JOINT SPECIAL COMMITTEE ON MERGERS June 11, 1999 9:40 a.m. MEMBERS PRESENT Senator Rick Halford, Chair Senator Drue Pearce Senator Johnny Ellis Representative Joe Green, Vice-Chair Representative Beth Kerttula Representative Jim Whitaker MEMBERS ABSENT Representative Brian Porter COMMITTEE CALENDAR British Petroleum-ARCO Merger WITNESS REGISTER Attorney General Bruce Botelho Department of Law PO Box 110300 Juneau, AK 99811-0300 Kevin Meyers, President ARCO Alaska PO Box 100360 Anchorage, AK 99510-0360 James A. Palmer Vice President, External Affairs (Alaska) BP Exploration PO Box 196612 Anchorage, AK 99519-6612 Stephen Conn Alaska Public Interest Research Group PO Box 101093 Anchorage, AK 99503 Kay Brown, Executive Director Alaska Conservation Alliance 750 W 2nd Ave. Anchorage, AK 99501 Christy McGraw BACKBONE 5412 West Dimond #4 Anchorage, AK 99515 Richard Fineberg PO Box 416 Ester, AK 99725 Jack Laasch Alaska Petroleum Contractors 6700 Arctic Spur Rd Anchorage, AK 99516 Pete Leathard VECO 813 West Northern Lights Blvd. Anchorage, AK 99503 Bill Walker Gasline Now 550 West 7th Anchorage, AK 99517 Vic Fisher Anchorage, AK Bob Stimson ConAm Construction 3015 Seawind Drive Anchorage, AK 99516 Karen Cowart, General Manager Alaska Support Industry Alliance 4220 B St, Suite 200 Anchorage, AK 99503 Mary Shields Norrh West Technical Services 3330 Arctic Blvd. Anchorage, AK 99503 Maynard Tapp Hawk Construction Company 1407 W 31st Ave. #100 Anchorage, AK 99503 Bill Stamps Peak Oil Field Service Company PO Box 7222 Nikiski, AK 99635 Joe Mathis NANA Development Corporation 1001 E. Benson Anchorage, AK 99508 Mike Macy Alaska Wave Riders 308 G Street Anchorage, AK 99501 Rick Steiner PO Box 231824 Anchorage, AK 99523 Walt Parker Anchorage, AK Charlie Cole 404.5 Cushman Street Fairbanks, AK 99701 ACTION NARRATIVE TAPE 99-1, SIDE A CHAIRMAN HALFORD called the Joint Special Committee on Mergers meeting to order at 9:40 a.m. and asked for a motion to go into executive session. VICE-CHAIRMAN GREEN so moved. There being no objection, the Committee went into executive session. The Joint Special Committee on Mergers reconvened to hear a status report by the Administration. Number 010 BRUCE BOTELHO, Attorney General for the State of Alaska, introduced Barbara Ritchie, Deputy Attorney General, and stated he wished to make preliminary comments to Committee members in a regular session, and then to speak to members in executive session regarding matters related to the ongoing investigation. ATTORNEY GENERAL BOTELHO made the following comments. In general terms, I wish to report to you formally that we are continuing to develop our view based on a model formulated around six different topics. I have provided a copy to you, Mr. Chairman, and the committee. Copies for the public are in the back of the room. They list the various committees at work related to the value of facilities, marine transportation, TAPS, the gas project, and leasing. With respect to each of these areas, we have provided the committee members as well with the questions which we have directed each of these committees to focus on as a way of providing a paradigm for our analysis of whether, ultimately, the acquisition is in the best interest of the State of Alaska. Our focus is primarily from the point of view of anti-trust, though those competitive issues obviously have a major impact on other programs of the state, specifically revenues that come to the state in the form of taxes and, of course, our entire leasing program of the state. Between them, the bulk of the revenues to the state are derived. We have, at the moment, several meetings that are on schedule this morning in Seattle. We have a joint meeting with other states and representatives of ARCO and BP to further discuss issues of document production. We are scheduled as the State of Alaska to meet with the Federal Trade Commission in Washington, D.C. on June 22 and, finally, we will be participating in a hearing which has been scheduled by the Senate Energy Committee, chaired by Senator Murkowski, on June 24 in Washington, D.C. Our goal, obviously, in each of these instances, is again to work toward an analysis of the merger, again our focus being what, ultimately, what outcome or alternative outcome, would be in the best interest of the State of Alaska - both in terms of the state as sovereign, but also as minora, and a concern for the welfare of the citizens. Those are my brief comments, Mr. Chairman, and I am willing to answer questions from the Chair and other members of the committee, but then request the opportunity to brief you in further detail about certain aspects of the investigation in executive session. CHAIRMAN HALFORD noted, for the benefit of the public, the handout includes not only the committees referred to by Attorney General Botelho, but also the core questions initially identified in each category. He stated that information should be useful to the public in that it provides background information. CHAIRMAN HALFORD acknowledged Attorney General Botelho's request for an executive session, and stated his intent to include an update by legislative attorneys during that session as well. He announced the committee would meet in executive session for about 45 minutes, after which BP and ARCO would give presentations. Number 089 SENATOR PEARCE asked Attorney General Botelho who would replace Ann Thompson after July 1 on the committees she was appointed to. ATTORNEY GENERAL BOTELHO said that slot has not yet been filled within the Department of Law. SENATOR PEARCE moved the committee meet in executive session, as requested by the Attorney General. There being no objection, CHAIRMAN HALFORD announced the committee would meet in executive session for the remainder of the Attorney General's presentation. Number 067 CHAIRMAN HALFORD reconvened the Joint Special Committee on Mergers to take further testimony. KEVIN MEYERS, President of ARCO Alaska, Inc., gave the following testimony. Thank you Mr. Chairman, members of the committee and committee staff. Let me thank you first for the opportunity to appear before you today. For the record I am Kevin Meyers, President of ARCO Alaska. Today I'll be testifying along with Jim Palmer from BP Amoco. I'll do my testimony, then Jim will do his, and then we'll be glad to answer any questions that you have - if that's okay with you all. ARCO, as you all know, has been a major player in Alaska for almost 45 years. North Slope oil production is the foundation of the modern ARCO. This is where ARCO has had its greatest successes. We are very proud of what our people have accomplished and the role that they've played in helping build this great state. Our business in Alaska is in excellent shape. We've had exploration success, we are developing new fields, we are on track to achieve our goal of stabilizing ARCO's share of North Slope production. With continued reductions in operating and development costs, and continued access to exploration acreage, and a continued good working partnership with the state, we see a bright future for the oil industry in Alaska. Given all that, you have to be wondering, and many Alaskans are wondering, and were surprised to hear that ARCO had approached BP Amoco, proposed and then agreed to an acquisition - and you have to be wondering why. Unfortunately, because of the quiet period rules imposed by the FTC, I'm not here to advocate the transaction from a shareholder perspective, and won't get into pushing the why too hard, but I can respond to your questions, and will in my prepared remarks, address the effects of the transaction on Alaska. I believe the merger will benefit the state. It will be positive because combining ARCO Alaska and BP Amoco will allow the restructuring of our Alaskan operations. This will allow elimination of duplication, it will permit lower operating costs and create new opportunities for growth on the North Slope. The result will be more capital spending, greater ultimate oil recovery, higher production and more state revenue. Clearly this acquisition will bring short term pain - there's so no doubt to that - but it is also the key to a better future. Make no mistake - in today's top business climate, continued consolidation of our operations on the North Slope is inevitable. North Slope oil production is half of what it was a decade ago. We are on decline. To remain a viable industry, and attract new investment, we must continue to reduce operating costs as production declines. I know many in the community are worried this change will affect our suppliers and our contractors. Many of them are here today. Others are concerned about job losses that will result from the joining of our two companies. These concerns are understandable, however, even without this acquisition, change was imminent. At the time the news of this deal became public, ARCO and BP were engaged in serious discussions aimed at establishing a single operator at Prudhoe Bay. This transaction delivers much more than the single operator Prudhoe Bay one because it better aligns the interests of BP Amoco and the remaining PBU owners while delivering Slope-wide savings and efficiencies. Now, a lot of good people will soon be looking for work. All have made significant contributions to the success of our industry in Alaska and seeing them go will be very, very difficult. Even so, myself and the ARCO Alaska management team are working hard to win approval of this merger for lots of good reasons. One of the most important ones is that the vast majority of ARCO employees will become part of a larger, stronger company, better equipped to compete in a fast changing world. Their jobs and their futures will be much more secure. The State of Alaska will benefit also. You've all seen what can happen when we take cost out of our North Slope operations. I would recall 1994 for those of you who were here, and most were. Oil prices had plummeted to $15 per barrel. It's sort of ironic - 15 sounds like a high price these days but it had plummeted to 15 - and ARCO Alaska's long term plan showed year after year of declining North Slope production. To survive, we had to made some difficult changes. We began by eliminating over 900 jobs. We changed the way we purchased goods and services. We forged new agreements with suppliers and contractors. We used technology and facility sharing agreements to reduce the cost of North Slope exploration and to lower operating and developmental costs. When we were done, we had reduced our total operating costs by 25 percent. Now we knew from the outset that those savings would go to our bottom line in allowing us to survive the low oil prices but, more importantly, our new cost structure allowed us to pursue projects that weren't feasible before: projects like additional link field drilling in our existing fields; projects like the mixed pump - the mixable injection expansion that's being built down at the Port of Anchorage; projects like West Sak; projects like satellite exploration and development; and last, but not least, ALPINE, which is setting a new standard in North Slope development. We challenged our employees to make the most of our new, lower cost structure, and they delivered a plan for achieving no decline after '99. The result was a three-fold increase in the level of ARCO capital spending in Alaska. That investment has paid off. In 1998, for the second year in a row, ARCO replaced every barrel it produced in Alaska. We also kick started a whole new industry here in Alaska when we awarded contracts to two Alaskan companies for the fabrication of the first sea lift modules ever built in Alaska. With the startup of ALPINE in 2000, we will deliver on the promise of no decline after '99. Why am I saying all of this? I want to emphasize that low cost operations mean new opportunities in increased investment - there is a tie there. That's why we must continue to drive costs out of the system. That's why combining our Alaskan operations with BP's Alaskan operations is the right thing to do. ARCO's low cost Alaskan assets, combined with the cost savings that will result from the merger, will significantly improve the competitiveness of Alaska in BP's global portfolio. This will create new opportunities for investment on the North Slope and, over the long term, it will mean more investment in Alaska, more exploration, more new fields, more production and more state revenue. The prize is real and it is worth capture. Now, prior to the regulatory approval of this combination, ARCO will operate as an independent company. We will continue to pursue our plans for production in Alaska. Capital spending will not be reduced. ALPINE will stay on track. We will continue to explore for new fields. We will continue to support community service organizations like United Way and other non-profits. We will continue to put protection of the environment and the safety of our employees first in all we do. ARCO is to deliver to BP Amoco a well run company with quality assets and tremendous growth potential. And, as I said before, when I talk about assets, I'm not talking about just the rock and the steel, but first and foremost, the men and women of ARCO Alaska. In short, it's going to be business as usual until this deal is approved. So, where are we? ARCO's first filing with the Federal Trade Commission was made the week of May 17. We expect to learn in mid-June whether the FTC will want additional information. The quiet period I mentioned earlier will end when our proxy statement is filed and accepted by the Securities and Exchange Commission, probably in late July. In the interim we are working with our counterparts at BP Amoco to design an efficient, cost-effective company that will make the most of our North Slope assets. ARCO supports and wants this combination to be successful. We picked BP Amoco for a lot of easily quantified business reasons but there is a lot of other strong intangibles as well. First, BP Amoco has made a commitment to treat our employees with respect and fairness. Second, we know BP Amoco well. We have been their partners and their competitors since the discovery of Prudhoe Bay more than 30 years ago. We share a common commitment to the development and marketing of cleaner burning fuels, to operating in an environmentally responsible manner, and to being good corporate citizens. Finally, and probably most importantly, we share a history, a 40 year history of commitment to Alaska. It will be tough to haul down the ARCO flag for the last time but for me that show will be a little easier because our people and their commitment to Alaska and to operating and maintaining the best oil fields in the nation will continue under BP Amoco. In closing, I want you to know that we understand and welcome your interest in this transaction. We look forward to working with the Committee as it assesses the merger and its impacts on the State. Thank you. Number 169 JAMES A. PALMER, Vice President of External Affairs, BP Exploration Alaska, gave the following testimony. Mr. Chairman, members of the Committee, for the record my name is Jim Palmer and I am the Vice President of External Affairs for BP Exploration Alaska which is part of the BP Amoco Group. I am grateful for this opportunity to speak to you today about what is an historic change with BP Amoco and ARCO, and within the Alaskan oil industry. The agreement for BP Amoco to purchase ARCO starts a journey towards a new future for Alaska. Two great Alaska companies have taken the first steps toward becoming a single, more competitive Alaskan company that is positioned for the challenges and opportunities of the 21st Century. Over the last two months, the proposed union of our two companies has generated a serious and mature discussion throughout the State, and the hearing here today is a further important event in that dialog. The simple reason for this transaction is to recapture the health and competitiveness of the industry, which is the foundation of Alaska's economy. BPX and ARCO have striven to achieve everything they can do separately to reduce the cost of finding and developing oil on Alaska's North Slope, but we need to do more to make producing oil in Alaska competitive with other opportunities in the global marketplace. The proposed combination of BPX and ARCO in Alaska is the product of a positive joint and long term vision of the fullest possible development of the North Slope. We can only do this by creating greater efficiencies, reducing costs, and increasing our financial strength by combining our organizations, which is necessary in order to make greater investment. Greater investment also leads to increased output and production which leads to lower unit cost, leading in turn to more incentive for greater investment - in other words, a virtuous cycle of lower cost, greater investment, and greater production. The natural consequence of this positive vision is increased revenue, long term jobs, and increased stability for the State of Alaska. The proposed combination of BP Amoco and ARCO in Alaska is equally driven by the virtual certainty that the alternative is a much less benign cycle, a downward spiral of higher costs, reduced investments and reduced production - the proverbial "negative spiral." Obviously, the natural consequence of this unhappy path is reduced revenue and jobs for Alaska. It is the positive vision of reduced costs, greater investment, greater production and the resulting benefits which brought ARCO to seek the combination earlier this year and brought both companies to agree to it, and to be here today to explain this to the Joint Committee. We recognize that this transaction and its potential impacts have raised questions and concerns in the months since it was announced. We are confident that the promise of the combination will, after examination and reflection, be evident to you and to the citizens of Alaska you represent, as it was and is to us, and that we will all enjoy the positive effects of it in the years to come. Mr. Chairman, the benefits and positive effects are not simply a hope that the future will be bright. The immediate benefits are embodied in concrete commitments we have pledged for the combined company. These have been aired before the press, in testimony earlier this year before the House, and in some of the articles and letters in the press. But let me briefly summarize our ten key pledges again now. First, we will invest $5 billion in our Alaska business over the next five years. This is an increase over the combined Alaskan investment of BP and ARCO in the last five years, and $150 million over the current year of 1999. Second, we will increase our financial support to community organizations by 50 percent from the current combined ARCO-BP level. Third, we will consolidate our global gas technology activities into Alaska with the objective of commercializing North Slope gas. The company will continue the ARCO-led sponsor group, relocate its gas technology center to Alaska, and build a $70 million gas-to-liquids pilot plant on the North Slope. Fourth, we will honor all current agreements with ARCO's contractors and suppliers and we will continue to treat all business partners fairly and equitably, with dignity and respect. ARCO contractors will be able to compete for future business on a completely equal footing with other contractors, including current BP contractors. Mr. Chairman, I might add that we've been greatly encouraged by the welcome for the BP- ARCO link given by the state's leading contractors. This confidence speaks well for the future. Five: Organized labor will continue to play an important role in our North Slope construction activities, and again we appreciate the supportive comments on the combination from several of the labor leaders in the state. Six: We will continue to work cooperatively and collaboratively with all levels of government. Seven: We will continue our efforts to provide jobs and business opportunities for Alaska. Eight: BP Amoco will honor ARCO's commitments to build new millennium class double-hulled tankers, and is fully committed to a tanker renewal program complying with the Oil Pollution Act of 1990. Of the 11 chartered tankers used in BP Amoco's ANS trade, three already have double hulls and six others have double bottoms. Nine: We will continue to actively be involved in state and federal lease sales and continue to pursue exploration and development opportunities in Alaska. And tenth, finally, but no less important, we will treat all of our employees with respect and dignity. I know there have been concerns expressed about the new company's potential size and its implications for competition within Alaska, about the influence and power we could have when this deal is approved. Mr. Chairman and members of the Committee, we have been responsible and good corporate citizens in Alaska for 40 years. That won't change. Indeed as the importance of Alaska grows in BP Amoco's global portfolio, so does our responsibility to the state. Our size, the experience, the skills, the financial resources and the stability we bring will be Alaska's competitive advantage, not a competitive threat. We are not competing against Alaska for shares of the shrinking pie, we are partnering with Alaska to compete together for a larger slice of the global investment pie. We can and will be an even more powerful ally of the state in helping make that bigger pie a reality. Mr. Chairman, before closing I would like to spend a little time talking about the process we foresee as we move forward. We are very excited about the potential for this combination and are eager to begin capturing and sharing the benefits of it but there are certain practical and legal steps that must come first. On the practical side, both ARCO and BP Amoco must review their respective organizations and plan, in very specific terms, how the organizations can intelligently be integrated. That work is continuing in Alaska, and indeed worldwide, and will take several more months due to the inherent complexity of blending two large corporations. And, of course, there are the legal steps which will take their own time as well. This committee is familiar with some of that, as I believe BP Amoco's and ARCO's lawyers have been speaking with the committee's lawyers about establishing a reasonable procedure for the committee to review the transaction. That is necessarily a complicated process, due to the various confidentiality laws and requirements involved. That will work itself out and I am certain can proceed in good order. A similar process is going on with the Attorneys General for Alaska and other states, and those talks are progressing this week as well, in Anchorage and in Seattle. The Federal Trade Commission in Washington is conducting its review at the same time under the Hart-Scott-Rodino merger notification rules. In that process, the companies filed their initial notification on May 17 and expect to receive a second request for information next week. We expect the FTC review to continue through the summer and we are hopeful that they complete ten complete all-government reviews in the fall of this year. We are eager to move forward and to capture the benefits of this transaction and to demonstrate in real action the positive effects it will have for our companies, the state, and for its people. Thank you, Mr. Chairman, for this opportunity to talk to the committee. Number 282 CHAIRMAN HALFORD asked Mr. Palmer at what time during the fall he expects the FTC to complete the government reviews. MR. PALMER said BP initially estimated six to nine months, which would fall between September and December, and that target remains. BP would like the reviews to be completed as soon as possible however, to get on with business and to remove any uncertainty for the employees of both companies. MR. MEYER concurred with Mr. Palmer's response, and said BP and ARCO want to make sure that all of the Legislature's needs, questions, and concerns are addressed. They need time to do so and are doing whatever they can to facilitate the process and alleviate the concerns of the 2250 employees who might be affected. CHAIRMAN HALFORD asked when BP and ARCO expect to make their initial filing documents available to the Attorney General's Office. MR. MEYERS replied to his understanding they are currently in discussions with the Attorneys General about the process in which that will occur. MR. PALMER indicated the discussions are going well and should not create a problem. CHAIRMAN HALFORD said he is aware that the Attorney General's Office requested, but has not yet received, the documents, and that he is trying to formulate a time line for the process. MR. PALMER said the discussions revolve around which documents the Attorney General wants, and needs, to see. Number 309 SENATOR ELLIS referred to the statements made by Mr. Meyer and Mr. Palmer about creating a more competitive company and noted the committee's concern is maintaining a healthy level of competition in the oil industry and ensuring that competition is not eliminated altogether in Alaska. He questioned BP's position on the issue of divestiture of acreage as required by statute, and, more importantly, divestiture of other important assets so that the situation might be made healthier for smaller oil industry operators who want to do business in Alaska. MR. PALMER said in reality, the only competition BP and ARCO have had in the past has been in the area of leases, otherwise they have been partners in the development of fields. When BP and ARCO speak of competitiveness, they are speaking about competing with other areas of the world involved in oil production. Regarding the acreage question, MR. PALMER stated BP fully understands the statutory prohibition to hold more than 500,000 acres. BP and ARCO fully intend to divest whatever excess acreage they have and will discuss with the state how it wants to proceed. MR. PALMER said BP and ARCO see no need to divest any other assets. They believe there are opportunities for other entrants to do business in Alaska and hope they do. Number 335 VICE-CHAIRMAN GREEN stated another company operated at Milne Point but found it necessary to sell out and leave because operating costs were too high due to pipeline tariffs (the company was a non- owner). He asked while the pipeline itself is covered by the Federal Energy Regulatory Commission (FERC) regulations, how BP and ARCO foresee allowing other companies to buy into facility use, cleanup and shipping operations. MR. MEYERS stated he finds the concern about facility access intriguing because he believes five fields are sharing the common facilities of the Lisburne Production Center; three fields are sharing the common facilities at Prudhoe; four fields are sharing the common facilities at Kuparuk; and two or three fields share the common facilities at Endicott. Although those arrangements have encompassed difficult commercial discussions, closure and a satisfactory conclusion have always been reached for both the resource and facilities' owners. He hopes that precedent continues in the future. VICE-CHAIRMAN GREEN maintained those negotiations took place between BP and ARCO but now there will be only one company. MR. MEYERS noted Exxon was a key player in the negotiations at Granite Point; Mobile,Phillips and Chevron played a key part in the negotiations at Prudhoe; and at Kuparuk, Unocal was a key part of the discussion. He agreed one less party will be involved but he believes sharing facilities is in the mutual interest of all parties involved. It is in the interest of the facility sharing owner to get more production through the facility to drop the per barrel operating cost; it is in the interest of the resource owner to get their production on-line; and it is in the interest of all North Slope owners to get more production to help bear the cost of TAPS. He noted people with a common incentive will find a solution. MR. PALMER added that after the acquisition is approved, BP will be a larger owner of many fields but it will not be the 100 percent owner of any field it does not currently own. Facility sharing requires 100 percent approval of all owners therefore BP will not have any more veto power than it currently has. Number 388 CHAIRMAN HALFORD asked Mr. Palmer to identify the most critical issues BP will face on the upstream side of the merger. MR. PALMER replied the most critical issue is working with the state on the perception of the creation of one large company here. The oil industry worldwide has entered a new era and the merger will provide huge benefits to the state. The Governor has set out six areas of concern in relation to local hire and the environment; each has its own peculiar issues surrounding it. It all boils down to access to facilities by new entrants and the cost of accessing the facilities. The pipeline is a common carrier with an agreement in place on tariff setting. BP has been purchasing oil from smaller companies and expects to continue to do so. BP will now be an active marketer on the West Coast - it was not before. Still, BP will have to sell 50 percent of the oil it produces in Alaska on the open market so its objective is to get the highest value for all of the crude - the same position the State of Alaska is in. CHAIRMAN HALFORD said that because of the direct economic difference to the State of Alaska in terms of the amount paid based on the assignment of field costs, or the pipeline tariff or other agreements, Alaska usually makes more on a barrel of ARCO oil. He asked Mr. Palmer what impact he foresees the merger having on state revenue regarding the lower ARCO tariff and field cost assignment. MR. PALMER stated BP is very cognizant of that issue and that the subject will be a matter of discussion with the Administration. Number 449 VICE-CHAIRMAN GREEN stated post-Mukluk, ARCO has been somewhat more aggressive exploration-wise. He questioned how much of the $5 billion to be invested by BP over the next five years will be used for existing discoveries development versus what might continue on the existing fields. MR. PALMER said he does not have a good answer for that question because BP has not determined with enough detail how it will spend the money. Regarding Vice-Chairman Green's assertion that ARCO has been more aggressive, BP believes it is as aggressive an explorer as any other company. MR. PALMER pointed to the Liberty and Sourdough discoveries, and noted when BP took over the Milne Point field it was producing about 10,000 barrels of oil per day; that amount is now quadrupled. Number 478 CHAIRMAN HALFORD stated, with regard to the flow of information between BP, ARCO and the Administration's attorneys, that it is important that the committee conduct an independent policy review. He indicated the committee is interested in the Hart-Scott-Rodino filing, particularly in the 4(C) business plan section. He asked Mr. Palmer how he sees the access agreement for the legislative branch progressing. MR. PALMER replied BP understands the Legislature's need to have access to information and BP intends to pursue the ongoing discussions to achieve accommodation. CHAIRMAN HALFORD said it is important to conclude the negotiations as soon as possible. MR. MEYER said they want to get the Legislature the information it needs to make its decisions but, at the same time, there are confidentiality concerns. He expressed confidence that an agreement will be reached that meets both parties' needs. Number 518 REPRESENTATIVE WHITAKER brought up the facility sharing agreement and asked Mr. Meyer to explain what he meant by the term "commercial discussion." MR. MEYER said those discussions are centered around determining a fair facility sharing fee. The discussions take into account what share of operating and maintenance costs and capital fees should be paid. In addition, almost every facility operating on the North Slope is at its limit for water and gas handling, so the discussions can become complicated. He emphasized that although the discussions can be lengthy, conclusions have been reached to the satisfaction of the resource and the facility owners. REPRESENTATIVE WHITAKER asked if the commercial discussion is essentially a negotiation between the facility owner and a potential facility user. MR. MEYER said a negotiation is correct. REPRESENTATIVE WHITAKER asked if Conoco was subject to facility sharing agreements and its associated costs, and BP was not, whether BP, as the owner of the facility, would be in an advantageous position. MR. MEYER clarified that when he spoke about facility sharing he was referring to the production facilities on the North Slope, not to the pipeline, TAPS, which is regulated as a public utility. He said he was not aware of any facility sharing agreement that Conoco entered into because Conoco had its own production facility. REPRESENTATIVE WHITAKER asked if a direct line from Milne Point to Pump Station 1 exists. MR. MEYER said a pipeline from Milne Point joins the Kuparuk pipeline, a common carrier, which then joins TAPS, another common carrier. REPRESENTATIVE WHITAKER asked if any shared facilities exist between Milne Point and Pump Station 1. MR. MEYER said he is not aware of any facility sharing agreements at Milne Point. Number 590 CHAIRMAN HALFORD stated the combination of the disposal-removal component of the tariff over the life of the pipeline, if added to present value, has been estimated at $5 billion. The value of the pipeline, for tax purposes, is about $3 billion. He asked whether the pipeline is an asset or liability in the equation of the merger. MR. MEYER said he has not pondered that question but arguments could be made on both sides of the ledger. CHAIRMAN HALFORD indicated that issue will be discussed further and it may be that the disposal costs taken from the tariff may exceed the cost of removal. TAPE 99-1, SIDE B [MR. MEYER'S response was interrupted by the tape change.] SENATOR PEARCE referred to Mr. Palmer's statement that BP plans to invest $5 billion in the next five years, an increase over the two companies' investments during the past five years, and questioned what level of investment was projected by each company prior to the plan to merge. MR. MEYER replied ARCO presented its three year forecasted capital plan last January and February, in which its net share in Alaska was estimated to be $450 to $500 million over the next three years. That plan did not include the $150 million each for the three millennium tankers ARCO is building. ARCO's goal for 1999 is to spend $462 million. He assumed the amount would have remained the same over the five year period. MR. PALMER replied BP is spending $400 million on capital this year; last year it spent $700 million. Historically, BP has spent between $400 and $500 million per year. SENATOR PEARCE concluded that the $5 billion investment during the next five years is the same amount both companies planned to spend independently. MR. PALMER said that is not necessarily true because he does not know how much BP planned to spend after this year. It was BP's view that the $5 billion would be an increase of $100 million per year spent by both companies. SENATOR PEARCE asked Mr. Palmer and Mr. Meyer to elaborate on their comments that the merger will allow Alaska to compete in the global marketplace, resulting in greater investment. She expressed concern that the combined operations will save $1 billion per year which could be invested elsewhere in the global markets rather than in Alaska, resulting in a net loss to Alaska. MR. PALMER clarified the $1 billion savings would be in worldwide operations; the savings in Alaskan operations is projected to be $200 million. He repeated with the decline in oil, costs are of concern and BP downsized to prevent a downward spiral. It was BP's view that investing in activities on the North Slope would have looked less and less attractive. MR. MEYER said he believes Mr. Palmer is giving the committee the "straight scoop." As partners and competitors in the past, both BP and ARCO did their own estimations of what key partners and competitors might be doing and where they were going. In his opinion, $1 billion per year is more than the two companies would have spent independently. SENATOR PEARCE asked if that is true even with NPRA. MR. MEYER said he believes so. Number 056 REPRESENTATIVE WHITAKER asked whether ARCO and BP representatives will be available to the committee as it progresses through the process. CHAIRMAN HALFORD said they made that commitment. He thanked Mr. Meyer and Mr. Palmer for their testimony and announced that the committee would recess until 1:20 p.m. at which time public testimony would be taken. Number 068 CHAIRMAN HALFORD reconvened the meeting at 1:40 p.m. and asked participants to limit their comments to five minutes. STEPHEN CONN, Executive Director of the Alaska Public Interest Research Group (AkPIRG), made the following comments. The Legislature's job is a serious one because it is dealing with a watershed issue: the ultimate political control of Alaska's natural resources. The Territorial Legislature experienced again and again a similar situation whereby a single business had dominant control of a natural resource and could dictate the price, time, and terms to exploit that resource. As the Territorial Legislature sought statehood, that issue was deep and substantive and drew people of all ideologies together. E.L Bartlett urged delegates to the Constitutional Convention to be creative in their drafting of the section on natural resources, pointing out at least two dangers: the exploitation of Alaska's resources under the thin disguise of development; and that outside interests tend to stifle any development that would compete with their activities elsewhere. To this point in time, Alaska has been able to secure a fair deal for the exploitation of its natural resources because it has relied on a competitive process that it could apply to its best interests. That competitive process is now at stake. As a resident of Alaska, he wants the Legislature to have full authority over that decision, not a multinational corporation. He is dismayed with the way the process has unfolded so far. He questioned how BP and ARCO dare negotiate how much of the information they have provided to the FTC they will share with the state. That information must be shared to the greatest extent possible and a deal should not be cut that denies the public the opportunity to scrutinize it. Alaska should file an antitrust lawsuit to secure information through the discovery process to work on the citizens' behalf. Hearings should be better noticed and teleconferenced. Sooner or later the public will understand that the amount of their permanent fund checks will be affected by the revenue Alaska has to work with in coming years. BP and ARCO's ten principles have been run as part of their advertising campaign. BP and ARCO may be reading past actions of the Legislature, such as NorthStar, as a sign of weakness or capitulation. BP and ARCO are wrong. The Legislature is not prepared to capitulate. The public wants maximum input in this process and is prepared to back the Legislature's demand for divestiture. BP and ARCO will do what is in the best interest of their shareholders. He asked the committee to let the public have full access to its deliberations. Number 199 KAY BROWN, representing the Alaska Conservation Alliance (ACA), gave the following testimony. BP Amoco's acquisition of ARCO has major implications for Alaska and its environment. The ACA conducted a statewide poll in early June: 29 percent of respondents favor BP's proposed takeover, 38 percent oppose it and 34 percent are undecided; 83 percent favor placing conditions on the merger to protect Alaska's interests, while 9 percent oppose conditions and 8 percent do not know. ACA is fearful that the pace and extent of conversions to double-hulled tankers may be diminished. Last year, ARCO announced plans to construct double-hulled tankers for shipping crude oil from Valdez. ARCO ordered three tankers with an option to purchase two more. These tankers exceed the standards for double-hulls required by law, and were to be built ahead of schedule for converting the U.S. tanker fleet mandated by the Oil Pollution Act of 1990. At the same time, BP announced its plan to build three double-hulled tankers for transport of ANS crude, however construction was abruptly terminated when the merger was announced. It now appears a total of three new tankers will be built. No new tankers have been added to the fleet since the Exxon Valdez oil spill. A new pattern of oil tanker ownership may result in less corporate liability from future oil spills. BP, a foreign company, is prohibited from owning TAPS tankers under the Jones Act. This creates a disincentive for maintaining current standards of marine safety and oil spill prevention. In ACA's recent poll, 90 percent of Alaskans favored the use of double-hulled, state-of- the-art tankers in Alaska waters. MS. BROWN continued. ACA's second concern relates to BP's ability to maintain oil spill prevention and response capabilities with the personnel cuts that will result from the merger. This is particularly troublesome given BP's risky and ill-advised development of the NorthStar oil field; an area for which there is no effective spill response technology available, especially during broken ice conditions. ACA is also concerned that the loss of competition will result in less innovation in developing new technologies to protect the environment. Multiple operations are key to disclosure of environmental problems; downsizing will result in less self-monitoring of compliance with environmental standards. MS. BROWN discussed ACA's concern with the more than 60 toxic waste sites on the North Slope. Conservation groups successfully sued ARCO in 1988 over those sites; as a result companies developed new techniques for waste disposal and now reinject the wastes into the oil bearing formation. As of 1998, however, 253 abandoned reserve pits have not been cleaned up. Of those, 130 belong to ARCO and 49 to BP. ACA fears the merger will give BP less incentive to clean up its waste sites. MS. BROWN speculated that consolidated control of TAPS could affect the environment. ACA has suggested that a citizens advisory council be established for the oil fields and TAPS corridor, however industry opposes that idea. Funds collected through the TAPS tariff to dismantle TAPS at the end of its life are not in escrow. To assure accomplishment of pipeline dismantling and restoration of the environment, funds should be put into escrow now. Finally, MS. BROWN stated that the consolidation of industrial development in Alaska's arctic will give BP unprecedented economic and political influence over where and how oil and gas exploration and development will occur in the region. BP has lobbied aggressively to exploit the coastal plain of ANWR and other sensitive environmental areas. ACA asks legislators to look carefully and hard at this merger, and that they take appropriate steps to address ACA's concerns and the concerns of other Alaskans. She endorsed Mr. Conn's request for more public access to this process. Number 318 CHRISTY MCGRAW made the following comments on behalf of BACKBONE, a fact-finding group of citizens formed since the merger of BP and ARCO was announced. The members of BACKBONE are gravely concerned about the long term implications of combining the two oil giants. They believe the Legislature is obligated to maximize the sale and production of Alaska's resources for Alaska. BACKBONE wants the following: -optimization of marine transportation with an emphasis on safety, responsibility, and economic return to Alaska; -to optimize operation of the TransAlaska pipeline system with emphasis on providing open commercial access to potential producers to ensure competition; -to protect resources, competition, and the environment for maximum return to Alaskans in development of current and new North Slope facilities and fields; -to ensure access to, production of, and marketing of North Slope natural gas to provide a substantial source of revenue to the state's budget; and -to ensure that leasing provides maximum returns to Alaskans in a timely and state-dictated basis. BACKBONE believes the TAPS dismantling, removal and restoration fund has not been providing benefits to Alaskans. It also believes legislative consideration of the social, cultural, and broad economic impacts of the merger on Alaskans' quality of life - including the issue of Alaska hire - is very important. BACKBONE would like to see more public representation in this process. Number 400 RICHARD FINEBERG, an oil development consultant, made the following proposal and comments. In response to this significant alteration of the landscape of North Slope resource development, the state should seriously consider owner divestiture and state purchase of the TransAlaska pipeline as a condition of approval for the merger. This proposition revolves around two axes. The state should negotiate to receive ownership of TAPS plus approximately $2 billion, the difference between the money collected by the owners for dismantling and the assessed value of the pipeline. The state should operate the pipeline on a non-profit basis reducing shipping costs by approximately $1 per barrel. Tariff reduction would enhance state revenues, improve the competitiveness of North Slope oil in the global market, and remove all possibility that TAPS might be operated to inhibit competition. This proposal has been endorsed by AkPIRG, the Alaska Forum for Environmental Responsibility, and Oil Watch Alaska. He envisions the creation of a quasi-public corporation, along the lines of the Alaska Railroad Corporation, to replace the TAPS owners' committee. The corporation could continue to use the same agent the owners' committee now uses, the Alyeska Pipeline Service Company. His main concern is that the pipeline has been used to inhibit competition, and whether that is occurring or not, it is a potential problem. The purchase of TAPS could, without cash outlay, enhance the state's ability to deliver oil to Valdez at tariff rates below those charged by TAPS owners; ensure competition; ensure that the pipeline communities receive a stable revenue stream in lieu of property taxes; ensure that cost cutting does not affect environmental performance; and escrow dismantling collections to trade performance of those obligations for latter-day investment that would prolong North Slope production. JACK LAASCH, General Manager of Alaskan Petroleum Contractors (APC), made the following comments. APC supports the BP Amoco - ARCO merger as its long term working relationship with both companies has been very good. One operator will provide a more cost effective approach to oil production on the North Slope through a single management structure. Efficiencies will be realized in the areas of oil production, operation, maintenance, safety, quality, and administration, and in many areas through the consolidation of Slope-wide procedures and processes. These efficiencies will benefit the state through increased revenues as well as by employing Alaskans. BP has shown a strong commitment to Alaska hire in the past. APC has invested considerable time and capital into its Anchorage fabrication facility and its Nikiski modular assembly site. BP's commitment to Alaska's business development will ensure that this investment will be honored. As long as Alaska makes oil development economically attractive, BP Amoco, like any for-profit corporation, will aggressively pursue the development of new oil in Alaska, as well as commercialization of North Slope gas. BP has stated it will not only continue its community support, but it will also increase the amount its contributions to charitable organizations. This merger will create an opportunity for future development in Alaska, well beyond what Alaska has already experienced. He urged members to endorse the merger. TAPE 99-2, SIDE A PETE LEATHARD, President of VECO Corporation, gave the following testimony. Over 30 years ago, ARCO put VECO in business and since that time they have worked closely together. ARCO has been a good corporate citizen and a credit to the State. Alaska is fortunate to have BP buy ARCO. BP has been doing business in Alaska for 40 years and has been the State's number 1 investor. BP's resources allow it to invest and remain strong in the world market. Many smaller companies have left the state in the last decade because they do not have the resources to compete in the world marketplace. Many of VECO's contractors will be negatively impacted by the merger in the short term, however in the long term the benefits gained by making Alaska more competitive will be worthwhile. BP's ownership of so much gas will enhance the chance for gas sales, and its ability to bring the latest in gas technology to Alaska will be a good opportunity. Regarding state ownership of the pipeline, VECO believes the state should stay out of the business and let private enterprise do its job. SENATOR PEARCE disclosed her association with Mr. Walker, who is a member of the RCAC, as is her husband. BILL WALKER, representing a group named Gasline Now, comprised of mayors from the North Slope Borough and a few other locales, made the following comments. Gasline Now was established 2+ years ago in an effort to bring forth the gas line. Its members participated in hearings on HB 393 which is a step in the right direction to bring the project to fruition. The most positive aspect of HB 393, from Gasline Now's standpoint, is that financial incentives were not provided for gas and liquids. Gasline Now sees the gas and liquids concept, not unlike the Manhattan icebreaker tanker was in 1969, as another way of removing a resource from Alaska without providing much benefit to Alaskans. Gasline Now learned that under HB 393, the biggest beneficiary of a gas line would be the federal government, through taxation of the profits. Gasline Now submitted an amendment to HB 170 that would provide for revenue sharing through community dividends comprised of 25 percent of the net profits. Gasline Now's goal is to make sure that a pipeline is built from the North Slope through the permitted route to Prince William Sound. To this end, members have met once per week for the past five weeks with the sponsor group. Gasline Now has done some work on the market side: it appears that the pace of the various options under consideration may not be in the best interest for a gas line to be built in Alaska. The tremendous amount of gas on the North Slope will require a unique market and Alaska needs to quickly get established in the market, hopefully within the next 24 months. Gasline Now has been in contact with the Texas Municipal Gas Corporation which bids on gas reserves for the benefit of those in the coop. Gasline Now finds discussion of a $70 million pilot project of gas and liquids on the North Slope offensive from the standpoint that Alaska communities do not have natural gas and will not without a gas line. Other spinoff activities in the way of development from a gas line have enormous potential. It is unusual for a governmental entity to be involved in concepts such as this, but in some ways it is not unlike Alyeska's approach to the City of Valdez to protect and get financing. Gasline Now sees the construction of a gas line as another opportunity for government and industry to work together to benefit both parties. MR. WALKER said Gasline Now is concerned about the loss of ARCO because it is a leader in technological advancement. Gasline Now believes that a lack of interest in selling the gas will be a substantial hurdle to the project. He asked committee members to keep in mind that several entities in Alaska would like to have a gas line built. The revenue stream that would normally go to the federal government in the form of income taxes would instead go to a dividend sharing program. While construction of a gas line might not be financially economical for BP Amoco, Gasline Now believes it would be viable and possible for the State of Alaska. Number 150 VIC FISHER stated that BP, ARCO, and the State of Alaska have had a very successful partnership. This partnership will now become more of a monopoly. He noted that Bob Bartlett said, in a November 1955 keynote address to the delegates at the Constitutional Convention, that in the long term, the convention and the constitution will be judged, not by the structure of government established or the rights of individuals, because they are taken for granted, but by provisions relating to resources. As a result, the Convention heeded Bartlett's concern about monopoly power. Bartlett warned the Convention about large multinational corporations that might get control of Alaska's resources and develop those resources for their benefit rather than for the benefit of the people of Alaska. The Constitution vests in the Legislature the responsibility for protecting the interests of the State. The Legislature, government, and public need information regarding the proposal and its implications. If BP and ARCO are not completely forthcoming with information, the state should file a lawsuit and use the process of discovery to obtain all information the state needs to evaluate its position and to determine any conditions it may want to impose before concurring with the merger. Any conditions imposed by the State should be made public. BOB STIMSON, President of ConAm Construction Company, stated ConAm has experienced first hand the economic ups and downs of Alaska's oil industry over the last 25 years. The proposed merger of BP Amoco and ARCO represents a necessary economic adjustment to keep Alaska's oil and gas industry viable and competitive in the global market. Adjustments and modifications by industry and the state over the years have kept the oil and gas industry healthy. In an aging oil field, production decreases but costs do not follow suit: the merger is a logical adjustment to make Prudhoe Bay economics work. ConAm survived the ups and downs by diversifying into other non-oil and gas construction projects and is stronger today because of it. BP Amoco has proven to be an efficient and environmentally sensitive producer with a good track record as a corporate citizen. KAREN COWART, General Manager of the Alaska Support Industry Alliance (the Alliance), made the following comments. The Alliance does not view the proposed merger as a crisis, however it does recognize it as a profound turning point, changing the landscape of Alaska's oil and gas industry. For years, the industry has taken measures to reduce costs; one operator is the next logical step toward further efficiency. The biggest surprise that came with the announcement of the merger is that it will leave the state with not only one operator, but with only one main producer as well on the North Slope. Initially, the Alliance expects to see further job losses in the support sector as administrative functions are consolidated. Support industry businesses will likely respond to demand changes by streamlining their own operations. Competition is critical to successful leasing programs in the National Petroleum Reserve, the Outer Continental Shelf and possibly ANWR; it is time to aggressively market Alaska. The state's biggest weakness is its image of instability created by the $1 billion fiscal gap. Closing the gap this year is the Alliance's top priority. While the Alliance does have questions about the merger, it also believes there is room for optimism. If the merger makes the resulting company more competitive under increasingly difficult business conditions, this will bode well for Alaska's future in petroleum development. Weakened companies cannot afford to operate in remote, expensive locations like the North Slope, especially when oil prices continue to fluctuate. Money freed up from cost savings may well be spent on exploration and production activities. BP Amoco has said it will pursue ways to commercialize Alaska's vast natural gas reserves. Without new projects, Alaska's new modular industry will fade. BP's corporate philosophy is focussed on development that does not compromise environmental protection or employee safety. MARY SHIELDS, General Manager of Northwest Technical Services, stated she has followed the fluctuation in oil prices and events around the world, and knows the status quo is not going to work unless prices turn around dramatically and the coastal plain is opened. Efficiencies need to be realized for Alaskan operators to continue to compete in a global market. She has a high regard for people in BP and ARCO after working closely with them for 15 years and believes the merger is necessary. ARCO and BP have handled this transaction in a very straightforward action. Meetings have been held with organizations that will be impacted and all questions have been answered. She is concerned about the status of Northwest's contracts and how competition will be established as the merger moves forward, as well as Alaska's economy. She echoes other Alaska business leaders in looking to the newly structured company to continue its emphasis on Alaskan hire and Alaskan buy; it is now critically important that this happen. She applauds the Governor and Legislature as they continue to analyze the change that will result in uniting two of Alaska's largest employers. MAYNARD TAPP, President of Hawk Construction Consultants and a member of the Alliance, made the following points. Alaska must remain competitive in the worldwide oil market in order for his company to continue in business in Alaska. Changes in the oil industry in Alaska were inevitable. A one-company scenario is somewhat frightening only because we are unfamiliar with its operations. Hopefully this scenario will offer competitive opportunities for all Alaskan suppliers and contractors. BP Amoco and ARCO have been good corporate citizens of the State. Their announcement regarding higher capital expenditures over the next five years, as well as efforts toward commercialization of North Slope gas, is a good indicator of BP's future commitment. Number 449 BILL STAMPS of the Peak Oil Field Service Company made the following comments. The oil industry in Alaska has been downsizing for several years. As producers downsize and consolidate services, the contracting community must also adjust in the same direction. This does not mean there will be any reductions to the high standards and development of our oil and gas reserves. It means better, safer, and more economical methods of development have evolved. Finding cost cutting methods and developing Alaska's oil and gas reserves in a safe and environmentally sound method is essential for Alaska to compete in world markets. The BP Amoco - ARCO merger does just that. It is a solid business decision which he supports. JOE MATHIS, Manager of Business Development for NANA Development Corporation, said NANA Development Corporation has been doing business with the oil industry for the past 25 years, with both ARCO and BP. NANA has three priorities: shareholder hire; safety; and protection of the environment. BP and ARCO have honored those priorities. Over the years he has seen BP and ARCO create a safer industry and work to protect the environment. NANA's core values that govern its activities are honesty, integrity, and to treat all individuals with respect and dignity. BP and ARCO have used the same values in their dealings with NANA. NANA sees no reason that those values will change and it has no fear of doing business with the merged companies. MIKE MACY, testifying on behalf of Alaska Wave Riders, said the committee has heard some amazing things from BP and ARCO today, such as the fact that they feel their workers' pain while BP's personnel officers finalize plans to cleanse any and all of ARCO's engineers who have spoken out about the companies' practices on the Slope. BP has been very clear about what it means when it says it plans to move its global gas commercialization headquarters to Alaska; it means it will put a plaque on the door of an office in Anchorage and continue stalling the North Slope gas export project until it can place one of its Indonesian projects in the Japanese market. Even though BP has admitted it is Alaska's partner and that it will have no competition on the North Slope, it cannot give the Legislature and the Governor documents because of concerns about trade secrets and competition. BP and ARCO talk about being competitive on the world market but Alaska only needs to be competitive on the West Coast. He has come to expect non- performances like the one today. He is encouraged by the committee's questions and is convinced the committee will open up the process and make all documents available to any interested Alaskans. Alaska has had too many dirty secrets regarding settlements of tax, royalty, tariff, and Prudhoe Bay Unit disputes. If Alaskans are informed and their opinions are heard, the Legislature will be sure that Alaska's future is determined by Alaskans and not by BP's shareholders. TAPE 99-2, SIDE B RICK STEINER posed his concerns about the merger as follows. The lack of a competitive edge between ARCO and BP will reduce the incentives to increase the environmental protection standards. BP and ARCO have been trying to "out-green" each other over the past 20 years. His main concern is with the tankers traveling through Prince William Sound; he echoes the Alaska Conservation Alliance's concerns regarding the need for more new vessels. He hopes the Legislature exerts every bit of legal authority it has in stipulating several conditions to any merger that goes forward, one being that the newly-merged company advance its retirement schedule of its single-hulled vessels and require that vessels meet the millennium class standard that ARCO initiated. Also, the Hinchenbrook tug is inadequate as a rescue or salvage vessel. The state needs to stipulate that an adequate rescue vessel be stationed there. The Legislature should support a Presidential Task Force to audit the pipeline from the terminal North, and a pipeline citizens advisory council should be created. The biggest question surrounding the merger is who is in charge. He supports the comments of AkPIRG, the Alaska Conservation Alliance, BACKBONE, Mr. Fineberg, Mr. Fisher and Mr. Macy. He suggested leaving some oil in the ground for 20 years to maximize returns. He thanked the committee for scrutinizing this issue. Number 103 WALT PARKER stated he has been involved with North Slope oil since 1947. He fears the state is under-funding itself in regard to analyzing the merger. The Administration and Committee will need more expertise to ensure that the State has a level playing field. If the state files a lawsuit, it will need substantial documentation so that those who make the ultimate decision have the best information available. An audit needs to be done on the pipeline. Without a strong request from the Legislature and the Governor, the audit will not occur. An audit will enable the State to better make future decisions regarding tariffs. Regarding global oil and gas markets, more information is necessary to determine where Alaska fits in those markets. Anti-trust decisions changed with the Microsoft case, so the ball field is entirely new. Regarding the regulatory side of this issue, the APUC has changed and the Oil and Gas Conservation Commission has been eliminated. CHAIRMAN HALFORD pointed out the Oil and Gas Conservation Commission was not eliminated, and in fact, its authority and funding were increased. MR. PARKER said the effect on regulators will be very different because they will not be able to get information from several sources. He stated the effect on the state's economy needs to be a part of the dialogue also. CHAIRMAN HALFORD pointed out the legislative branch cannot file a lawsuit, but the Committee, by resolution of its creation, has subpoena power, and it is the committee's intent to gather the parallel information with the Administration and to be a party to the discussions. He said the Committee will be in a "catch-22" situation because of legitimate confidentiality requirements. CHARLIE COLE made the following remarks. After listening to previous speakers make verbal assaults about past tax settlements between the State of Alaska and the oil companies, he has to respond to the accusations that those settlements are dirty little secrets. Those settlements were hard fought, well litigated, well prepared, and as clean as snow. Many committee members were in the Legislature when those settlements were being negotiated. The Legislature was fully briefed on those settlements. Anyone who says they were dirty little secrets is totally wrong: those settlements were clean, honest, and in the best interest of the State. CHAIRMAN HALFORD agreed with Mr. Cole's conclusion but said the problem is that some of the data behind the information will never be public because under the Hart-Scott-Rodino filing, it is highly confidential. He announced that no one else had signed up to testify, therefore the public testimony portion of the meeting was closed. He stated the series of questions before the Committee at its next meeting would be in regard to the confidentiality of information. SENATOR PEARCE requested that the Committee get a briefing on the process and timing of the reauthorization of the pipeline right-of- way. CHAIRMAN HALFORD announced the committee would attempt to meet sometime during the week of July 5th. He announced that any input is welcome. He adjourned the meeting at 3:25 p.m.