Gas line deal raises legal issues
PACT: Conoco, state agree to "base terms"; new concerns arise.
By WESLEY LOY
Anchorage Daily News
Published: October 22, 2005
Last Modified: October 22, 2005 at 01:45 AM
adn.com
[ Next stop, the Court House and years and years of litigation. ]
Legal questions surrounding the natural gas pipeline negotiations are so great that they could force resignations from the state's gas pipeline team, state Natural Resources Commissioner Tom Irwin said in a memorandum released Friday night.
Irwin, in the dense, five-page memo, said he and his staff have been put in a "work environment where they seriously question the legality of administrative actions" taken toward achieving a deal with a trio of North Slope oil producers.
His memo to Attorney General David Marquez seeks advice on whether he and his staff members are being asked by the Murkowski administration to break the law by continuing to negotiate a state gas line contract with the oil companies that might run counter to the state's best financial interests.
Gov. Frank Murkowski, speaking from Fairbanks in an unusual after-hours news conference Friday, released the Irwin memo after the conference was over. He mentioned it as an aside to his main news: That one of the three oil companies holding long-dormant rights to develop the giant North Slope gas reserves had agreed to the "base terms" of a contract laying out tax, ownership and other details if the oil companies build the $20 billion pipeline.
That company is Houston-based Conoco Phillips, the state's No. 1 oil and gas producer. The president of the Alaska subsidiary, Jim Bowles, stood at Murkowski's side in Fairbanks and said about the agreement, "the journey has started."
The other two North Slope producers negotiating pipeline terms with the state for more than a year, BP and Exxon Mobil, still have not agreed and contract negotiations continue with all three firms, Murkowski said. A BP representative, Ken Konrad, spoke at Friday's news conference but Exxon did not have a representative.
"This is a significant milestone," the governor said of Conoco's acceptance.
Irwin also did not speak, but his memo, dated Thursday, said a great deal about a contract that remains under wraps.
He wrote that he and members of his staff have concerns they "are being asked by the administration to operate outside current law" and might face personal liability if they sign off on a gas line contract under the state's Stranded Gas Development Act, which authorizes the governor to negotiate pipeline terms subject to final approval from the Legislature.
The contract, more than 100 pages long, remains under wraps while negotiations continue, Murkowski said Friday.
Irwin asked Marquez for his opinion on the legality of pipeline negotiations in eight areas. Among his concerns:
• Whether the administration's proposed contract unnecessarily gives oil companies major incentives to develop the gas, and at the same time seems to relax their existing obligations under state leases to develop the gas in the giant Prudhoe Bay and Point Thomson fields.
• Whether it's legal to support a contract provision under which the state would, for decades, agree to take gas instead of dollars as payment for the state's royalty interest in the gas fields. Doing so would shift project risk to the state, which would have to find buyers for the royalty gas, "without proof or compelling evidence" this would improve the viability of the pipeline project, Irwin wrote.
• Whether the contract is in the state's best interest when the state's economic models don't "show the need for the proposed fiscal support from the state to the producers." Irwin does not specify exactly what fiscal support he's referring to.
• Whether the commissioner can support a deal under which the likelihood of a gas pipeline might be tied to an agreement with the producers to alter tax methods or rates on crude oil. Irwin noted that the administration long resisted an invitation from the producers to negotiate contentious oil taxes in conjunction with a gas line. "However, this summer the administration embarked on extensive analysis and discussion of oil taxes under the umbrella" of gas line talks, Irwin wrote.
• Whether it's legal for the commissioner to sign a finding that the gas contract is in the state's best interest, when the contract would later need changes in state law to take effect. Irwin said other prospective pipeline builders who have applied for a fiscal contract under the Stranded Gas Development Act might view that as "changing the rules of the game" to "allow the award of a contract to a favored party on terms other than as advertised."
Irwin concluded his memo with the specter of possible resignations:
"I must point out that putting members of the Department of Natural Resources in a work environment where they seriously question the legality of administrative actions they are asked to participate in is so troubling that it could result in the resignation of exceedingly valuable members of our gas pipeline team," he wrote.
Irwin did not return a message left on his cell phone Friday night. Mike Chambers, a Murkowski spokesman, said he couldn't answer questions regarding Irwin's memo.
"We are very concerned about the issues raised by Commissioner Irwin," said Jim Whitaker, mayor of the Fairbanks North Star Borough and head of an organization with a competing pipeline proposal. "We think they're valid."
Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590. |
