state exploration acres to new companies, divest more than 200,000 acres in NPR-A;
  • Make available 1.2 billion cubic feet/day of its working interest in North Slope gas reserves;
  • Environment: spend up to $10 mill in next 6 yrs & to seek other contributions to cleaning up NS orphan sites. Invest $200,000 a year for 10 yrs to research and development for spill response equipment & techniques and fund an independent spill response organization such as Alaskan Clean Seas. BP will also provide $500,000 annually for 10 yrs at DEC's direction for various environmental programs including NS clean up, spill response improvements & pipeline safety. BP will fulfill Arco's commitment for double-hulled tankers, "Millenium Class;"
  • 2 mill annually in perpetuity to UA foundation;
  • Commitment to AK hire, especially Alaskan Natives.

November 17, 2000: Second written request by the Merger Committee to the Administration to prepare and provide a detailed analysis of the revenue impacts that the Administration anticipates will occur as a result of the merger.

November 18 & 19: The merger committee holds meetings to discuss Charter Agreement; have Q&A with Administration about the Charter Agreement and to take public testimony.

Nov. 25, 1999: Collier, Shannon, Rill & Scott submit legal memorandum to merger committee.

Quote from memo: "The recent Charter for Development of the Alaskan North Slope ("Charter") describing divestitures and other actions proposed by BP Amoco, ARCO, and Governor Knowles does not resolve the competitive concerns raised by the combination of the two largest integrated oil companies in Alaska. The commitments contained in the charter are so vague that BP Amoco will not be obligated to create meaningful competition. Even if every term in the Charter could be enforced to the maximum benefit of Alaska, the result would be a market that will not perform as well as it does today. As it stands, the Charter is neither in the form or substance of an agreement that meets typical antitrust standards."

Dec. 1, 1999: Anchorage Daily News Editorial: article condemns Knowles for secret negotiations and rushing the deal, condemns legislature for sitting passively by.

Article quote: "The Knowles administration has been shameless in its rush to sign and seal the deal. It even concocted a phony deadline "imposed" by federal regulators to justify its actions."

Dec. 2, 1999: Knowles Press Release: State and BP sign revised merger agreement. New agreement provides legally enforceable environmental provisions and new production & divestiture provisions.

Knowles quote: "I come here today keenly aware of the responsibilities of my office to maximize the benefits of natural resources to all citizens; to protect Alaska consumers against monopolistic practices; to promote jobs for Alaskan families and businesses; and to keep our economy strong and our environment clean. The mechanism that will help us achieve that goal is the precedent-setting agreement between the state of Alaska and BP-Amoco concerning BP's proposed acquisition of ARCO."

The Merger Committee orally requests, yet again, for the Administration to provide a detailed analysis of the revenue impacts the Administration anticipates resulting from the merger.

Jan. 18 & 19, 2000 - Merger Committee scheduled a series of hearings. Merger committee experts, administration experts and representatives from BP and ARCO presented testimony regarding the proposed merger's effects on Alaska. Teleconferenced statewide.

Jan. 24, 2000: The Legislature's panel of merger analysts, consisting of economists, attorneys and industry experts, issued their final report concluding that the Amended Charter Agreement did not require BP to divest a sufficient portion of ARCO's assets to provide for competition by a vertically integrated company that is the functional equivalent of ARCO in its ability to participate in the same level of competition in all phases of operations.

Jan. 30, 2000: Pearce Compass Piece:

Pearce quote: "I would like to support the merger, but in all honesty I cannot. The Charter may lead to better bidding on North Slope leases and if it does I applaud it. But as recent polls and my constituent contacts demonstrate, most Alaskans understand the tangible and intangible benefits Arco has brought to Alaska. Two unknown companies with unknown intentions cannot replace these benefits. So like the majority of Alaskans, I oppose the merger as laid out in the BP/Knowles Charter and believe that the State should use its full resources to block it."

Feb. 2, 2000: FTC announces it will oppose merger. Governor Knowles intervenes in the lawsuit on behalf of BP Amoco.

Knowles quote: "Throughout the process we have sought to address Alaska's concerns to maintain competition on North Slope, while allowing the efficiencies that help keep Alaska oil competitive on the world market. Despite the company's flexibility to address the state's and federal concerns, the FTC has simply refused to negotiate."

February 8, 2000: Merger Committee Issues recommendation rejecting merger under terms agreed by BP & State. The final report contains numerous, detailed recommendations by antitrust attorneys, economists and oil industry experts. It concluded that the Amended Charter Agreement did not require BP to divest a sufficient portion of ARCO's assets to provide for competition by a vertically integrated company that is the functional equivalent of ARCO in its ability to participate in the same level of competition in all phases of operations.

Porter Quote: "Some members of the committee were reluctant to reject the merger but after a thorough review of the findings by the Committee's experts it was our belief that the Amended Charter does not go far enough to ensure vigorous competition on the North Slope. We are hopeful that the Federal Trade Commission, BP, and all the other parties to the litigation can negotiate a satisfactory agreement."

February 11, 2000: Administration receives heavy criticism by Legislature and media for seeking payment of its legal costs from BP Amoco. In a story printed in the Anchorage Daily News, Bob King acknowledges that the state had collected $1.5 million from BP and plans to ask the oil giant to pay the state's cost of filing a motion last Monday in federal court on behalf of BP.

Daily News quote: (2/11/00) "But seeking additional legal fees from BP while the state is intervening on behalf of and aligning itself with BP against the Federal Trade Commission `is fairly unique,' Bruce Botelho acknowledged in an interview. `We've not done anything to compromise the independence of the state,' Botelho said. `Numerous Alaskans don't agree that was the right place to make the call.'"

February 14, 2000: Merger Committee sends its third written request to the Administration regarding a detailed analysis of the revenue impacts that the Administration anticipates will occur as a result of the merger.

March 15, 2000: BP announced sale of ARCO Alaska's assets to Phillips Petroleum. Governor issues press release applauding announcement and asserting that the deal preserves most points from his Charter Agreement.

Knowles quote: "In many ways the Charter agreement proved to be the catalyst for concluding this major acquisition," Knowles said. "While the FTC sought greater levels of divestiture, the charter provided the framework for the resolution of the merger and protected Alaska's interests beyond those of the FTC, such as for Alaska jobs and the environment. We could not have accomplished these goals had we not been at the table."

March 17, 2000: Anchorage Daily News Michael Doogan Column, "Federal Government, not governor, protects Alaska's interests."

Doogan quote: "Whatever the reasons, Knowles worked out a deal with BP that called for the company to sell off some Alaska assets and to make some environmental and charitable promises. Even though the deal gave BP greater control of the state's largest oil field and its oil transportation system, Knowles declared that it eliminated Alaska's anti-trust concerns. Even though he said the most important thing at stake was jobs for Alaskans, he supported BP's plans to lay off 400 workers. Knowles signed the deal, and the state government became the most enthusiastic supporter of BP's purchase of Arco."

March 21, 2000: Merger Committee sends letter to FTC Chairman Robert Pitofsky endorsing Phillips Petroleum's purchase of ARCO Alaska's assets, signed by Halford, Pearce & Porter. Merger committee issues release endorsing Phillips' acquisition of ARCO Alaska's assets and recommending FTC Approval of BP/ARCO Merger.

Halford Quote: "The only step that remains is for the court to enter into a consent decree recognizing the Phillips purchase of ARCO Alaska assets and approving the BP/ARCO merger."
Pearce Quote: "These latest developments satisfy all of the committee's concerns aimed at retaining a major, vertically integrated oil producing competitor in Alaska. Though we understand that Alaska issues are not the only consideration before the FTC, we do hope that a consent decree is entered soon. This would herald an auspicious future for Alaska's oil patch."

March 24, 2000: Exxon sues to block merger.

April 26, 2000: Phillips Petroleum announces it has completed its acquisition of ARCO's Alaskan businesses.

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