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Governor names team to review BP Amoco acquisition of ARCO
Kristen Nelson PNA News Editor
Alaska Gov. Tony Knowles has named a cabinet-level team to review the terms of the BP Amoco acquisition of ARCO. Combined, the companies produce some 74 percent of crude oil in the state and own more than 72 percent of the trans-Alaska pipeline system.
State Attorney General Bruce Botelho, one of four named to the team, said April 1 that the “state of Alaska intends to fully, thoroughly, carefully review the terms of that acquisition.”
Members of the team are Botelho, Department of Natural Resources Commissioner John Shively, Department of Revenue Commissioner Wilson Condon and John Katz, special counsel to the governor and director of the state’s Washington, D.C., office.
Knowles said in a statement that he was asking the team to review the proposal for its impact on jobs, Alaska businesses and the economy; state revenues and royalties; future oil and gas development; management and rates on the trans-Alaska oil pipeline; North Slope natural gas commercialization; and other legal concerns, especially the impact on competition. Four principles set for merger evaluation The governor said there were four principles on which the merger would be evaluated:
It must continue to strengthen Alaska’s economy through Alaska hire, use of Alaska businesses, and support of community organizations and causes;
It must continue improvements for environmental protection and the safe transportation of oil;
It must maintain competitive opportunities for other companies to enter the oil industry in Alaska; and,
It must continue to provide a stable source of revenues to the state of Alaska.
Botelho said that the governor has met with the state’s legislative leadership and that there was consensus that these should be the paramount reviews. The state, he said, is also in contact with the Federal Trade Commission to coordinate efforts. He said the state will make use of whatever resources required, both its own staff and contracts with expert specialists in acquisition and economic evaluation.
Botelho said that because of the magnitude of the merger’s impact on Alaska, he expected “the FTC is primarily going to focus on Alaska.” Botelho noted that the state is not the only sovereign that might be affected by the arrangement — the federal government is another major land owner in Alaska. Opportunity to look at how oil is valued Botelho also said that discussions around the merger presented an opportunity for the state to look at how oil is valued in Alaska. The value of oil is a production tax issue involving subtractions from sale or spot price to calculate wellhead value.
“Production tax is levied on the gross value of oil at the point of production,” Commissioner Condon told PNA in a November interview. Since most North Slope oil is transported to distant points, wellhead value is calculated by subtracting agreed upon charges, such as transportation, to reach the value of oil to be taxed. Department of Revenue regulations were revised in 1994, Condon said, in an attempt to provide tax certainty to the state’s producers. The first set of audits have been done on 1995 taxes — those calculated by tax payers under the new regulations — and some additional areas have been identified where the regulations are subject to interpretation. Revenue is working, Condon said in November, on revisions to provide more clarity.
Condon said April 1 that “to the extent that the arrangements that we have now can be adjusted so that they work better, this merger does give us the opportunity to look at those arrangements and seek to modify them if it makes sense to do so.” It is, Condon said, “an opportunity to look and see if any arrangements are not as clear and not working as well as they could be.”
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