Oil Firms Say Merger Will Aid Competition

BP Amoco and Atlantic Richfield Co. urged a federal judge on Wednesday to approve their $30-billion merger over government objections, saying it “will benefit competition worldwide and in the United States.”

In papers filed in U.S. District Court, the two oil companies called the Federal Trade Commission’s argument for an injunction against the merger “a fatally flawed attack” that ignores legal standards and the FTC’s own guidelines.

There was no hint in the court papers of settlement discussions that have been widely reported. A seven-day hearing on the injunction, likely to determine the fate of the merger, is scheduled to start March 20 before U.S. District Judge Susan Illston.

London-based BP Amoco agreed last March to acquire Los Angeles-based Atlantic Richfield, known as Arco. The purchase would create the second-largest non-government oil company, behind Exxon Mobil.

The two companies together control 70% of Alaska’s crude oil production. In an agreement with the state of Alaska, which supports the merger, they have promised to sell enough of their holdings to reduce their share to 55%, if the merger goes through.

However, the FTC, joined by California, Oregon and Washington, argues that the new company would effectively control the supply of Alaskan crude oil to West Coast refineries, with the power to force increases in gasoline prices.

The companies dispute the existence of a separate West Coast oil market and say oil prices are set by the international market, which would be less affected by the merger.

“The worldwide sale of crude oil is the relevant market,” attorney Frank Cicero said in court papers.

He said the FTC’s claim of reduced competition in sales to West Coast refineries is contradicted by the commission’s own guidelines. Properly applied, the guidelines show that the two companies do not compete on the West Coast because BP Amoco sells Alaska crude oil there, but Arco provides crude oil to its own refineries and sells only refined products, Cicero said.

Likewise, he said, the assertion of reduced competition for oil leases in Alaska flies in the face of antitrust law because there will be no overall decrease in crude oil production.