The Federal Trade Commission decided yesterday not to challenge the Interior Department's decision last month to grant oil leases off the shore of Alaska to Standard Oil Co. (Ohio) and British Petroleum, agency sources said.
In a 3-to-1 vote in a closed meeting, the commission's Republicans agreed that the award of these potentially lucrative leases to the biggest producers of Alaskan oil was not inconsistent with antitrust laws.
The vote was a setback for the FTC's Bureau of Competition, which last week urged the commission to tell the Interior Department to withdraw the leases it had awarded to BP and Sohio.
The bureau's antitrust officials contended that granting BP and Sohio the rights to drill in the oil-rich waters of Diapir Field would reduce competition in the oil industry and could lead to higher prices on the West Coast.
BP, Sohio and their partners bid more than $900 million -- or nearly half of the total $2 billion offered for the 121 tracts -- for 24 tracts in the Oct. 13 sale. These tracts were considered to be the most lucrative, estimated to contain at least one-quarter of the 800 million barrels of oil that are estimated to be commercially recoverable from the Diapir Field.
The antitrust staff argued that the addition of this oil would increase BP and Sohio's market share on the West Coast unfairly, but the majority of commissioners said there were too many uncertainties to justify that conclusion.
Agreeing with an argument by the FTC's Bureau of Economics, the three commissioners said that, under some scenarios, the dominance of BP and Sohio on the West Coast could be eroded, particularly if there were new oil discoveries off the California shore or in the Far East.
Dissenting was the only Democrat on the commission, Michael Pertschuk, who argued that the Bureau of Competition had made a persuasive case to urge that the Interior Department reject the bids from BP and Sohio.
Yet even if the commission had sided with Pertschuk, it is unclear how much force that decision would have had. Under the law, the Interior Department must consult in advance with the Justice Department -- which in turn must consult with the FTC -- to make sure the granting of leases does not conflict with antitrust laws. However, the Interior Department does not have to follow the Justice Department's recommendations if the agency concludes that the leases would be anticompetitive.
In this case, Assistant Attorney General William F. Baxter told Interior Department officials three weeks ago -- before the FTC had completed its investigation of the lease sale -- that his agency saw no anticompetitive problems.