Port authority sues BP, Exxon to get North Slope gas for project

An antitrust lawsuit filed Dec. 19 against Exxon Mobil Corp. and BP PLC claims the two oil giants are restricting the nation’s supply of natural gas and keeping prices at record highs.

The lawsuit, filed in U.S. District Court in Fairbanks, says the two companies acted together to eliminate competition for the exploration, development and marketing of natural gas from Alaska’s North Slope to U.S. markets.

“The only reason for them to collusively not to sell is to try to continue the scarcity that has driven natural gas prices to historic highs,” said David Boies, the attorney for the Alaska Gasline Port Authority, which filed the lawsuit.

BP and ExxonMobil are two of Alaska’s biggest oil and gas leaseholders, and are the operators for the North Slope’s largest oil and gas fields, Prudhoe Bay and Point Thomson. Alaska’s North Slope is estimated to have at least 35 trillion cubic feet of natural gas reserves, which could supply 7 percent to 10 percent of the nation’s natural gas, Boies said.

The January future contract for natural gas rose 41 cents Dec. 19 to settle at $14.04 per 1,000 cubic feet on the New York Mercantile Exchange. The gas contracts have reached record levels near $16 per mcf in recent months.

“I don’t think anybody can tell you exactly how much the prices would decline, but it’s clear it would decline substantially,” Boies said.

The federal lawsuit arose from the producers’ refusal to sell supplies of natural gas to the port authority, which wants to build a pipeline from the North Slope to Valdez. From there, the gas would be liquefied and shipped by tanker to the West Coast.

BP and ExxonMobil, along with ConocoPhillips, have their own gas pipeline proposal that they are in negotiations with the state to build. They say the port authority’s 800-mile pipeline project is not competitive with other LNG projects around the world.

“Our North Slope gas has always been available to commercially viable projects. It’s not at all clear to us that the port authority project is viable,” BP spokesman Daren Beaudo said.

Officials at Irving, Texas-based Exxon Mobil did not return a call for comment.

The port authority is seeking unspecified dollar amount in damages and to restore competitive conditions to the North Slope. The only thing keeping the port authority from moving forward with its pipeline plans, its officials say, is BP’s and Exxon Mobil’s refusal to sell the gas.

“This is an effort to acquire a supply (of gas),” said Jim Whitaker, chairman of the port authority and mayor of the Fairbanks North Star Borough. “They have refused to deal, therefore we are here.”

Gov. Frank Murkowski has halted negotiations with the port authority and is focused solely on closing a deal with the three oil companies for their $20 billion pipeline proposal. Murkowski spokeswoman Becky Hultberg said the governor’s office has not seen the lawsuit and could not comment.

She said the governor hoped to finalize a long-term fiscal contract with BP, ExxonMobil and ConocoPhillips to build a gas pipeline after negotiators return from a holiday break.

—MATT VOLZ, Associated Press Writer