BP and ARCO avoid legal action by complying with Botelho's subpoenas

The attorney general said he would not scuttle members of his review team to quell the companies' concerns about privacy

Tracy Wilson

PNA Staff Writer

BP Amoco and Atlantic Richfield Co. officials have turned over documents subpoenaed in May by Alaska's attorney general for his investigation of the companies' planned $26 billion merger.

ARCO spokesman Ronnie Chappell and BP spokesman Paul Laird both said June 14 that the documents in question had been delivered to Attorney General Bruce Botelho.

Botelho had said he would go to court if he didn't receive the paperwork that day.

“I issued subpoenas in May and the documents are due today,” Botelho said just hours before he received the material from the two companies. “I'm counting on compliance ... but if they do not comply, I will seek an order to have them held in contempt.”

Botelho said he and the companies had clashed because he refused to agree to privacy provisions that would exclude everyone except Department of Law investigators on his review team from seeing the confidential information in the documents under subpoena.

The companies' request, he said, exceeded even the Federal Trade Commission's strict confidentiality regulations regarding anti-trust investigations.

Members of the review team include Botelho, Natural Resources Commissioner John Shively, Revenue Commissioner Wilson Condon and John Katz, special counsel to the governor and director of the state's Washington, D.C. office.

Laird said the documents were sent without a privacy agreement in place.

“This is a bit of a leap of faith,” Laird said.

Inviting public scrutiny

BP Amoco and ARCO announced the proposed acquisition in April.

As state officials push for documents, Alaskans concerned about BP Amoco's proposed acquisition of ARCO are calling for a process that is more open to the public.

But FTC and Securities and Exchange Commission rules will make it difficult for the public and even a special legislative committee with subpoena power to legally delve into specific details of the two companies' operations and strategies.

“We're sort of learning as we go about the high confidentiality requirements,” said Ted Popely, legal counsel for the House and Senate majorities. “You'll definitely not see BP or ARCO or the attorney general's office or the FTC give an open-door policy to the Legislature ... You can imagine what's going on here. One company is trying to acquire another and doesn't want the general public to know their business arrangements, profits and losses. It's not public information and the companies could suffer if it's revealed. The FTC recognizes that.”

Popely said the public will have ample access, however, through committee meetings that will be held throughout the summer. The Legislature's Joint Special Committee on Mergers convened the first of those hearings June 11.

“To my knowledge, all the special committee hearings are going to be noticed and will be public, subject to executive sessions intermittently,” he said.

Popely said he was not sure when the special committee would take its findings back to the full Legislature and that the FTC review will likely take between six and nine months to complete.

The Legislature, he said, has retained two law firms to assist in its probe of the proposed merger — Preston, Gates and Ellis of Anchorage and Collier, Shannon, Rill and Scott of Washington, D.C.

Keeping secret information safe

That access is strictly regulated by the Hart-Scott-Rodino Act, he said.

“Revealing that information could be a taking of their property,” Griffin said. “In addition, you could prejudice the competitive positions of the companies ... It's difficult. To the legislators' credit, they're concerned. They want information. The governor too would like to provide more information, have a conversation with the public about each step, but it's not the way the system is set up.”

Griffin said the inability of state investigators to share confidential information with the legislators initially created tension, which has since dissipated.

“They appear to understand and accept that now,” he said.

ARCO spokeswoman Dawn Patience and Laird of BP have said their companies welcome government and public scrutiny of the proposed combination of their companies.

“The bottom line from our perspective is that putting ARCO and BP together is vital to the long-term health of the state,” Laird said. “It will make Alaska a lot more competitive with investments, more money will be invested here, there will be more North Slope investment, more revenues, more jobs. It's no surprise this is creating an extreme amount of interest and concern.”

Patience said she could not offer much new information about the progress of merger talks, since it is in the SEC's so-called “quiet period” until ARCO's proxy is approved and mailed to shareholders.

“Once it's written and approved and mailed, we'll be able to talk about the merger again publicly,” she said. “We understand that people have concerns and want to be able to answer their questions.”

Jack Griffin explained that the SEC actually limits the things that can be discussed by company officials during a pending investigation, because any statements can have a significant effect on how the market views the likelihood of a merger's success.

“Which in turn can affect stock prices, which can benefit or harm the shareholders,” Griffin said.

Griffin said the confidentiality rules won't prohibit Alaskans from going to public meetings and testifying about how they feel about the merger.

“A representative from a company that does business with these companies can approach and testify about things that raise concerns for them,” he said. “You could have stock analysts express their views of what the merger might mean for the ultimate success of these companies. There are lots of things lots of people can talk about. What's difficult and awkward is a law enforcement entity talking about its investigation, and it's difficult for the companies themselves to talk about their views of the merger, other than stating in rather benign terms what a good idea they think it is.”

Ensuring Alaska doesn't become a “company state”

The group, which counts two former Alaska governors among its members, has expressed concern that if the takeover proceeds without significant modifications, BP will have a virtual monopoly over the state's oil and gas and that Alaska will become a “company state.”

McGraw has said Backbone approves of the state's examination of the proposed merger's effect on jobs, Alaska businesses and the economy, state revenues and royalties, future oil and gas development, management and rates on the trans-Alaska pipeline, North Slope natural gas commercialization and the impact on competition.

And, McGraw says, Backbone also wants Gov. Tony Knowles to place funds for future dismantling of the pipeline into an escrow account with interest to benefit all Alaskans and ensure access to North Slope natural gas before the Exxon-Mobil and BP-ARCO consolidations are allowed to proceed.

“If people don't get involved, if we sort of sit back and say they're taking care of us, everything will come out OK, it won't,” she said. “Politicians only respond to political pressure, numbers, loud voices. We're in a representative democracy. I think anybody who wants to talk about it should be able to talk about it.”

McGraw said she thought the two companies should have approached the hearing with more consideration for public concerns.

BP sent Jim Palmer, its executive vice president for external affairs, to the hearing and ARCO sent ARCO Alaska Inc. president Kevin Meyers.

McGraw referred to Palmer and Meyers as “second-stringers” and said higher officials such as BP Exploration (Alaska) Inc. president Richard Campbell and Ken Thompson, executive vice president of Atlantic Richfield Co., should have been there at the hearing to answer the public's questions.

“I thought it was extremely disrespectful that (Palmer and Meyers) basically showed up and gave no information,” she said. “Where are the men we have to talk to in order to get answers? They weren't there. They did not present themselves to the committee, which I thought was very conspicuous.”

BP's Paul Laird defended the companies' representatives who appeared at the hearing.

“I wouldn't call the vice president of one company and the president of another 'second-stringers,'” he said.