Attorney General Lockyer Announces Settlement in British Petroleum-Arco Antitrust Case: Merger Conditioned on Divesting All of Arco in Alaska

(SACRAMENTO) – Attorney General Bill Lockyer today announced settlement of a federal antitrust lawsuit that will require BP Amoco, p.l.c.,(BP) of London and Los Angeles-based Atlantic Richfield Co. (ARCO) to sell all of ARCO in Alaska as part of its announced merger.

California, Washington, Oregon and the Federal Trade Commission went to federal court in San Francisco in February over concerns that the merger would give BP monopoly-like control over Alaska North Slope crude oil production and sales to West Coast refineries in violation of antitrust laws. BP and ARCO entered into its $26 billion merger agreement on March 31, 1999.

“Under the originally proposed merger, BP-ARCO would have controlled nearly 75 percent of the crude oil produced on the Alaskan North Slope,” Lockyer said. “By conditioning the merger on the sale of all of ARCO in Alaska, we can avoid a monopoly force on the North Slope and provide a new competitor that could benefit gasoline production on the West Coast. This divestment plan is another part of our effort to restore competition to the California gasoline market in the short-term and future.”

Under the settlement agreement, BP-ARCO is selling its ARCO assets in Alaska to Phillips Petroleum of Bartlesville, Okla. ARCO’s Alaska assets include interests in Prudhoe Bay and other oil fields in the North Slope that produce some 325,000 barrels of oil a day. Phillips also would obtain a 22 percent interest in the trans-Alaska oil pipeline, six existing oil tankers, three tankers being built, oil storage facilities and natural gas reserves. The divestiture agreement basically neutralizes the merger’s impact where BP and ARCO interests would overlap for Alaska North Slope crude oil exploration, development, production and sales. Phillips, which has a minor presence in the North Slope crude oil production market, would become a new marketer of crude oil to California refiners under the settlement agreement.

“We want to keep competition in the marketplace and protect West Coast consumers from being squeezed further,” Lockyer said. “If we can follow up recent divestiture requirements with further pro-competitive, pro-consumer public policy decisions, we have a chance to win long-term price protection for California.”

The Attorney General’s antitrust review of the BP-ARCO merger is another step in efforts to make California’s market more competitive and avoid having consumers pinched by price spikes year after year. Last year, the Attorney General and FTC required Exxon-Mobil to divest its refinery and 370 gasoline stations in California as a condition of the global merger. The special California concessions were designed to inject new competition into the state gasoline market.

In conjunction with legal matters addressed by the state Department of Justice, Lockyer convened in January this year a task force after a preliminary report to the Attorney General found Californians paid $1.3 billion more in 1999 to operate their vehicles, largely as a result of low competition and high concentration of market control held by only a handful of oil companies. The task force concluded its series of fact-finding meetings last month and will issue on May 1 a report for use by policymakers seeking to increase competition in the state’s gasoline market and avoid ever-increasing pump price gyrations for consumers.