Legislature(1999 - 2000)
02/24/2000 01:10 PM House MER
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT SPECIAL COMMITTEE ON MERGERS
February 24, 2000
1:10 P.M.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Drue Pearce
Representative Brian Porter
Representative Jim Whitaker
MEMBERS ABSENT
Senator John Ellis
Representative Joe Green, Vice-Chairman
Representative Beth Kerttula
COMMITTEE CALENDAR
Discussion of BP Amoco/ARCO merger by:
Mr. William MacLeod
Collier, Shannon, Rill & Scott
3050 K Street, N.W., Suite 400
Washington, D.C.
Mr. Jack Griffin, Assistant Attorney General
Oil, gas, and Mining Section
Department of Law
1031 W 4th, Ste 200
Anchorage, AK 99501
Mr. Carl Katz
Collier, Shannon, Rill & Scott
3050 K Street, N.W., Suite 400
Washington, D.C.
PREVIOUS ACTION
See the Joint Special Committee on Mergers minutes dated 6/11/99,
7/28/99, 9/24/99, 9/25/99, 11/18/99, 11/19/99, 1/12/00, 1/18/00,
1/19/00, 1/25/00, and 2/8/00.
ACTION NARRATIVE
TAPE 00-11, SIDE A
Number 001
CHAIRMAN HALFORD called the Joint Special Committee on Mergers
meeting to order at 1:10 p.m. and said they were scheduled for an
update from the Administration and the committee's consultants on
what is happening with the merger.
MR. BILL MACLEOD, Committee Consultant, said the memo laying out
the timetable gives them all the important dates that are likely to
to be coming up for a while. There is going to be a tremendous
flurry of activity getting ready for a hearing like this. It is
almost unprecedented for this amount of preparation to occur in
this amount of time. He asked if there were any questions.
SPEAKER PORTER asked if they should presume there aren't side
negotiations going on that might conclude the matter. He asked if
that was a possibility.
MR. MACLEOD answered that it's always hard to make predictions like
that, but he thought that all the energy being expended right now
was going toward the hearing.
CHAIRMAN HALFORD asked if there was any point that negotiations
might resume before the hearing.
MR. MACLEOD said that negotiations can happen at a number of
points. The obvious times when they could occur are after a little
bit of evidence has been taken and especially a day or two before
the hearing. The FTC has laid out a clear position as to what they
want. It seems that unless there's going to be some movement by
BP, it's hard to imagine there's going to be a lot of room for
settling.
Number 325
CHAIRMAN HALFORD asked about the February 24 teleconference as a
key date. Did he know anything about what happened there.
MR. MACLEOD said they didn't know anything yet; it could still be
going on now.
CHAIRMAN HALFORD asked if he had a list of who is on BP's witness
list.
MR. MACLEOD answered that he didn't have it, but could get one
quickly.
MR. JACK GRIFFIN, Assistant Attorney General, said the State's
motion to intervene was granted Tuesday giving the State status as
a party in the proceedings. They will be entitled to call
witnesses and cross examine adverse witnesses. Attorney General
Bruce Botelho will be participating in that trial as will our
outside lawyers, Boise Schiller and David Foerster, in particular;
and Morrison and Foerster are Bob Loeffler and Brad Lui.
CHAIRMAN HALFORD asked if the State had a separate witness list.
MR. GRIFFIN answered yes that they have a tentative witness list on
which they have identified Rick Warren Boulton, Jeff Leitzinger,
Commissioner of Revenue Wilson Condon, and Ken Boyd, Director of
the Oil and Gas Division.
CHAIRMAN HALFORD asked how our presentation as a party worked with
BP's presentation. Are they presenting the merger as modified by
the Charter as their bottom line, because the State opposed the
original merger. How does it work.
MR. GRIFFIN answered that they would be talking with BP and ARCO
about how to co-ordinate the witnesses. They don't want to present
witnesses who are going to duplicate things. He said that both BP
and ARCO and the State of Alaska believe that the court,
considering the public interest, has to consider the merger as
modified by the Charter, not as the FTC would have it as the merger
unmodified by the agreement that the companies have with the State.
CHAIRMAN HALFORD said that BP/ARCO's presentation is that the
Charter is the real proposal that's before the FTC.
MR. GRIFFIN said that is correct - the merger as modified by the
Charter.
REPRESENTATIVE WHITAKER asked if the assumption was that there are
no outstanding issues regarding the merger (State v. BP/AMOCO).
MR. GRIFFIN answered that he wasn't sure he was responding to his
question, but the case as going to be presented will talk about the
public interest as the public interest is reflected in the merger
as modified by the Charter. He didn't see other hypothetical
constructions of the transaction playing a significant role. Maybe
BP or ARCO have plans along those lines, but he didn't know about
them.
Number 700
REPRESENTATIVE WHITAKER said he wasn't hypothesizing; he was asking
a question and that question is: have the State and BP/AMOCO
agreed to all of the terms and intricacies inherent to the Charter
agreement.
MR. GRIFFIN answered that the Charter agreement is binding on both
the State and BP/ARCO. The terms are as they are reflected in the
Charter; there are no side deals. There may be some intricacies
associated with how the Charter is ultimately implemented that will
have to be worked out, but right now there were no additional
agreements with BP or ARCO along those lines.
REPRESENTATIVE WHITAKER asked if the disposition of acreage and the
formalization inherent to that was such an intricacy.
MR. GRIFFIN replied that the way the Charter is set up, before any
deal can go through or be complete, BP has to come to us and say
here's the package we've put together. We believe this has
satisfied all the terms of the Charter and then we have to
essentially approve that. That hasn't happened. One of the things
that will have to be a part of that package is a structure that
shows the requisite amount of acreage: in NPRA within one of the
particular play fairways goes to either the new operator at Alpine
or Kuparuk, that the right amount of acreage goes to both the new
operators at Alpine and Kuparek, etc. That process is not
complete. BP has not come to them with a proposed purchaser or set
of purchasers reflecting their obligations under the Charter.
REPRESENTATIVE WHITAKER said the acreage he is concerned with
includes not only the acreage adherent to the Kuparuk River Unit
and the Alpine, but rather the reformulization of the entire
acreage picture on the North Slope with regard to the 500,000 acre
limit. He is having a difficult time with the notion that might be
characterized as something akin to an intricacy. His concern is
that the State is arguing on behalf of an agreement that is
probably far from finalized. He guessed there would be
considerable disagreement as to the disposition of that acreage and
the formulization adherent to it. He asked if that was not
troublesome to Mr. Griffin - with regard to a weakened position the
State may have as a result of arguing for an agreement that
essentially is agreed to before it's finalized. He said it was as
clear as mud at this point. He wanted Mr. Griffin to clarify that
for him.
MR. GRIFFIN responded that he would try. The structure of the
Charter right now doesn't concern him in the way he suggested. He
didn't foresee a lot of difficulty associated with implementing the
Charter's terms. There are two aspects to the exploration acreage
portion of the Charter. One is the specific structure of the
divestiture required to create viable new competitors on the North
Slope - both as new operators of existing production and with
respect to new exploration operators. The other aspect is that the
merged entity is going to have to get down to the statutory limit.
The divestitures required to create viable competitors are spelled
out fairly specifically in the Charter. They haven't identified
each lease that must go to the Alpine or Kuparuk operator, but they
have identified very specific play fairways where the divestitures
have to occur and have set acreage minimums that must go to both
the Alpine operator and the Kuparuk operator or the State
exploration acreage and acreage minimum in one of the play fairways
in the NPRA that must go either the Alpine or the Kuparuk operator.
REPRESENTATIVE WHITAKER said the statutory requirement on
exploration acreage is 500,000 off shore and 500,000 on shore.
(MR. GRIFFIN nodded agreement.) He asked if the formulation
adherent to that was complete.
MR. GRIFFIN answered if he was asking if they had identified which
particular leases must be divested or relinquished in order to get
to the 500,000 acre limit, apart from the specific divestitures
required to create competitors, the answer is no. They have not
required BP or ARCO to divest or relinquish particular acreage
solely for the purpose of getting to the 500,000 acre limit. They
have a fair amount of flexibility there in order to reach the limit
- to the extent that they don't get there when they put their
packages together with the new purchaser or purchaser. The
packages that were created have minimum acreage amounts that need
to go to the new operator or operators. BP and ARCO can reach the
statutory limit in their deals with those new operators simply by
adding acres on to the minimums that were established in the
Charter. If they don't satisfy the statutory requirement in their
deal with the new purchaser(s), they have some flexibility in terms
of either selling acreage to other companies or in simply
relinquishing the excess acreage back to the State.
Number 1219
SPEAKER PORTER said he thought Washington, Oregon, and California
had been granted similar status to our State. He asked if he had
a feel for what the relationship between Alaska and those three
states would be. Do we agree on anything? Are we totally opposed?
MR. GRIFFIN answered that the relationship is fairly described as
the western states lining up behind the FTC's position and we
fundamentally disagree with the FTC's position - particularly with
respect to the idea that BP somehow exercises market power in a way
that would allow it to raise ANS prices above competitive levels to
the detriment of a handful of refiners in Washington and
California. They just don't think that's the case.
Even if it were the case that BP could somehow obtain more for ANS
than it currently does from those refiners (a proposition they
don't agree with), they would disagree that the FTC should be in
the business of saying the upstream is making too much money. The
refiners in Washington and California should make more. They do
not think that is what the anti-trust laws are really designed to
do.
SPEAKER PORTER asked if that issue was the predominant discussion
or was there more as it relates to the relationship with the other
states.
MR. GRIFFIN answered that he thought that was the principal issue
with the other states. They did allege some concerns for
competition in Alaska, but that is, in his view, not really their
concern. They are concerned about their refiners.
CHAIRMAN HALFORD asked if he was saying the record shows no price
deferential to different refineries based on their capacity to
process ANS or non-ANS crude.
MR. GRIFFIN answered that the reason he is hesitating is because he
didn't want to go into....(confidential issues). He knows that the
FTC has alleged that BP engages in price discrimination. That has
been made public in the version of the preliminary injunction
motion that the FTC has made available generally. They
fundamentally disagree with the characterization that someone who
may charge differently situated companies different amounts for a
particular commodity is necessarily engaging in price
discrimination. Just as if the Cal Worthington Ford dealer in
Anchorage charges two different customers a different price for a
particular car. That does not mean that Cal Worthington is
engaging in price discrimination. They are both products of
individual negotiations. He thought it is fair to turn the whole
question around and ask the FTC why aren't they investigating the
refiners and the market power they must possess in order to force
BP to sell them oil at a price that's less than foreign crude.
SENATOR PEARCE inserted that they aren't trying to merge.
MR. GRIFFIN responded that he thought that was exactly the answer.
SENATOR PEARCE asked if this was a fair characterization of when
discoveries are made and the companies move forward to development.
There is a unitization agreement between the owner companies of the
leases. That agreement is then brought to the AOGCC for approval;
they look at it, but if the companies have come up with the
agreement without squabbling, they will probably approve the
agreement.
MR. GRIFFIN answered that he personally didn't have any involvement
with the AOGCC and its role in approving unit agreements. The
existing unit agreements were approved by the Department of Natural
Resources. Typically, the AOGCC would get involved if you had
royalty owners other than the state who couldn't agree on how to
allocate the produced substances from the various leases within an
area or within a proposed unit.
SENATOR PEARCE asked if he believed that the agreements presently
in place on the North Slope have been approved only by DNR, not by
the AOGCC.
MR. GRIFFIN responded if the AOGCC has approved those units, he is
not aware of it. He is not aware of a statutory role for them in
approving units that have been approved by the DNR involving state
leases and state resources.
SENATOR PEARCE asked if the unitization agreements specific to
Kuparuk or Prudhoe Bay hold any preferential rights.
MR. GRIFFIN answered that the unit agreements do not contain
preferential rights. They could be found in either the operating
agreement between the companies, which the State would not be a
party to or other agreements between the companies. He was not
aware of the State recognizing preferential rights in the unit
agreements themselves. They are typically embodied in agreements
to which the State is not a party to.
SENATOR PEARCE referenced Commissioner Shively's letter saying the
State would not allow preferential rights if it's not in
unitization agreements and is an operating agreement. He has
written a letter to owners who are parties to these agreements who
thought they had preferential rights of refusal for additional
ownership in these fields.
MR. GRIFFIN replied that he is familiar with the letter she is
referring to, although he had a slightly different interpretation
of it. He believed Commissioner Shively said in his role of
deciding whether to approve any lease transfer that is proposed by
a current lessee on a state lease, he is going to consider the
goals and objectives embodied in the Charter in his best interest
analysis (which he is required to do by statute). Mr. Griffin
thought it was fair to say that Commissioner Shively suggested
fairly strongly that these companies with preferential rights would
have a fairly high burden to show that they could dismantle what
the State had tried to accomplish in the Charter through the
exercise of their preferential rights; and have the Commissioner of
Natural Resources conclude that the transfer was nevertheless in
the State's best interests.
SENATOR PEARCE said so we've got a company that comes up here,
leases land, spends lots of money to do exactly what the State is
purporting we're going to get more of if this merger goes through,
is lucky enough to be part of a discovery, gets to a development
phase; and they have signed an operating agreement with the other
companies in which (because they are one of the owners who put all
that money up front) there are preferential rights that say: "By
the way, if you, Company A, decide to sell, you are part of this.
We get a preferential right of first refusal to buy the rest of the
leases that we're involved in." Is the Attorney General saying
that they would have a high burden before he would approve those
preferential rights. Why would anyone want to do business in
Alaska under those circumstances.
Number 1716
MR. GRIFFIN answered that Commissioner Shively wrote the letter.
SENATOR PEARCE interrupted saying that she doubted he wrote it
without an attorney.
MR. GRIFFIN said he would analogize it to the situation where she
is a landlord and she leased an apartment to someone she trusted
and knew to have the financial ability to pay the rent. Then that
person entered into an agreement with another party saying if I
ever leave here, I will sign my lease to you. You, as the
landlord, have the right to look at that transfer and judge whether
that is reasonable or not. If that other person, for whatever
reason, is not financially capable or is not someone who would
normally qualify for renting your apartment, the law allows you to
raise those objections. The State is in a somewhat comparable
situation here, but the stakes are a lot higher. In the typical
situation where no merger is involved, where the State's anti-trust
enforcement authority isn't hanging in the balance, a company that
currently owns a lease within an established unit that has right of
first refusal on lease interests that are being sold by anther
participant in the unit is not going to have any problem getting
the State to find that the transfer is in the State's best
interest. But Commissioner Shively is under a statutory obligation
to consider a whole range of factors in deciding where the State's
best interests lie, and in this particular case, it just so happens
that we have a proposal for two companies to merge and the State
has taken anti-trust enforcement action. The efficacy of that
action may be affected by a company that seeks to exercise a
preference right that is inconsistent with the State's enforcement
action.
SENATOR PEARCE asked if he was saying the other owners are like
parties the State would not want to have as the second lease owner.
MR. GRIFFIN answered that he wouldn't characterize any of the
existing participants in any of the units as unwelcome tenants.
Quite the contrary, the Charter was set up in a way to specifically
allow each of the existing participants in each of the units to
qualify for the packages that the Charter described. We are only
talking about the situation in which an existing working interest
owner in a unit would seek to exercise a preference right in a way
that would make BP and ARCO's satisfaction of the Charter
impossible.
SENATOR PEARCE said we say we want new companies to come in and we
want exploration and competition; then we turn around and say by
letter that we approve you can do all the agreements with all the
other lease owners you want to and any time the State suddenly
decides it wants to align itself with one of the other companies,
it can do so and throw your operating agreement out the window and
tell you you don't have the preferential rights that you had in
your agreement. She thought that would somehow quell the urge for
companies to come here and do business.
MR. GRIFFIN said he didn't think so. Every company who comes to do
business in the State knows that they are going to be able to
acquire interests through the exercise of preferential rights in
the normal course. We are talking about the ability of the State
to review that and assure itself that the transfer in that
particular instance is going to satisfy the best interest test that
has been established by statute. Commissioner Shively, or any
other commissioner of Natural Resources, cannot arbitrarily align
himself with a particular company in order to frustrate the
legitimate contractual rights of other working interest owners.
It's only if the Commissioner legitimately concludes and reasonably
concludes that the best interests of the State, for whatever
reason, under the circumstances at hand, do not support the
transfer. That is something the companies can then take to the
courts, if they do think the decision was made unreasonably or
arbitrarily for reasons that do not genuinely affect the best
interests of the State. He highly doubted that any court looking
at the merger and the State's enforcement action would say that is
not a factor that Commissioner Shively could consider when consider
the best interests of the State in approving a lease transfer.
CHAIRMAN HALFORD asked if the preference right was an interest in
land.
MR. GRIFFIN said he would characterize the preference right as an
interest in land.
Number 1983
CHAIRMAN HALFORD asked if the relinquishment, denial, or change in
that preference right, based on some condition created after the
preference right, have to be considered by the courts to be a
taking of some kind. You might be able to enforce it, but you
might have to pay for it at some point if someone sues. The
State's goal of meeting the competitive package that it wants to
meet may be a superior goal, but the person who has lost the
interest in land through a government taking could have some
recourse against the State for the value of it.
MR. GRIFFIN explained that it wouldn't be a taking, because every
company that enters into a lease with the State knows that it
cannot transfer its interest in that lease to someone else without
the State's approval.
CHAIRMAN HALFORD added on the conditions that were there at the
time. Does adding a new condition after the fact change the rules,
he asked.
MR. GRIFFIN answered that the rules have not changed, only the
circumstances at issue in this particular case have changed. The
rule has always been that you are not going to be allowed to assign
an interest in a State lease, if it's not in the State's best
interest. The merger they are currently reviewing is obviously not
the typical event, but that doesn't mean that it's not a legitimate
factor for the State to consider in weighing the best interests of
the State when evaluating a request to transfer an interest in a
state lease.
CHAIRMAN HALFORD said he disagreed.
SENATOR PEARCE said she did, too. The Charter still talks about
two unnamed companies to be the purchasers and asked why he
believed you can say without any question that two unnamed
companies are going to take away all the concerns we had under the
original merger and we are going to have competition on the North
Slope.
MR. GRIFFIN answered that he couldn't give her the sort of
assurance she is asking for unless he could predict the future. He
can't say if the merger were stopped that ARCO would continue to
look like ARCO.
SENATOR PEARCE said that was not her question.
MR. GRIFFIN said he interpreted the question as: How can he say
there is no question, whatsoever, that the Charter will satisfy all
of our concerns. The Charter has been designed specifically to
create competition on the North Slope and capture the efficiencies
targeted by the merger, principally at Prudhoe Bay. They believe
that combination is the combination that will, in the long run,
produce the greatest level of production and the greatest total
revenues for the State. This is a judgement call on the
Administration's part. Ten or 15 years from now, people will be
able to say whether they were right or not.
CHAIRMAN HALFORD asked if it's the AG's position that the merger
precharter was anti-competitive.
MR. GRIFFIN answered yes with respect to North Slope bidding and
leasing. Not with respect to downstream markets.
SENATOR PEARCE asked if Company A or Company B or if Company A plus
B fixed all that.
MR. GRIFFIN answered that the universe of companies that would
qualify under the Charter is relatively limited. One can find a
list of companies on various web sites or in the Oil and Gas
Journal by size of assets and check off who the qualified
companies are. They looked at who all the companies were and asked
themselves the question: Is there any one of these companies that
couldn't compete here in Alaska if they had the right to operate,
the exploration acreage, the barrels, the infrastructure, and if
they had the pipeline transportation.
The answer they came to was that any one of those companies that
would qualify under the terms set by the Charter could be a
competitor and should be a competitor in the State with all of the
assets included in the packages as defined by the Charter. There
wasn't a company they could cross off the list because they just
wouldn't do. Their view was that any company that would be willing
to commit the resources necessary to acquire the assets that had to
be divested would have to be interested in Alaska. You wouldn't
make that corporate decision as a company unless you had decided as
a corporation to commit yourself to the State. That is what the
Charter does.
None of us can predict what's going to go on in the minds of
individual managers at any particular level in any particular
company at some indefinite point in the future. What you can do is
try and put together the pieces that under any reasonable scenario
would reflect a commitment to the State to future exploration,
development, and future production. And that's what the Charter
attempts to do.
CHAIRMAN HALFORD said that now he is a party to the legal case with
regard to the injunction. If the hope in the process is that it
pressures negotiation to a positive solution for everybody, he
asked where Mr. Griffin's part was in that process. If BP and ARCO
sit down and make an agreement with the FTC, will the State be a
party to the negotiation as well as the court battle. Does he have
a commitment that they will be a party to that negotiation or will
he find out after the fact that a deal has been made between the
companies and the FTC. The Administration would have to evaluate
whether they are in favor of it or not when the momentum is going
in the other direction.
MR. GRIFFIN answered that he didn't know that there was going to be
additional negotiation. He said if the injunction is granted, the
deal is dead. It's over at that point even though the FTC has
talked about its internal process. As a practical matter it could
take years; in reality companies cannot let their shareholders hang
out that long...
TAPE 00-11, SIDE B
Number 2350
over proposed merger plans while the FTC goes about its business.
CHAIRMAN HALFORD asked if in his opinion we would have an answer by
the first of April on the current schedule.
MR. GRIFFIN replied that the Court should be given a little more
time than that to issue her decision. The parties have expressed
the hope the Court could rule on the motion by mid-April, although
she hasn't committed to that. On the negotiation matter, the fact
that the State is in as a party will mean that the State is at the
table if the parties go back to the table to try and work something
out. He anticipates playing an active role in something like that
to ensure that any deal that might be cut would protect Alaska's
interests.
CHAIRMAN HALFORD said he hoped the parties would guarantee that to
the Governor.
REPRESENTATIVE WHITAKER said he didn't want to belabor this, but
stated that a key component to competition is the disposition of
exploration acreage. This also relates to the state's intervention
efforts and the effect it may have on the state's ability to
negotiate post-merger. He has difficulty understanding how such an
agreement can be argued for so strongly when such a substantial
portion of that agreement (the disposition of acreage as required
and the attendant statute regarding lease acreage limits). How can
we argue so strongly in favor of an agreement which in this
specific and substantial regard is incomplete. You don't know to
whom you're selling or what the formulization will be for the
limitations of acreage. That is a huge component to future
competitiveness on the Slope.
MR. GRIFFIN asked if he was referring to the acreage that might
have to be divested beyond the specific acreage that was identified
in the play fairways that had to go to either the exploration
operators or the operators at Alpine and Kuparuk.
REPRESENTATIVE WHITAKER said there were two parts to control
exploration acreage; first the acreage that is being divested and
the other that which is adherent to the 500,000 acre limitation and
the reformulation of that that will be required as a result of the
merger. It is difficult to separate one from the other when in the
end they all relate to who has what acreage on the Slope post-
merger. How can you argue in favor of an agreement that has not
answered that question.
MR. GRIFFIN asked Representative Whitaker to refresh his memory on
how many acres above the amount that is going to go to the new
operators would be required to be divested in order to reach the
500,000 acre limit. He recollected that it's relatively small.
CHAIRMAN HALFORD said he thought it was about 380,000 total.
That's net acreage that can be pretty substantially manipulated by
sale to fractional interests.
MR. GRIFFIN responded that the Charter on this particular point
requires a divestiture of 660,000 total acres: 240,000 acres or so
are going to be in NPRA; 400,000 acres are going to be state
acreage. On the state acreage, they have identified at least
250,000 acres has to go to the new operators. So there may be some
portion that won't have to go to either the new operator at Alpine
or Kuparuk. To answer his question, the play fairways and the
acreage limitations that were identified in the Charter were the
fairways and acreage limitations they felt were necessary to assure
whoever acquired those packages would have a substantial commitment
to the State. That's what satisfied the anti-trust concern.
The acreage beyond that, which was specifically identified, that
didn't have to go to either of those operators to satisfy the
State's anti-trust concerns shouldn't affect the competitive
success of the Charter regardless of where they go. We don't need
to know who the excess acreage goes to in order to characterize the
Charter as a success.
Number 2194
REPRESENTATIVE WHITAKER said Chairman Halford touched on the key
point which is the reformulation of the percentage of ownership
with regard to acreage and the control that's adherent to that is
tantamount to the very key component of the question at hand - the
anti-trust question. By controlling substantially more acreage in
the future as a result of the merger, is there not a substantial
lessening of competition.
MR. GRIFFIN replied no. Once the acreage has been leased, you've
gotten past the point of worrying about whether there's going to be
competition at the bidding or leasing stage. That's already
occurred. The next important thing is the cost. Ideally, the more
acreage you have in the low cost producer, the more likely you are
to have that acreage developed. We have no interest in competition
per se within acreage that has already been leased. The State has
an interest in seeing the acreage developed and it is most likely
to be developed by the company that can do it at the least cost.
The Charter tries to reconcile the benefits the State gets from
competition at the bidding and leasing stage and the benefits the
State sees from having a low-cost, competitive
developer/producer/transporter/marketer of ANS.
REPRESENTATIVE WHITAKER said that is the essence of their
disagreement. You are willing to entrust the future of the State
of Alaska's oil resource to the low-cost producer regardless of the
competitiveness within the oil patch. That low-cost producer,
then, must be entrusted to take the resource to market simply
because they are the low-cost producer-irregardless of other
internal economics associated with that low-cost producer. He
disagrees fundamentally that that is in the State's best interest.
He chooses to trust the free enterprise system and he thinks that
we have an opportunity and that we will be successful to that end.
Number 1957
CHAIRMAN HALFORD asked how much has the State spent so far on the
executive side.
MR. GRIFFIN answered the total for the outside consultants through
February 10 is slightly in excess of $1.5 million. There are still
some outstanding bills for work done, but those are the bills they
have received to date.
CHAIRMAN HALFORD asked with regard to the reimbursement that's in
the Charter, which says reimbursement to the State of Alaska, if
that included the legislative branch.
MR. GRIFFIN said he understood that it doesn't.
CHAIRMAN HALFORD said there were no further questions.
MR. CARL CATZ, Washington D.C. consultant, said the teleconference
with the judge today was postponed until 4:00 pacific time
tomorrow. Additionally, the FTC is not making the witness list
available to the public.
CHAIRMAN HALFORD said the FTC's witness list had been circulated.
MR. KATZ explained that he was referring to the defense witness
list.
CHAIRMAN HALFORD thanked him and adjourned the meeting at 2:20 p.m.
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