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FTC commissioners disagree on export issue Two commissioners wanted to prohibit export of ANS crude, charging export used to manipulate West Coast prices Petroleum News Alaska
While the Federal Trade Commission voted unanimously in favor or the consent order allowing BP Amoco to complete its acquisition of ARCO with divestitures of ARCO Alaska and ARCO’s pipeline and storage facilities at Cushing, Okla., the commissioners could not agree to include a ban on the export of Alaska North Slope crude oil.
Commission Chairman Robert Pitofsky and Commissioner Mozelle Thompson wrote that they concurred with the consent decree, but dissented on the issue of export of ANS crude oil.
Pitofsky and Mozelle said that in the commission’s original complaint and supporting memorandum, the commission alleged that BP has exported ANS crude oil to Asia and other regions in the United States “in order to curtail or tighten supply to refiners on the U.S. West Coast and to maintain crude oil prices in that market.” Pitofsky and Mozelle said the commission was prepared to substantiate that charge with documents in court.
When the litigation was suspended for settlement negotiations, “the issue of exports designed to raise price was addressed. BP and Phillips reportedly stated publicly that they would not export U.S. crude resources out of PADD V” (the West Coast market — Alaska, Arizona, California, Hawaii, Nevada, Oregon and Washington).
Pitofsky and Mozelle said they “believe the commission should follow the logic of its own complaint and require BP and Phillips to affirm their public statements in our consent agreement in this matter.”
Improves West Coast market competition Commissioners Anthony, Swindle and Leary note that they agree with Pitofsky and Commissioner Thompson that the structural relief proposed by the required divestiture of ARCO Alaska has the potential to improve the level of competition in the West Coast market.
“In addition to this structural relief,” Anthony, Swindle and Leary said, “Chairman Pitofsky and Commissioner Thompson would favor ‘behavioral’ relief that would require the commission to engage in extensive monitoring of ANS crude oil exports and prices for the next decade.”
The Pitofsky-Thompson proposal would have prohibited BP and Phillips for 10 years from “knowingly and intentionally” exporting ANS crude outside the West Coast for the purpose of increasing the West Coast spot price for ANS.
Anthony, Swindle and Leary said they believe “this over-regulatory export restriction would be unnecessary, unenforceable and otherwise inappropriate.”
They note that BP is highly unlikely to engage in exports following the merger because it previously did not own West Coast refineries and benefited from higher spot prices because it was a merchant marketer and because Alaska’s royalty scheme for ANS crude is tied to ANS spot prices on the West Coast. After the merger, they argue, BP will own two former ARCO refineries, and will need most of its ANS crude to operate those refineries. BP will benefit from lower royalty payments to the extent the ANS spot price drops.
Anthony, Swindle and Leary also note that the export restriction “would be extremely difficult to enforce because it would require proof of BP’s or Phillips’s knowledge and intent.”
They said the export restriction “is an inappropriate measure for the commission to impose in the context of a merger settlement, especially when the proposed structural relief fully restores, and may even improve upon, the status quo ante. The export restriction would address a pre-existing market condition, under which BP allegedly, unilaterally, and sporadically exported ANS crude oil with some slight effect on West Coast prices.”
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