JOINT SPECIAL COMMITTEE ON MERGERS January 25, 2000 1:37 P.M. MEMBERS PRESENT Senator Rick Halford, Chairman Representative Joe Green, Vice-Chairman Senator Drue Pearce Senator Johnny Ellis Representative Beth Kerttula Representative Brian Porter Representative Jim Whitaker MEMBERS ABSENT All members present COMMITTEE CALENDAR Discussion of BP Amoco/ARCO merger 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, and 1/18/00. ACTION NARRATIVE TAPE 00-09, SIDE A Number 001 CHAIRMAN HALFORD called the Joint Committee on Mergers meeting to order at 1:37 p.m. and said they had turned in the required report of their activities to date. Part of the Committee's charge was to recommend statutory changes, but there weren't any. The Committee didn't know what the target was because of ongoing negotiations. He proposed a discussion of where the Committee wanted to go from here. SPEAKER PORTER agreed and added that he thought an opinion from the Committee would have limited effect on the FTC's overall decision, although he wouldn't feel uncomfortable asking BP to revisit their original commitment for exploration and development. For the record he read the consultant's conclusion: "The only adequate protection for the State of Alaska's interest and for the protection of competition to require at least the sale of ARCO's Alaskan operations as an integrated entity with an existing management, employees, and organization to a large domestic oil company that would after review, appear to be fully committed to extending ARCO's past history and position in responsibly developing Alaska's resources." He said according to testimony from Kevin Meyers, President ARCO Alaska, that ARCO's position is not going to stay the same in any event - with or without the merger. He didn't think going back to the status quo was possible. He didn't want to offer something when they didn't know what negotiations were going on now. SENATOR ELLIS asked if he objected to forwarding the consultant's conclusions to their colleagues. SPEAKER PORTER said no, but he wouldn't recommend for the merger, against the merger, or neutral; and didn't want to do anything. SENATOR ELLIS asked if he was making a specific proposal to continue the work and during that ask the company to revisit the commitment of $5 billion somewhere during the Charter. SPEAKER PORTER said what he said before was the conclusion of his general remarks. CHAIRMAN HALFORD said the deadline for the report has been met, but the resolution continued the Committee through this session. He thought a continuing review of the proposals was appropriate. It's a question of what people want as a conclusion or step at this point. Number 136 REPRESENTATIVE GREEN asked if they are going beyond what was really expected of them if they go from a review to a proponent position. REPRESENTATIVE KERTTULA shared everyone's concerns about having a complex moving target, but she thought under the resolution, it wasn't just statutory changes they were supposed to suggest. They were supposed to take appropriate actions to insure the best interests of the State are protected. They could talk about conditions and commitments from BP/ARCO and maybe a consent decree. Given the interest of the public in the State, the Committee should put together what they agree on as findings and add suggestions as a result of the report. SENATOR ELLIS agreed with Representative Kerttula saying that they are a Special Committee on the merger, not the Charter. He thought they should be decisive and make a recommendation. Number 212 REPRESENTATIVE WHITAKER said he thought the Committee was agreeing with their consultants by passing on their letter and the consultant's report. He thought developing a consensus would be difficult and could be divisive and send no message at all. REPRESENTATIVE KERTTULA said she would agree if they are agreeing with what the consultants were saying, but she didn't understand that was what they were doing. CHAIRMAN HALFORD stated that in sending the recommendations on, they are obviously endorsing the general package, although everything is moving at this point. He thought the bottom line for Alaska was to get a vertically integrated competitor in Alaska. It sounds like the Administration's efforts were trying to get there. It sounds like the FTC's efforts are trying to get there, also. REPRESENTATIVE GREEN said he is concerned that if they come up with suggestions that are counter to negotiations coming to a closure, the Committee might just create a lot more problems. It seems like the FTC would either ignore their suggestions or they would "accept things back." If the suggestions were to be ignored, they wouldn't have accomplished anything. If the Committee has no legal standing, whatever they recommend would be after the fact. CHAIRMAN HALFORD said if people want an update of the latest legal information, they could have an executive session; but he thought it was a policy question of whether they wanted to go on and then, in what manner. Number 252 SENATOR PEARCE shared Representative WHITAKER's concerns about creating a situation where the Legislature ends up either taking action or through it's inability to take action even though it tried, sends an extremely mixed message in terms of support of the Charter and of the merger. She noted that the Committee members have confidential information that other members are not privy to and cannot be made privy to. So there is an unequal playing field in some respects which has led to some misunderstandings on the part of other legislators in terms of what the merger means to Alaska. There is no way those can be cleared up, unfortunately. She thought it might be good to leave things as they are now and give the Committee a chance in the future to voice its opinion on specific issues that may come up - since this is a moving target. Rather than tying the Legislature up into knots that even it doesn't understand, she would feel more comfortable if they left themselves the clear opportunity to come out with a clear committee position at a future date on some specific questions. There were no specific questions before them right now. Number 294 SENATOR ELLIS said he wanted to make sure there was a clear understanding if they adopt the report and forward it on to their colleagues and what that means. The consultants have said the merger is a bad idea for documented reasons. That is what it would mean to him and he wanted to know if thats what it meant to other members of the special committee. CHAIRMAN HALFORD said Senator Ellis opposed the merger, but it would be easier for him if he knew what the real merger proposal was right now. He has heard proposals he could conceivably support from the rumor mill, but they represent the virtual recreation of ARCO. If they get to that point, they have gotten to a position he can support. That's prospective. SENATOR PEARCE moved to take the Committee into executive session since there was confidential information that they needed to discuss. At approximately 2:15 p.m. the Committee went into executive session. The Committee reconvened at approximately 3:43 p.m. CHAIRMAN HALFORD announced the report had been delivered to the presiding officers and as soon as the Committee had anything definitive to act on, they would meet again. At this point, it is apparent that of the proposals that are currently on the table, none of them have the legs to be anything the FTC is considering that seriously. The Committee needs something from them before they go forward. He asked if there were any comments. REPRESENTATIVE KERTTULA asked if they would definitely meet again when they were at that point. CHAIRMAN HALFORD answered "definitely." He adjourned the meeting at 3:44.