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THE WALL STREET JOURNAL: Oil-Firm Merger, Tactic Controls Appear to Advance in the Senate

By JOHN J. FIALKA and CHIP CUMMINS
March 15, 2006; Page A8
A proposal to place further restrictions on oil-company mergers and marketing tactics appears to be gaining support among Senate Judiciary Committee members who see the approach as a way to respond to consumer complaints about soaring gasoline and natural-gas prices.
But the industry doesn't see it that way, and the effort could face significant hurdles. The chief executives of six of the nation's largest energy company's told the committee yesterday that they need the bigger size and financial power created by recent mergers to find new oil and gas and to compete for supplies in increasingly tight international markets.
“The energy industry follows what I call the law of large numbers,” said Rex Tillerson, chairman and chief executive of Exxon Mobil Corp. He said that tightening antitrust laws would make it more difficult for his firm to be a reliable national supplier of gasoline.
Committee Chairman Arlen Specter (R., Pa.) received support from some of the panel's Republicans and nearly all of its Democrats for legislation he is drafting that would make it easier for the Justice Department to challenge proposed mergers. Specifically, it would remove language from existing law that requires the government to prove a merger would “substantially” lessen competition, in effect shifting more of the burden of proof that competition won't be lessened to the companies. It also would allow the Justice Department to sue members of the Organization of the Petroleum Exporting Countries for conspiring to fix the world price of oil.
Despite the panel's support, it's unclear how legislation would fare. Last year the House rejected similar OPEC language.
Severin Borenstein, a business professor at the University of California at Berkeley, said changing current laws won't bring down oil prices, which are set by growing world demands.
Separately, the CEOs of BP PLC and Shell saw their overall pay packages rise last year as higher energy prices led to a surge in industry profits. But a series of stumbles by BP, the world's No. 2 oil company by market value, sent CEO John Browne's annual performance bonus tumbling 23%.
Lord Browne took home a pay package valued at £6.5 million ($11.3 million), 14% more than in 2004. BP paid him the equivalent of £3.3 million in salary, bonus and other benefits. He was also awarded stock valued at £3.2 million. His bonus, based on a series of benchmarks, was about £1.8 million, down from £2.3 million.
BP has a surge in profit last year, but was hurt by problems, including an explosion at its refinery in Texas City, Texas.
No. 3 oil company Shell's CEO, Jeroen van der Veer, was paid the equivalent of about $8.3 million in cash, benefits and stock for 2005, according to the company's annual report. Shell paid Mr. van der Veer $4.3 million in pay, bonus and other benefits, and awarded him incentive stock valued at $3.9 million. That compares with $3.3 million in pay, bonus and other benefits in 2004. Mr. van der Veer took over in 2004.
Write to John J. Fialka at [email protected] and Chip Cummins at [email protected]

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