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©2000 Cascadia Times

IN THIS ISSUE

Willamette Industries' Dirty Air
Triggers a Federal Prosecution

by Paul Koberstein and John Paul Williams

ENDGAME

The future is now for Snake River Salmon and four Federal Dams

FOREST ROADS
Clinton takes a green brush to his legacy

RAIDING ALASKA
Pending BP-Arco merger threatens Arctic environment

RAIDING ALASKA

Pending BP-Arco merger threatens Arctic environment

by Paul Koberstein
/Cascadia Times

When Alaska Gov. Tony Knowles said in November he would drop his opposition to the megamerger of the two multinationals that dominate the state's oilfields, people of virtually every political stripe erupted. The prospect of one company controlling a state already dominated by one industry was too much for many Alaskans. They hoped to stop the marriage between BP-Amoco and Atlantic Richfield before they reached the altar. Early in 2000, the Federal Trade Commission will decide whether to allow the merger to go through. The companies were eager to win Knowles over, as his position is likely to influence the outcome one way or the other.

The merger has been the top news story in Alaska almost all year long. To understand why this deal is so important, consider the role oil companies play in the state: Alaskans pay no state income tax. They pay very little in local property tax. Every year, they get a $1,700+ check from the state. Oil money has been very good to Alaska, but there comes a day when the devil asks for his due. From all indications that day has come.

As originally constituted, the merger would have given BP-Amoco-Arco control over more than 70 percent of North Slope oil, gas and production facilities, 72 percent of the trans-Alaska oil pipeline, and 80 percent of the available tanker capacity.

To Alaskans, already inconvenienced by the fact that their capitol is located in isolated Juneau, it meant that the seat of power would shift even further from home, to London, England, BP's home base. "In short, it is not the takeover of Arco that lies at the heart of our concern; it is the takeover of Alaska," said Christy McGraw, director of Backbone, a broad-based Alaska group that pushed hard against the deal.

Alaskans compare the pending BP-Arco monopoly to Microsoft. But while Microsoft controls only the operating system of personal computers, BP-Arco would control almost every function of government in this state, either directly or indirectly. Among many concerns, McGraw says, is the possibility that someday BP-Arco might decide to shift production out of Alaska to oil fields in some other country. The consequences for Alaska's economy would be devastating for as long as BP chose to "warehouse" its North Slope inventory.

Another concern is that with one company paying most of the taxes that run the state government for state, its hard to believe that government officials would have the guts to force BP to do what's necessary to protect the sensitive tundra of the North Slope, the near shore waters of the Beaufort Sea, and the poisoned ecology of Prince William Sound.

When first announced last March, Knowles was cautious in his criticism of the deal. In August, Knowles spelled out his concerns in a speech to the Anchorage Chamber of Commerce. "This (merger) represents an unacceptable monopolistic control of Alaska's resources. It is an insurmountable barrier to the competitive participation of other major companies developing our oil and gas. It cannot stand unchallenged."

Through the end of October Knowles pressed BP to accept a list of demands, but without success. On Sunday, October 31, Knowles wrote to the Federal Trade Commission urging it to reject the takeover, saying BP had refused to negotiate a settlement addressing Alaska's concerns. Apparently, the stock market considered Knowles' continued objection to the deal a serious problem for both BP and Arco. Over the first week in November, their combined value dropped a whopping $21 billion. On Thursday of that week, BP President Rodney Chase flew to Alaska to stop the hemorrhaging and cut a deal. By Friday the deal was done.

Experts say the deal will reduce BP-Arco's grip on Alaska's oil fortune to about 60 percent, in large part by introducing one-to-four new competitors to the North Slope. BP-Arco would have to give up 175,000 barrels per day of production, about 17 percent of the total, and relinquish operating control of two major North Slope oil fields, Kuparuk and Alpine. It must provide competitors with access to the Trans-Alaska Oil Pipeline. And, the company must give up significant interests along the vast western reaches of the Arctic coast, in an area known as National Petroleum Reserve-Alaska, or NPR-A.

Now that the deal is in place, Knowles believes Alaskans can breathe easier. "This agreement makes Alaska a stronger and more competitive player in the world oil market," he said.

The deal may indeed enhance competition on the North Slope. And it calls on BP-Arco to clean up the despoiled North Slope environment, and purchase double-hulled tankers to replace its single-hulled fleet. But existing laws already require the oil companies to do these things. Besides, in the words of the agreement, these promises can't be enforced in court: "The parties do not intend for them to be enforced by lawsuits but to be judged in the forum of public opinion, and no right of action is created with respect to them."

Conservation leaders are disappointed. "We are relying on BP to be a good citizen," says Sara Callaghan of the Sierra Club office in Anchorage. "We are relying on the honor of a handshake."

"Overall the agreement does not go far enough in reducing BP's control," says Backbone's McGraw. "They have to divest only a little bit here and little bit there."

Three members of Backbone, including two 1998 candidates for governor, have filed an antitrust lawsuit attempting to block the merger before it happens.

British Petroleum began building its Alaskan monopoly in August 1998 when it snapped up Amoco for $48 billion in stock. Then, in April 1999, BP Amoco said it would take over Atlantic Richfield Co. for $25.6 billion in stock. Knowles immediately launched an investigation, to be headed by the U.S. Justice Department's lead lawyer on the Microsoft antitrust case, David Boies.

Consumer advocate Ralph Nader said the merger would violate federal and state antitrust laws. The states of Washington, Oregon and California -- where the lion's share of Alaska's oil is burned in automobiles -- also announced their opposition. Over the summer, opposition to the merger took on a bipartisan character. Alaska Sen. Frank Murkowski promised to hold hearings, while Republicans in the Legislature demanded concessions from the corporation.

BP-Arco says it will push forward aggressively with new Alaska oil wells. It is developing offshore drilling operations, featuring a submerged pipeline which conservation groups contend is highly risky. The company also maintains a desire to develop production platforms in the 1.5 million-acre coastal plain of the Arctic National Wildlife Refuge. Known as "America's Serengeti" for its biological richness, the Arctic Refuge is critical denning habitat for polar bears, calving grounds for caribou, and home to wolves, muskoxen and millions of migratory birds. Knowles apparently made no effort to lock in protection for the refuge in his deal with BP-Arco.

Current federal law prohibits drilling in the refuge, but BP executives, in concert with Republican leaders in Congress, want to change that law. President Clinton has said he would veto any effort to open up the refuge, but he leaves office in 2001. If he's replaced with former Texas oilman George W. Bush, look for BP to make another run at changing the law. Campaign finance reports suggest the industry is betting that George W. will be worth the wait. So far, they've given him at least $1.1 million in contributions, more than 10 times his nearest rival.