3. Description of Transaction

An Agreement and Plan of Merger (Agreement) was executed on November 18, 2001 and was approved by the shareholders of Phillips and Conoco on March 10, 2002.² Under the Agreement, Phillips and Conoco will become wholly owned subsidiaries of ConocoPhillips. Tosco Corporation will continue to be a wholly owned subsidiary of Phillips, and UNOCAP will continue to be a wholly owned subsidiary of Tosco Corporation. As a result, the ultimate control of UNOCAP will pass from Phillips to ConocoPhillips.

Joint Applicants state that UNOCAP will continue to be managed by its own officers and directors, will continue to own and operate its pipelines and related facilities, and will maintain its operating offices in Santa Fe Springs, California. UNOCAP will continue to offer service pursuant to its Commission-approved tariffs. No change in rates, terms, or conditions of service is requested at this time.

Joint Applicants report that, because the merger of Phillips and Conoco is a stock transaction merger, individual assets have not been valued separately and there is no agreed-upon price specifically ascribable to UNOCAP in the agreement. They note that UNOCAP's most recent balance sheet indicated that it had approximately $100 million in assets.

Phillips and ConocoPhillips assert that the merger of Phillips and Conoco is in the public interest for several reasons. They state that the merger will create a stronger major integrated oil company with the benefits of increased size and scale and with significant recurring synergies. Joint Applicants state that the merger will not affect the day-to-day management and operation of UNOCAP appreciably, with the only appreciable difference being that Phillips will be a wholly owned subsidiary of ConocoPhillips. They assert that ConocoPhillips will have increased financial capability and integrity to maintain the viability of UNOCAP's oil pipeline services. The parties state that UNOCAP will continue to be operated by experienced and technically competent personnel and will also be able to draw upon the technical capability and expertise of ConocoPhillips to provide common carrier pipeline services in a safe and efficient manner and consistent with the requirements of the Commission. Finally, they state that no changes in rates or terms and conditions of service are expected to be requested as a result of the merger.

The proposed merger between Phillips and Conoco has been reviewed and approved by a number of regulatory agencies, including the European Commission and the Canadian Commission of Competition. Joint Applicants state that they expect Federal Trade Commission (FTC) approval of the merger in the second half of 2002, possibly as early as July 2002. As a result, they request that the Commission consider the Joint Application on an expedited, ex parte basis. Joint Applicants request that the Commission's order approving the change of control of UNOCAP be subject to the approval by the FTC of the merger between Phillips and Conoco on terms that are acceptable to the merging parties.

Joint Applicants state that only the UNOCAP pipeline assets fall under the jurisdiction of the Commission and are subject to the Joint Application. The parties state that they are not requesting authorization from the Commission for the merger per se or for the transfer of any facilities. The only permission requested by the Joint Applicants is the transfer of ultimate control of UNOCAP from Phillips to ConocoPhillips.

Joint Applicants contend that the Commission need not provide further environmental review, pursuant to California Environmental Quality Act (CEQA) Guideline 15061(b)(3) because UNOCAP will continue to be operated as it is now and because the Commission-approved tariffs will not be changed by the merger transaction. The parties point to D.01-05-021, in which the Commission determined that a CEQA review was not required when Tosco Corporation merged with Phillips, which they view as a similar situation.