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Exxon, BP ask judge to dismiss lawsuit Alaska Gasline Port Authority antitrust suit alleges North Slope producers refusing to sell natural gas to other projects Matt Volz Associated Press Writer
Attorneys for Exxon Mobil and BP on June 2 asked a federal judge to toss an antitrust lawsuit alleging the companies are refusing to sell their natural gas to an Alaska pipeline project other than their own.
It’s a case that could have consequences for the future of a North Slope gas pipeline, which would be the largest construction project in North American history and which Alaskans have been trying to build for three decades.
Exxon and BP, along with ConocoPhillips and the state as a partner, propose to build a pipeline 2,100 miles to Alberta, Canada.
If there isn’t enough capacity in Alberta to take Alaska’s 4.5 billion cubic feet of gas per day, the line would stretch 3,600 miles to Chicago.
The Alaska Gasline Port Authority has a competing pipeline proposal that would run 800 miles from the North Slope to Valdez, where the gas would be liquefied and shipped in tankers to the West Coast.
Gov. Frank Murkowski has endorsed the oil companies’ proposal and abandoned the port authority’s, saying the port authority’s plan is not viable and the producers control the gas, anyway.
Exxon and BP own nearly all the leases to the North Slopes’ 35 trillion cubic feet of gas reserves.
Port authority claims collusion The port authority, which was formed in 1999 by three local governments that lie along the proposed path of its pipeline, claims Exxon and BP are colluding to keep competition out of the North Slope.
That view is shared by several state lawmakers who accuse Exxon of keeping the North Slope gas in the ground while its other gas interests, such as Canada’s MacKenzie Valley gas pipeline and worldwide liquefied natural gas projects, come on line.
Robert Davis, a spokesman for Exxon who traveled to Fairbanks from Houston for the June 2 court hearing, said that is not the case.
“We are highly motivated to sell the gas, OK? We have been for a long, long time,” Davis said. “The United States needs all sources of gas. It needs Canadian gas, it needs imported gas in the form of LNG ... and it needs Alaskan gas. So no, it’s not an either-or situation from our vantage point.”
On June 2, both sides argued the companies’ motion to dismiss the case before U.S. District Judge Ralph Beistline.
Port authority attorney John Cove said the companies’ refusal to sell gas caused Sempra Energy Co. to back out as a potential buyer and partial project financier and caused Murkowski to shelve its pipeline application under the Alaska Stranded Gas Development Act.
Cove said the port authority is the victim of an agreement between like-minded oil companies to boycott competition. The group deserves to have the case resolved by a jury, he said.
The port authority also is asking the judge to issue an injunction that would force Exxon and BP to sell the gas.
“The port authority is not an opportunist trying to get a free ride on an antitrust violation that did not affect it,” Cove said.
Companies: lawsuit usurps state negotiations The oil companies say the port authority’s lawsuit usurps the process created by the state to negotiate a gas pipeline.
“The port authority should not be permitted to use the courtroom and this court to accomplish what it was unable to accomplish in the process that was set up by the state pursuant to the Stranded Gas Development Act,” said Exxon attorney David Beck.
A Stranded Gas Development Act contract proposal between the state, BP, Exxon and ConocoPhillips is now out for public review and comment. That contract, which would set the tax and royalty terms if a pipeline is built, could go to the state Legislature for a vote later this year.
But the contract is no guarantee a pipeline will be built. That commitment would come about four years later, after planning and permitting is completed, Murkowski’s negotiators have said.
BP attorney Matthew Heartney said there are other reasons than no access to gas that the port authority’s application wasn’t accepted.
“The port authority has no experience and no background in the very complex and demanding businesses of designing a pipeline, constructing a pipeline — particularly in the very adverse arctic conditions in Alaska,” Heartney said.
Cove: municipal authorities often build projects Cove said municipal authorities or districts are often created to build public-works projects. The port authority can issue bonds and would have federal loan guarantees available to it to safeguard financing the project, he said.
But there are a number of additional steps to move the pipeline project ahead that can’t be taken because the port authority can’t access the gas, Cove said.
“Not all of those steps have been taken because they don’t make sense, they can’t be done because there is no commitment to purchase the gas,” Cove said.
The port authority also alleges in its lawsuit that by warehousing the North Slope gas, the two companies have kept the price of natural gas in the United States artificially high.
Neither side addressed that charge June 2, but Beck afterward disputed the claim.
“The fact of the matter is, gas prices have been coming down consistently,” Beck said. “I think they’re now down in the $6 range. So gas prices are continually coming down. What happens in the future is going to depend on market forces.”
Beistline said he plans to decide within 30 days whether to dismiss the case.
“I don’t know what my decision is going to be yet, but I think (since) we’ve waited 35 years, we can wait 30 days,” Beistline said.
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