9. Market Power and Competition

The issue here is the fact that Pub.Util. Code § 854 (b) (3) provides that before the Commission may authorize a sale of this type, it must find that the proposed sale does not adversely affect competition.

9.1. CUE's Position

CUE states that transferring these assets to an entity that is affiliated with an oil exploration and production company and a proprietary crude oil blending company, both of which have interests in manipulating the price of oil, makes no sense. CUE goes on to state that in addition, transferring these assets to an entity that will co-manage a pipeline company, with interests in reducing storage and thereby increasing throughput on its own pipelines, make no sense either. CUE notes that EPTC has competed directly with this pipeline corporation in the past and could do so again in the future, and if Pacific Terminals owns the EPTC facilities, it will not use the facilities to compete against its own affiliate, reducing competition and raising additional anticompetitive concerns.

9.2. SCE's Position

SCE position is very similar to Pacific Terminals (below), and therefore is not recited.

9.3. Pacific Terminals' Position

Pacific Terminals claims that its purchase of the FOP Facilities will not adversely impact competition, but rather improve competition for the following reasons:

· Customers support the sale of the FOP Facilities. Pacific Terminals states that the sale will improve competition by introducing a new competitor providing black oil terminaling and local pipeline transportation services who is interested in growing the business and making service improvements. Pacific Terminals points out that only one customer²⁸ filed a protest to this application. That customer, BP WCP, once it understood that Pacific Terminals intended to assume the existing contracts and was willing to make plant modifications, endorsed the sale as well as Pacific Terminals' proposal to continue to set charges for such services based on arms length negotiations.

· The FTC and the DOJ determined that the sale of the FOP Facilities to Pacific Terminals did not raise competitive concerns. Pacific Terminals states that the DOJ/FTC, which are charged with reviewing acquisitions for anti-competitive impacts under the Hart-Scott-Rodino Act, concluded that the transaction was not one that requires further investigation and provided early termination.

· The record evidence conclusively demonstrates that competition will not be adversely impacted. Pacific Terminals notes that while the DOJ and the FTC quickly concluded that the proposed sale did not raise competitive concerns, CUE alleged in its protest that Pacific Terminals, acting alone or in concert with its affiliated companies could somehow exercise market power using the FOP Facilities so as to increase the overall profitability of its ultimate parent, the Anschutz Company; CUE failed to sponsor a single witness or present any evidence that would support this proposition. Pacific Terminals states that its witness, Dr. George R. Schink, a Ph.D. economist with extensive experience in analyzing competition in the oil pipeline industry, firmly and completely refuted CUE's unfounded allegations and concluded that the sale of the FOP Facilities to Pacific Terminals will not adversely impact competition and will not cause anti-competitive behavior.

Pacific Terminals also stated that Dr. Schink noted that Pacific Terminals and PPS LLC are subject to regulatory oversight by the Commission, which would inhibit their ability to even attempt to engage in anti-competitive behavior. Dr. Schink also noted that the companies that own Pacific Terminals or are affiliated with it would not benefit even if Pacific Terminals could somehow restrict the supply of terminal services in the Los Angeles basin, because the revenues of these companies are tied to the throughput of crude oil, and not its price.²⁹ Pacific Terminals states that it and its affiliated companies do not have the means, motive or the opportunity to engage in the anti-competitive behavior that CUE alleges.

Pacific Terminals states that CUE argues that EPTC and PPS LLC's predecessor, Pacific Pipeline System, Inc. (PPSI), have competed in the past and that the sale of the EPTC Facilities to Pacific Terminals will reduce competition for transport and storage services in the future; CUE claims that prior to the time that PPSI's pipeline was constructed, PPSI and the proposed Cajon/EPTC pipeline competed to construct a long-haul pipeline from the San Joaquin Valley to the Los Angeles basin. Pacific Terminals states that CUE alleges that SCE has not built the Cajon/EPTC project and that if the sale of the EPTC Facilities is made. Pacific Terminals will have no incentive to construct this pipeline. Pacific Terminals notes that long haul pipeline proposals that may have competed against one another have no relevancy to this proceeding. It states that the competition is over - PPSI won - EPTC has not proposed to use its facilities for long haul business.

9.4. Discussion

We believe that SCE and Pacific Terminals have addressed CUE concerns. We believe Pacific Terminals has addressed CUE's comments about a long haul pipeline competition some years ago and how it is not relevant to this proposed sale. We are persuaded by the fact the neither the FTC or the DOJ considered the proposed sale to be anti-competitive. Dr. Schink addressed, to our satisfaction, the absence of anti-competitive behavior by Pacific Terminals. We also note that there was only one customer protest relative to the Applicants' proposal, and that protest was resolved. Pacific Terminals addressed the market dominance issue to our satisfaction. Based on the above, we conclude the proposed transaction will have no adverse impact on competition.