JOINT SPECIAL COMMITTEE ON MERGERS February 8, 2000 2:10 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, 1/18/00, and 1/19/00. ACTION NARRATIVE TAPE 00-10, SIDE A Number 001 CHAIRMAN HALFORD called the Joint Special Committee on Mergers meeting to order at 2:10 p.m. and said since the Committee's last meeting, the Federal Trade Commission (FTC) had filed an injunction. He recapped also that they had the committee report and the staff report that was before them, but didn't reach a conclusion. SENATOR ELLIS moved that the Joint Special Committee on Mergers oppose the merger of British Petroleum Amoco with ARCO as embodied in the amended Charter for the reasons stated by our consultants as not in the best interests of Alaskans. CHAIRMAN HALFORD said that he personally didn't think they needed to go that far in their recommendation. The staff report lays out reasons and considerations with regard to both the Charter and original merger. He didn't necessarily disagree with the conclusions, but he thought there would be enough differences before them in the negotiating process that they would want to be a little more open to something that could truly represent a resurrection of ARCO. SPEAKER PORTER agreed with his approach and at a minimum wanted to "underscore the fact that my intent of that motion would be the merger as defined originally being non-competitive and not being suitably assisted by the charter agreement. What might subsequently come through negotiations is yet to be determined, and I want to, colloquially speaking, keep my powder dry on that one, because it might be something that would be in the best interests of the State." SENATOR ELLIS said that was the "moving target" argument and he doesn't agree. If that argument prevails, we'll never take a definitive position in time for it to have any effect, whatsoever. A definitive action by this body is about two weeks late. He thought the Committee might consider going further by encouraging the Legislature to intervene in some manner so they are a party to further discussions and maybe a negotiated settlement in the future that would amend the current version of the Charter where they could find some common ground. REPRESENTATIVE KERTTULA agreed with Senator Ellis saying she thought they should be forthright. She also thought the "target" had stopped with the FTC's filing of an intervention request. It's clear that one of the arguments is whether the Charter, itself, is going to meet the antitrust requirements. Our consultants' recommendations focused heavily on that point. She thought adopting their report was timely and speaks well to what is going on. She thought they would do well by embodying both feelings and suggested: "oppose the merger as explained in the final report to the Joint Special Committee on Mergers by our consultants, and add the date." That explains carefully what the consultants and lawyers found and clearly opposes the merger at this point and would be easily understood. If something subsequent happens, she hoped the Committee would keep working. She thought there would be other issues. CHAIRMAN HALFORD said he would have less concern with those words, because they are said at this point in time. SENATOR ELLIS responded that he would like to amend the motion to state, "We oppose the merger as explained in the final report to the Joint Special Committee on Mergers by our consultants, dated January 24, 2000, as our formal Committee report on the proposed BP Amoco/ARCO merger." He, then, asked the committee secretary if she got all the words and then he repeated his motion as follows: "The Joint Special Committee on Mergers opposes the merger of BP Amoco with ARCO as embodied in the amended Charter for the reasons stated by the Committee's consultants as not in the best interests of Alaskans." He said he was open to further discussion. Number 536 REPRESENTATIVE GREEN agreed that the "moving target" concept is weak, but the Administration has already made their position clear. They could make a decision among ourselves, but that wouldn't mean the Legislature was in concurrence. He thought there would be divisions of purpose in both the minority and majority. He was concerned they would say they are against something, unless they specified what was clearly the Charter, not necessarily the merger. That could conjure a lot of false feelings in some people's minds. They definitely want what's best for the State. CHAIRMAN HALFORD noted that the committee report dealt with both the Charter and the merger. He reminded them that the committee report they have before them is a distillation of a very complete report including a lot of confidential information. SPEAKER PORTER suggested instead of saying "the merger" saying "the merger configuration" as embodied in the amended Charter. CHAIRMAN HALFORD called an at ease from 2:20 p.m. - 2:24 p.m. CHAIRMAN HALFORD said he thought the staff report was much more important than any political statement that might sound better. He intended to have something that was one sentence long that they could get some consensus on. Every element is going to sound good, but the critical point is what is the committee report. SENATOR PEARCE asked if the committee report sticks to the original merger or to both (the Charter). CHAIRMAN HALFORD answered that it sticks to both. SENATOR PEARCE said she thought that should be made clear. REPRESENTATIVE KERTTULA agreed with Chairman Halford on the underlying reason. It's more important to be embodying what is said in the report, but the report does refer to both. They could say they oppose the original merger and the merger configuration as embodied in the amended Charter for the reasons enumerated in the consultants' report, and give the date to cover both ends. She thought that wording would make it clearer for the public. SENATOR ELLIS moved the latest version of his motion as follows: "I move that the Joint Special Committee on Mergers oppose the original merger and the merger configuration of BP Amoco and ARCO as embodied in the current version of the amended Charter, dated December 2, 1999, for the reasons enumerated in the consultants' report, dated January 24, 2000, as not in the best interests of Alaska." There were no objections to the motion and it carried. CHAIRMAN HALFORD noted they had a copy of the State's motion to intervene, the Summary of Actions with Regard to Other States: California, Oregon, and Washington. He asked if there was anything else anyone wanted to go through. He hoped to continue the dialogue. SENATOR PEARCE noted the lack of a fiscal note. CHAIRMAN HALFORD responded the fiscal note they requested in July or August and that was also requested in December, he assumes the Administration will tell them that the paper they presented at the last meeting was that. However, he said that was indeterminate. SENATOR ELLIS said the Governor stated that one of the reasons he intervened was to have participation in a negotiated settlement that might come between the FTC and the companies. He asked how the Legislature might have a role in the settlement to strengthen the entire state hand. CHAIRMAN HALFORD said he didn't know the answer to that off the top of his head. There was interaction at the staff and Commission level on things they are interested in that come out of the Committee's confidential report. He didn't know that they had any standing independent from the Administration to take any legal action. He thought the Legislature could consider resolutions back and forth, but he didn't know what the outcome of that would be. He stated that they don't have a formal standing in any way, but because of the confidential information they are privy to, they will be asked questions and may be asked to participate in some way. "Every time the Legislature tries to take legal action outside of the Administration, we lose. We lose on standing cases before they ever get started." SENATOR ELLIS agreed, but he wanted to explore the possibilities with their legal counsel to see if they had any suggestions for even an informal role in what he thought would be a negotiated settlement. He wanted to make sure all the bases are covered. Number 816 REPRESENTATIVE KERTTULA agreed, although she thought they didn't have any formal standing rights. There might be an avenue for an amicus or at least something informal. It would be helpful to know what they think. CHAIRMAN HALFORD said with the concurrence of the presiding officers and the ability to pay the bill, he hoped they would keep at least some level of activity of our attorneys so they can inform us of what happens. As he reads the newspapers, it changes almost every day. The last thing he heard is that the process for a temporary injunction has been set aside so they can go to the permanent injunction. SENATOR PEARCE asked that the D.C. attorneys and Mr. Boness be asked to prepare in layman's terms something that could be distributed to all the members of the Legislature, not just to those who have signed the confidentiality agreement. She wanted to know where they and the FTC are and what the schedule looks like. Number 1328 SENATOR PEARCE, in reference to Senator Ellis' comment about them intervening into the negotiation to a settlement with the court, said she hadn't heard of anything like that. She didn't think the FTC had done anything like that before, either. They don't listen to very many people. She wanted them to discuss that. If the State intervenes, does that give them some position before either the court or the administrative hearing officer. She didn't quite know the question to ask. She didn't know how intervening gave them any standing. CHAIRMAN HALFORD said his question was, you can file an amicus at one level, but you can actually be an intervener beyond that. He thought the Administration had chosen to be an intervener in an effort to be a party to the case versus a friend of the court. SENATOR PEARCE thought they should schedule a time for the Attorney General to come before them and explain their intention and filings. CHAIRMAN HALFORD said she could request a fiscal note, again. SENATOR PEARCE agreed and added if nothing else, the legal costs are getting high. CHAIRMAN HALFORD said they could probably get a status report from their attorneys and request a presentation by the Administration within the time schedule. It looked like March 13 was the first date of anything happening now. REPRESENTATIVE GREEN asked if he intended to have it before the FTC hearing. CHAIRMAN HALFORD said it would definitely be before the 13th of March. He adjourned the meeting at 2:35 p.m.