Winter 2000 Alaska Article Archive

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Lawsuit filed to declare Knowles-BP Agreement illegal - Press Release
FTC Rejects BP Amoco, ARCO Merger - H. JOSEF HEBERT
Gov. Tony Knowles might as well say it. - Soren Wuerth
No changes in Lockyer's probe of California gas prices - Jordan Lite
BP, ARCO & Knowles make second attempt to raid your permanent fund. - Ray Metcalfe
Tea & Crumpets - Dale Luther
Legislature Owes $3.8 Billion to State Treasury - Former State Representative Terry Martin


Lawsuit filed to declare Knowles-BP Agreement illegal

The following press release was sent state wide at 6:00 PM Friday, October 15.

For immediate release

An antitrust suit against BP Amoco and ARCO was filed at 4:00 PM Friday, October 15, in Alaska Superior Court.

A press conference to explain the action will be held at 2:00 PM on Saturday, October 16, in the lobby of the old state court, just inside the doors at 303 K Street.

Attorney Jody Patrick Brion filed the lawsuit on behalf of Ray Metcalfe, Vic Fischer and Nick Begich. They will have no comment prior to the press conference.

Vic Fischer is a former state senator and delegate to Alaska's State constitutional convention.

Ray Metcalfe is the chairman of the newly recognized political party called the Republican Moderate Party of Alaska and is the owner of Metcalfe Commercial Real Estate, Inc. He is also a former state legislator.

Nick Begich is an activist and author and a past candidate for public office. Begich currently serves as tribal administrator for the traditional tribal council of Chickaloon Village.

On Monday morning, November 22, Ray Metcalfe and Nick Begich plan to file a public litigant lawsuit against the State of Alaska. Mr.'s Metcalfe and Begich will be requesting a Declaratory Judgment declaring the “Charter for Development of the Alaskan North Slope, ”a proposed oil and gas contract entered into as a result of the secretly conducted negotiations between the Knowles administration and BP, to be illegal, being in violation of Article IX, Sec. 13 of the Alaska Constitution (Expenditure Clause), Article II, Sec. 1 of the Alaska Constitution (Legislative Power Clause), Article II, Sec. 7 of the Alaska Constitution (Dedicated Funds Clause) and Article IX, Sec. 17 of the Alaska Constitution (Budget Reserve Fund Clause). A Motion for Expedited Hearing is being filed contemporaneously with the Complaint. It would be my wish to see this matter get before a Superior Court Judge within a few weeks.

[Here is a] copy of Case # 3AN-99-11830-CIVIL (filing date of 11-22-99) Complaint in .PFD format and would welcome any input from you.

Jody Patrick Brion


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FTC Rejects BP Amoco, ARCO Merger

Updated 10:18 PM ET February 2, 2000
By H. JOSEF HEBERT, Associated Press Writer

WASHINGTON (AP) - The Federal Trade Commission moved Wednesday to block BP Amoco's takeover of Atlantic Richfield Co., setting the stage for the biggest oil antitrust court fight since the breakup of Standard Oil nearly a century ago.

The commission voted 3-2 to direct its staff to seek an injunction that would scuttle the $30 billion merger, concluding the new company would dominate Alaska oil production and West Coast markets.

"This particular merger is anticompetitive," Richard Parker, director of the FTC's Bureau of Competition, said at a news conference after the vote. "We're going after this merger and we're going to try to stop it."

He said the proposed company was "a colossus" that could dictate prices to West Coast refiners who rely on Alaska crude oil. Other critics of the merger have argued that such dominance could translate into higher retail gasoline prices in California and other West Coast states that rely heavily on Alaska crude.

The deal would create the second largest nongovernment oil company behind Exxon Mobil, whose merger was completed in November hours after receiving FTC's approval. BP Amoco itself was created only a little more than a year ago with the merger of British Petroleum and Amoco.

London-based BP Amoco pledged to "argue the case vigorously" in court. "We believe we have a compelling case," the company said in a statement.

BP Amoco and Los Angeles-based Atlantic Richfield, or Arco as it is commonly known, together account for about 70 percent of Alaska crude oil production. They dominate oil activities in the state, from drilling to transporting crude to market.

Parker said the government would go to court in San Francisco, as early as Friday, seeking an injunction that would prevent from completion of the merger as planned by the two companies on Monday.

BP Amoco had said it would sell off 13 percent of the production as well as part ownership in two Alaska oil fields. But Parker said the new company still "would control overwhelming proportions of the (Alaska) production."

Even with the proposed divestitures, the combined company would account for 55 percent of the oil flowing from Alaska's North Slope, the FTC estimated.

BP Amoco said claims the new company dramatically could affect West Coast prices, which are pegged to world oil markets, were "unfounded."

While the company said it remained receptive to negotiations and "any reasonable options," it acknowledged "the only course now open to us is to resolve the issue through litigation."

If the request for an injunction is successful, the case likely would go before an FTC administrative law judge, whose decision can be appealed in federal court.

The litigation could take months and eventually may end up before the Supreme Court if BP Amoco persists in fighting the biggest antitrust challenge to the oil industry since the Standard Oil breakup nearly a century ago.

There have been other industry challenges and price fixing cases, said Victor Goldberg, an antitrust scholar and law professor at Columbia University. But, he said, "this would be the first one attacking the basic market structure of the oil industry" since the Standard Oil case.

The Supreme Court in 1911 ordered the breakup of the Standard Oil holding company because of its market dominance.

Goldberg and other antitrust scholars said the government may have a tough time proving its case.

"Oil flows. They're going to have to find some sort of argument to show why the international (market) is not going to solve the problem," said Goldberg.

BP Amoco contends the merger would produce efficiencies that would lead to $1 billion in savings worldwide, about a fifth of that in Alaska, and "drive down Alaskan production costs" so its crude would be more competitive in world markets.

"Any suggestion that there is a special West Coast market for Alaskan crude oil that functions independently of world crude prices is without foundation," the company said.

In Wednesday's vote, FTC chairman Robert Pitofsky and commissioners Mozelle Thompson and Sheila Anthony voted to block the merger. Commissioners Orson Swindle and Thomas Leary voted against seeking an injunction.


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Gov. Tony Knowles might as well say it.

February 5, 2000

He needs to address his symptoms of denial. Like the alcoholic, whose assertion at an AA meeting is a recognition of a core issue, Tony Knowles needs to admit to Alaskans he is a puppet of British Petroleum. We need to make sure Tony never holds public office in Alaska ever again. He's had it. Let's look at the facts:

Why do we need the Federal Trade Commission to stand up for Alaskans and consumers across the nation? The FTC has the courage to challenge BP.
Knowles and the Alaska Legislature are spineless pawns of an industry that buys the servitude of Alaska politicians, tried to buy the Alaska public, and is laughing its way to the bank.
That Knowles and his attorney, Bruce Botehlo are joining BP in its suit against the federal government is an embarrassment to all Alaskans.

That he wants to use public funds to help subsidize BP's lust for profit is the bugle horn for end of Knowles' political career.

By Soren Wuerth,
Alaska Action Center.
publishers of Wild Voices

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No changes in Lockyer's probe of California gas prices

By Jordan Lite
November 22, 1999

SAN FRANCISCO -- Californians paid $1.3 billion more for gasoline this year than they would have if they lived in states where there's a competitive market for oil, but oil companies are playing within the law in their pricing, state Attorney General Bill Lockyer said Monday.

Instead, the inflated prices that forced residents in some spots to pay upwards of $2 a gallon in April when Lockyer started his probe are the result of inadequate competition, California's stiff clean air laws and the state's slightly higher gasoline taxes.

"We don't have any evidence that they've done anything criminal or violated anything civil," Lockyer said. But, he said, "the supply is manipulated in a way that produces the highest possible prices, and that is business, that is the American way.

"We can't make an antitrust case about these practices yet," he added. "Whether there is collusion or not or zone pricing mechanisms ... is still worthy of investigation."

Californians typically spend more at the pump than motorists everywhere but water-locked Hawaii and Nevada, which gets most of its gasoline from California. Motorists in California paid an average of $1.32 per gallon between January and August, compared to a high of $1.54 in Hawaii and a low of 89 a gallon cents in Georgia, the report found.

Copyright ©1999 Dale Luther; All Rights Reserved.

Proposed mergers between British Petroleum and Arco, and Mobil and Exxon could further stifle competition, especially since 90 percent of California's refining capacity and gasoline sold is controlled by six oil companies, Lockyer said. In Texas, the top six oil companies control only 58 percent of the market, he said.

Both consumer advocates and oil companies called the report a victory.

"The preliminary report's findings confirm what we've been telling the California Legislature for years," declared Dennis DeCota, executive director of the California Service Station and Automotive Repair Association.

Chevron Corp. spokesman Fred Gorell said the company was pleased Lockyer had found no evidence of wrongdoing. "We believe that other ongoing governmental investigations will come to the same conclusions," he said.

The attorney general said he plans to form a group of consumers, economists and oil industry experts to come up with a plan to lower prices.

He said he will lobby the Legislature to pass laws that would force companies to increase their inventories; facilitate imports from outside the state; enable smaller refineries to pool their resources and purchase tankers of crude oil; and free retailers from restrictions on where they can buy their products.

Lockyer also said he will "carefully scrutinize the pending mergers of Exxon-Mobil and BP-ARCO to see what we can do to restore more healthy competition."

The state must review any merger or acquisition to protect against "the erosion of competition in an already concentrated and vertically integrated gasoline market," he said.

Prices have dropped in California since Lockyer opened the investigation in April, and in some places gas costs less than $1.50 a gallon. Drivers in the San Francisco Bay area continue to pay about 22 cents a gallon more than those in the Los Angeles area -- a puzzling trend, Lockyer said, since much of the gasoline in California is distributed from area refineries.

Lockyer said in the spring that alleged price gouging by oil companies could lead to legal actions to cut high gasoline costs in the state. He said less than half the price increases imposed on motorists in California appeared related to increases in the world price of oil or to accidents that took San Francisco Bay area refineries out of commission.

Oil companies answered the state probe with 10,000 boxes of documents.

Nationally, the average price of a gallon of gas is $1.3287, according to Friday's latest Lundberg Survey, a review of pump prices at 10,000 gas stations nationwide.


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BP, ARCO & Knowles make second attempt to raid your permanent fund.

Dear Editor:
CC: Vote NO folks, Backbone & Oil watch

When the merger talks broke down, I briefly thought it possible that Governor Knowles had actually seated himself on Alaska's side of the bargaining table.

After reviewing his proposal, it's obvious that the breakdown was a pre-planned dog and pony show orchestrated to dupe Alaskans into believing that his sellout was the product of his hard bargaining.

Another dog and pony show is coming soon. It's titled BEND OVER AND GRAB YOUR ANKLES THIS IS GOOD FOR YOU. Screen written by BP and Tony Knowles.

Tony sold his soul to BP shortly after he became Governor. He gave BP a $200 million dollar oil lease for free and BP helped raise the money to reelect him.

Now he wants BP's help to raise money for a US Senate race, and he is willing to wreck Alaska's long-term economic future to get it.

I've read his proposed agreement. It clearly gives BP monopolistic control over the resources we depend on to fund government. Tens of billions of dollars in state revenue are at stake.

No other government on earth allows an oil company to keep as much of the wealth derived from the development of it's oil as we do. It's our oil to sell. We could double our take and still be the most profitable place on earth for BP to produce oil.

If you thought your permanent fund was in jeopardy with last September's, advisory vote, you were right. But, if the BP/ARCO merger goes together, "as proposed" by the Knowles administration, it's in more jeopardy than ever before.

As proposed, the Alaska gas line wont be built for another 20 years and Alaska's slice of our oil wealth will shrink even smaller. Alaska itself may be looking at bankruptcy in about 15 years.

Governor Knowles proposed the raid on your permanent fund and the oil companies raised the money for a campaign to persuade you to BEND OVER AND GRAB YOUR ANKLES THIS IS GOOD FOR YOU.

They did so with hopes of avoiding the possibility that Alaskans would realize how much money BP is hauling out of this state and start looking to BP to help balance the state budget.

Thankfully, over 80% of Alaska's voters saw through that bull---- story and said HELL NO.

I've written this letter to encourage the same 80% to show up at the upcoming merger hearings and say HELL NO again.

Ray Metcalfe

Ray Metcalfe served on the legislative committee that proposed the law that began the permanent fund distribution program and chaired the legislative hearings that established the Permanent Fund investment strategy. More recently, he sued to stop the BP/ARCO merger.


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Tea & Crumpets

Copyright ©1999 Dale Luther; All Rights Reserved.

A few weeks ago I saw this great quote on the outside wall of the Tech Museum in San Jose, California. "Optimism is an essential ingredient for innovation. How else can the individual welcome change over security, adventure over staying in safe places?" - Bob Noyce

Dale Luther

Visual Gags:
1) Double-decker bus with "Great Alaska (Britain) Touring"
2) The Beatles "Abbey Road" album cover is loosely portrayed in the background.
3) Michael Anderson of M.A.'s Hot Dogs (Fish and Chips) is wearing a 007 (James Bond) t-shirt.
4) "The best, pound for pound" is a play on words. Pound being the British currency.
5) The British flag patch on the gentleman's jacket.

Hail to the Guv'nr!

Dale Luther is a freelance editorial cartoonist who is published in the Alaska Journal of Commerce and has also been published in Alaska Business Monthly and the Anchorage Daily News.


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January 25, 2000

The second session of the twenty-first Legislature began on Monday, January 10 and we have hit the ground running. The Senate Finance Committee has been meeting all week to hear presentations on the Governor's proposed budget and revenue projections from the Department of Revenue. This year the Finance committees of the Senate and the house will again be focusing on creating and revising Performance Missions and measures for each Department to streamline services and encourage greater efficiency in state government. As a member of the Senate Finance Committee, I chair the Senate Finance subcommittees for the Department of Natural Resources and the Department of military and Veterans Affairs.

The biggest issue facing the Legislature this year will be the budget. The Governor has requested a $124 million increase in general fund spending this year. However, the Republican majority and I remain committed to our five-year fiscal plan with a $30 million decrease in spending from Fiscal year 2000.

Returning to my staff this year are Ginny Austerman and Carolyn Reitter who will assist on constituent concerns. Also on staff is Caroline Lombard, a long-time Eagle River resident who will be working on legislation and budget issues. Caroline and Carolyn also work in my Eagle River office during the interim months (June-December).

On Monday, January 10 I mailed 9,400 Questionnaires to my constituents. To date we have received approximately 700 responses. Please send your return your completed questionnaire to me as soon as possible, but no later than February 29. All participants will receive a copy of the results after they have been tabulated. This annual survey has been an invaluable tool for me in representing my district since 1977.

Senate Bill 162, an Act relating to the rule against perpetuities, nonvested property interests, and power of appointment, passed the Senate by a vote of 19 - 0. This bill corrects a technical problem created by the Alaska Trust Act, and allows for the creation of perpetual charitable lead trusts. This type of trust would pay income to a charity for 20 years before benefiting the trust creator's descendants. The Alaska Trust Act is the only legislation of its kind in the United States.

The Senate Finance Committee heard reviews of audits performed by the legislative Audit Division in 1999. The auditors reported on the Statewide Single Audit for FY'98, a sunset review on the Alaska Commission on the Aging, the Office of Public Advocacy, the Alaska Pioneer's Homes, the Division of Family and Youth Services, and the Matanuska Maid Dairy, among others.

TThe first Senate District L Constituent meetings for this session were held on Saturday, January 22 in Muldoon and Eagle River. Thank you to all who attended. There will be three additional Saturday constituent meetings. The next meetings are scheduled for February 12, March 18 and April 15. The meetings start at 11 a.m. in Muldoon at the Muldoon Mall. The afternoon session starts at 4 p.m. and is held in Eagle River at the Valley River Center above Garcia's Restaurant with the exception of the March 18th constituent meeting which will be held at the Chugiak Senior Center in Chugiak. Please make a note of these dates and plan to attend. These are good opportunities for constituents to advise me of their ideas and concerns.

Download: Senetor Randy Phillips' Biography


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Legislature Owes $3.8 Billion to State Treasury

By Former State Representative Terry Martin

As we approach the tenth anniversary of the creation of the Alaska Constitutional Budget Reserve Fund, the citizens need to evaluate what were the dreams promised by the legislature and what has, in reality, been produced. This becomes more apparent when we see that for the first time in my memory the Department of Revenue acknowledges deep within it’s annual revenue source book the legislature has borrowed approximately 3.8 billion from the CBRF and pays no interest on the loans. Since there is no interest charged to the loans, much like the Social Security Fund, the state is losing hundreds of millions in earnings that would have been accrued if the initial windfalls had been placed in the corpus of the Permanent Fund.

It doesn't take an average stock broker long to calculate the tremendous amount of money that has been lost during these past nine years of very high returns had these billions of dollars been placed in the Permanent Fund account instead of free cash for the legislature. No this money is lost forever unless...

The state and the public also receive less interest on the CBRF dollars due to short time investment commitments necessitated by large draws of principal in any two year period. Expected earnings are approximately 5% in the CBRF whereas, if the money were deposited in the Permanent Fund, earnings would climb to 11-12%.

The future safety net would be additional growth of the Earnings Reserve Account. The excess of $500 million to $1 billion would be available to cover revenue shortfalls. We don’t need two accounts for the same objective, especially when the CBRF is not working as proposed and costing the state hundreds of millions in lost revenues annually.

Reviewing the statements made in the voter pamphlet of November 1990 it is easy to see why the voting citizenry approved this financially devastating constitutional amendment.

First, the neutral statement made by the Division of Elections guarantees “the Fund would have to be paid back...”. The only way this will occur is when some liberal spending group sues the legislature for not obeying the Constitutional mandate of payback and the Supreme Court says the legislature must do it through the earnings of the permanent fund account or because the deficit has become so large they must now withdraw from the corpus to balance what is owed to the CBRF. The Department of Revenue’s report, through a graph on page 73, shows that by the end of fiscal year 2001 the continued annual borrowing by the legislature will escalate the state liabilities to over seven billion dollars. Thus further exacerbating hundreds of millions in lost annual revenue to the state. The Problem needs to be corrected. The best solution would be a Constitutional Amendment for November 2000 repealing Section 17 of Article IX and put what remains in the corpus of the Permanent Fund.

The cost of this flawed savings account will also see a higher rate of interest charged to the state when we borrow for new construction and deferred maintenance as recently proposed by CO-chairs of the House and Senate finance committees. The increased rate of interest to the state will be magnified through the Municipal Bond Bank agencies for local governments that borrow through bonds for school and local construction projects since a large amount of their revenues come from the state that is borrowing to give locals more money for schools and health and social services. The hundreds of millions lost in earning revenues could be direct cash available for these capital needs instead of the current liable debt grave the legislature is digging. It is ironic in this new fiscal year when the last of general obligation debt goes to zero, some propose to bond for new revenue - there is a better solution.

Another major fallacy expressed in the 1990 ballot initiative by the legislator in favor of this spending account is that it would “cut the budget, reduce state spending and get spending under control.” This propaganda and wishful dreaming have not materialized. I wrote the opposition point of view emphasizing the required 3/4 vote of each house of the legislature would give the minority power and they would give their votes only upon receiving money for their special interest. The windfall settlement dollars have, by the billions, gone with the wind never to return. Ten years ago I had proposed that the billions of oil settlement money the former Attorney General, Charlie Cole, on behalf of Governor Walter Hickel be placed into the Permanent Fund where the legislature could never get to them, but liberal spenders saw through this and could not bare the thought of never placing their hands on these revenues.

As we approach the tenth anniversary of this unworthy crude, tacky amendment to our constitution reality confirms it should be repealed. The conservative, fiscally responsible legislators should combine their efforts to develop a resolution that would be placed on the ballot for the general election of November 2000 and let the citizens reevaluate this preposterous and financially wasteful situation we are living under. The new ballot initiative should further direct the monies left over in the CBR account be deposited into the Permanent Fund along with future revenue sources enumerated in Section 17 Article IX.

What a tremendous boost this would give to the Permanent Fund. Over $30 billion market value earning in excess of three billion annually. After dividends are paid, there would still be hundreds of millions to close the so called fiscal gap for the state operating budget and capital needs and at the same time vanish the fear of a personal state income tax.

Terry Martin served in the Alaska State House of Representatives for 20 years from 1979 to 1999. He was House Minority Leader in 1985-1986. He served on the House Finance Committee for 12 years (Chairman for 2 years) and on the Budget & Audit Committee for 8 years (CO-Chair for 2 years).

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