BP Amoco and Atlantic Richfield Co. (Arco) say they will fightthe Federal Trade Commission in court for their right to merge.Wednesday the FTC said it would seek a preliminary injunction infederal District Court to block the merger.

The FTC said the deal would violate antitrust laws by lesseningcompetition in the exploration and production of Alaska North Slopecrude oil and its sale to West Coast refineries. The FTC also saidcompetition would be harmed in the market for pipeline and storagefacilities in Cushing, OK, raising prices for oil used to producegasoline and other petroleum products throughout North America.

“We are surprised and disappointed that the FTC has rejected allefforts for a positive resolution,” the companies said yesterday ina statement. “We have consistently been open to improvement of ouroriginal proposal. We have addressed the concerns of the State ofAlaska. We have been, and remain, willing to discuss any reasonableoptions that might lead to a negotiated settlement

“We regret that the only course now open to us is to resolve theissue through litigation, but we believe we have a compelling casein support of our combination which we will argue vigorously incourt.”

The FTC voted 3 to 2 to seek the injunction against the merger.The fate of the deal has been uncertain for months due to FTCconcerns over the Alaskan crude market. “Any suggestion that thereis a special West Coast market for Alaskan crude oil that functionsindependently of world crude prices is without foundation,” thecompanies said. “In fact, the proposed combination of our companieswill drive down Alaskan production costs, making Alaskan crude oilmore competitive in the world market.”

The FTC worries the merger would give the combined company toomuch control over California gasoline prices. The companiescurrently produce 70% of the oil on Alaska’s North Slope.Production there accounts for about 45% of oil refined inCalifornia, Oregon and Washington state.

“We will prove in federal court that BP has market power andthat it has used that market power to maintain higher prices on theWest Coast by exporting crude oil to the Far East,” said thedirector of the FTC’s Bureau of Competition, Richard G. Parker.”This deal will cement that market power and harm competition bycreating a significant risk that crude oil prices would be higheron the West Coast than they would be without the deal. In addition,the merger would enable BP to manipulate trading in crude oilfutures and affect crude oil prices throughout the country.”

The FTC said the merger would create the third largest privatepetroleum company in the world and the largest U.S. oil producerand refiner.

The preliminary injunction would prevent the merger from movingforward until the conclusion of an administrative trial or anyappeals on the legality of the merger. If the court grants theFTC’s motion, the commission will have 20 days to determine whetherto issue an administrative complaint. The complaint would mark thebeginning of the administrative trial process.

The companies announced their intent to merge in April (see DailyGPI, April 5). The deal stumbled inAlaska, but the companies eventually were successful in winning thestate’s blessing (see Daily GPI, Dec. 13).

BP Amoco closed down $0.56 Wednesday at $53.94. Arco sharesclosed down $2.19 at $72.06

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