May 27, 2005 --- Vol. 11, No. 51May 2005

Prince William Sound RCAC sues Alyeska

The Prince William Sound Regional Citizens’ Advisory Council filed suit today against Alyeska Pipeline Service Co. in Alaska Superior Court in Valdez defending the group’s right to use funds from Alyeska to analyze oil industry profits as they affect environmental safety.

The council said it acted in response to a demand from Alyeska that the council’s base funding not be used to study industry profitability in Alaska.

Alyeska told the council in mid-March that it would not approve the $25,000 contract with Richard Fineberg to analyze the profitability of ANS crude oil production and transportation.

“North Slope production profitability and TAPS profitability are not topics that are included as subjects for local and regional input under the terms of our Contract. TAPS compliance with environmental laws is not dependent upon profitability,” Alyeska Pipeline President David Wight told the council’s executive director, John Devens, in a March 17 letter. Wight said that following the council board’s approval of the contract at a September meeting, an Alyeska representative met with the board president and told him that Alyeska would request that funds provided by Alyeska not be used for this project.

Devens responded March 29 that it had been told in September that a letter would be forthcoming, but never received one until mid-March. He said the council disagrees that the subject of the analysis is not covered under the contract. “Most of the work that we do is not explicitly named in the contract but, rather, can be interpreted to fall within the general description of services to be provided under the Contract.”

The council said that while its contract with Alyeska provides for private arbitration proceedings or open proceedings in state court, it “went to court so that the matter would receive a full airing in a public forum.”

Alyeska spokesman Mike Heatwole said Alyeska doesn’t disagree that the council has the ability to pursue the report, “what we disagree with is the use of Alyeska funds under the contract we have with the council.”

He said Alyeska is “disappointed that we’re having to go to court over this issue.” The company had believed it was headed to arbitration with the council over the issue, one of the options provided under the contract.

He also said there is an implication that Alyeska is “somehow not in environmental compliance or that we’re running an unsafe operation and that is just not true.”

Heatwole said he is not aware of any previous litigation over terms of the contract, but said there was an earlier arbitration on the use of Alyeska funds for issues which Alyeska believed were outside the contract and an arbitration panel decided in Alyeska’s favor in 2000. That decision, he said, was over use of Alyeska funds to comment on a pipeline C-plan. The panel said it agreed “generally with Alyeska that the plain language of the contract contemplates only review and comment on tanker and terminal operations, which generally means tanker and terminal C-plans…”

The council was founded as a result of the Oil Pollution Act of 1990, is funded by Alyeska to the tune of some $2.8 million a year, and operates under OPA ’90 and under a 1990 contract with Alyeska.

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