Court to hear gas deal request

Senator asks to peek at contract between state, oil companies

Posted: Tuesday, May 02, 2006

A Juneau Superior Court judge on Monday agreed to hear arguments from a state senator requesting that Gov. Frank Murkowski make public details of a deal the state has with oil producers to build a $25 billion natural gas pipeline.

Sen. Hollis French, D-Anchorage, filed the injunction on April 21 and then filed to expedite the case. Previously, the senator was denied two public-records requests.

After hearing from French and the Department of Law, Judge Larry Weeks said he expects to make a ruling on Friday.

French said it's crucial for the Legislature to know the details of the contract as it approves a new oil-and-gas tax regime.

"We've got many, many experts in (the Capitol) who I think are ready to tear into the contract once it becomes a public document, if I'm successful on Friday," French said.

If the court rules in favor of French, the senator said the document will become available to him immediately. French hopes to get the entire 300-page contract and he promises to release it to the public.

"In the halls and on the floors and in the legislative lounge, people say all the time that they want to know what's in that contract," said Senate Minority Leader Johnny Ellis, D-Anchorage. "And they think it's unfair that we don't have that available to us when we are asked to change the oil-tax regime."

The administration maintains it will not release the contract because it is incomplete. It will be finished when the Legislature passes the oil tax as it will be written into the contract and locked in for 30 years.

The Stranded Gas Development Act passed in 1998 allows negotiations with oil companies and groups bidding to build the pipeline to be confidential. According to a legal document French wrote, the confidentiality applies only to documents that reveal negotiation secrets.

French said the state's legal team offered as a settlement to let him see the contract in exchange for dropping the lawsuit and signing confidentiality papers. He declined.

"I doesn't do me any good by myself. I've got to have help getting through 300 pages. I've got to have help analyzing the terms," he said. "It also told me the contract is ready for release."

Legislators have been told by the administration and the oil companies if they pass an oil-tax plan with a 20 percent tax rate, then the producers will sign the pipeline contract. The governor has warned that if the tax rate is higher than 20 percent, the producers may back out of the deal.

In February, Murkowski announced he had reached an agreement with three major oil producers - ConocoPhillips, Exxon Mobil and BP - to build a pipeline to deliver some 35 trillion cubic feet of natural gas to markets in the Midwest.

The governor said last week he intends to release the contract on the first day of a special session that is to begin May 10, regardless of whether the Legislature passes the Petroleum Production Tax, known as PPT.

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But his spokeswoman, Becky Hultberg, on Monday said the governor was basing his promise on the assumption that the bill would pass before the session ends May 9.

"The May 10 contract release date was based on the assumption that PPT would be passed during the regular session and we continue to believe it will be passed during the regular session," Hultberg said.

House majority leaders indicated during a press conference on Monday that the oil-tax may not be done before the end of the session.

The House version calls for a 20 percent tax rate with an increase of 0.3 percentage points for every dollar above $50 per barrel. The Senate version is set at 22.5 percent with an increase of 0.2 percentage points for every dollar above $50 per barrel.

The difference in a few percentage points could mean several hundred million dollars at high oil prices. According to the Department of Revenue, at $60 a barrel the governor's plan would bring in $2.2 billion a year.

Hultberg said Jim Clark, the governor's chief of staff and lead negotiator, has indicated that any legislator who wants to talk with him about the provisions of the contract can do so if they agree to sign a confidentiality agreement.

• Andrew Petty can be reached at

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