RCA issues order on Marathon’s refusal

The Regulatory Commission of Alaska has issued an order in response to Marathon Oil’s refusal to comply with its ruling requiring Marathon to provide information about LNG conversion and shipping costs for the Nikiski LNG plant. Tesoro had made a discovery request for the data in connection with an RCA hearing on a new gas supply contract between Marathon and Enstar Natural Gas — Tesoro and others are challenging the gas pricing in the new contract.

On July 13 Administrative Judge T.W. Patch adjourned a hearing in the case, so that RCA could respond to Marathon’s refusal to comply with its ruling. Marathon had said that the data at the core of the dispute are especially confidential and subject to a non-disclosure agreement with LNG plant operator ConocoPhillips.

“Complying with the order will put Marathon in the position of either breaching … agreements with ConocoPhillips or violating a commission order, neither of which is a very appealing place to be,” Mark Lewis, counsel for Marathon, said.

RCA has now ruled that portions of the testimony of Marathon witness Bruce Henning be struck from the record. RCA also ordered Marathon not to challenge estimates of LNG conversion and shipping costs presented by Benjamin Schlesinger.

In its new order RCA said “Marathon’s flagrant refusal to obey our order compelling responses to Tesoro’s discovery requests is unprecedented in the history of this agency.” Although RCA said it could dismiss Marathon from the case or seek a superior court action enforcing its ruling about the data, the commission has decided on the course of action set out in the new order “balancing our desire to defend our authority to compel discovery and to deter future discovery violations with the public interest in a record that is as complete as possible under these circumstance.” RCA also said the time limits for completing the Enstar/Marathon contract case precluded the possibility of court enforcement of its ruling.

RCA also decided “not to pursue monetary penalties from Marathon as a sanction under the unique circumstance of this docket.”

In its discussion of its order, RCA said parties to the case had asked it not to dismiss Marathon from the proceeding, because it might compromise their case if they could not question Marathon’s company witnesses. Some parties proposed remedies to the impasse over the LNG data, including striking the testimony of some Marathon witnesses. And Marathon had volunteered not to challenge Tesoro’s LNG cost estimates.

However, RCA denounced Marathon’s refusal to produce the information under discovery: “Marathon has breached its obligations to us, to the public and to other parties,” RCA said in its order. “Marathon refused to produce discovery that could have provided another party, Tesoro, with information to counter Marathon’s case. … Marathon’s actions have unnecessarily delayed this proceeding and created a risk that we may not be able to determine whether APL-5 (new Marathon/Enstar contract) is in the public interest before the tight timeframe imposed in this proceeding elapses.”