No written comments
April 10, 1984
Sandra Vidas, Esq.
Room 301, Federal Trade Commission
Washington, D.C. 20580
As we discussed on the telephone last Friday, (redacted) has signed an agreement to acquire (redacted) properties in (redacted) and one property in (redacted) with a total value of about $28 million. These properties are owned by (redacted) limited partnerships, with (redacted) as the general partner. Not one of these 25 partnerships has an interest in these properties exceeding $3.3 million, now would (redacted) derive revenues from this asset sale which would even be close to $15 million. (Redacted) currently has crude oil production in (redacted) of less than 1000 barrels per day, and in (redacted) of only about 10,000 barrels per day, so it is highly unlikely that this transaction has any antitrust significance.
It is my understanding that it is the FTCs position that because (redacted) has filed as the ultimate parent entity of its limited partnerships in the past, it has waived the usual interpretation of the Premerger Notification Office that a partnership is its own parent entity. That position undoubtedly was adopted because a contrary interpretation would have required a number of nearly identical, but separate filings by each (redacted) limited partnership and the buyer, and because each partnership was presumably selling more than $15 million in assets to that buyer. By calling (redacted) the ultimate parent entity in the above situation, duplicative filings were avoided and all parties benefited.
I can appreciate the FTCs concern that it not be forced into an inconsistent position. However, it would appear that the intent of 802.20 of the Rules, which exempts from the requirements of the Hart-Scott-Rodino Act asset transactions not exceeding $15 million in value, would be frustrated by requiring a filing in (redacted) present transaction with the (redacted) limited partnerships. This should particularly be the case where, as here, the transaction has no antitrust significance.
I always understand that you have taken the position that crude oil producing properties are never exempt from filing under 802.1 as acquisitions made in the ordinary course of business. I am sure that you are aware that the vagueness of the ordinary course of business standard and the lack of guidance provided to the oil industry to date has led to a lot of confusion on this issue. (Redacted) believes that your interpretation of 802.1 as never applying to crude oil producing properties is unrealistic, because oil producers frequently sell or exchange producing properties in the ordinary course of business. I would like the opportunity to discuss this subject with you in greater detail if this becomes necessary.
However, regarding the transaction at hand, this issue need not be addressed if we are able to agree that, applying the unique facts of this transaction to the FTCs usual interpretations of holdings and ultimate parent entity with respect to partnerships, it is not reportable because the $15 million asset threshold set forth in 802.20 is not reached. Please let me know what you decide on this question, and feel free to contact me if you need further information.
Very truly yours,