|
Prince William Sound RCAC sues Alyeska Council sues to use Alyeska funds to analyze industry profits; Alyeska disputes funding of report, not right to do report By Kristen Nelson Petroleum News Editor-in-Chief
The Prince William Sound Regional Citizens’ Advisory Council filed suit May 27 against Alyeska Pipeline Service Co., operator of the 800-mile trans-Alaska oil pipeline system from Prudhoe Bay to the port of Valdez. The lawsuit, filed in the Alaska Superior Court in Valdez, defends the group’s right to use funds from Alyeska to analyze oil industry profits as they affect environmental safety.
Alyeska said it doesn’t dispute the council’s right to do the report, just the use of Alyeska funding for the report.
And, Alyeska spokesman Mike Heatwole told Petroleum News, the company objects to the implication “that we’re 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.
An arbitration panel decided in Alyeska’s favor in 2000 over use of Alyeska funds to comment on a pipeline C-plan, Heatwole said. 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 said in a May 27 press release that it acted in response to a demand from Alyeska that the council’s base funding not be used to study industry profitability in Alaska. The funding is provided “under a long-term contract that, among other things, guarantees the council’s independence from the industry,” the council said. $25,000 report at issue 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 the council had been told in September that a letter would be forthcoming, but only received the letter in mid-March. The project went forward, he said, and the council “neither sought nor obtained outside funding.”
Devens 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.” He said the council agrees that compliance with environmental laws is not dependent upon profitability, but said there have been “numerous occasions when you have cited economic justification for decisions being made on the Strategic Reconfiguration project…” and Alyeska personnel have given economics as a reason for not doing some projects. “Clearly, if economic reasons are being given for decisions about the system, we have a right to research the economic impact of those decisions on Alyeska” under terms of the council’s contract with Alyeska, Devens said.
Alyeska Pipeline responded, through its attorney, asking if the council wished to arbitrate or litigate the issue of whether, to the extent the council has already used Alyeska funding to pay for this project, the council “has gone outside the constraints of the contract and the appropriate remedy.”
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: dispute over use of funds Alyeska’s 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.”
North Slope production profitability and trans-Alaska pipeline profitability are not topics included in the contract, he said.
Heatwole 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 said.
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.
As to who pays for the council’s litigation, apparently it will be Alyeska.
The contract between Alyeska and the council provides that funding by Alyeska will be used “only to engage in any or all activities authorized expressly or by implication by this Contract.” The contract specifies that Alyeska funds may not “be used for attorney’s fees, litigation consultants or witnesses, studies specifically undertaken for purposes of litigation, expert witnesses, or other litigation costs in connection with litigation against Alyeska or the TAPS owners, or for any litigation arising out of the Exxon Valdez oil spill of 1989…”
Alyeska funds, may, however, be used “for purposes of litigation or arbitration with Alyeska respecting disputes over the interpretation or performance of this Contract.”
| 