Alaska and ... Exxon?

Posted: Wednesday, June 17, 2009

The name of one of the world's largest corporations has been in the news a lot lately. I am of course referring to Exxon Mobil, the oil and gas behemoth.

Last week, Gov. Sarah Palin announced that Exxon had signed an agreement with TransCanada Corporation to partner with the Canadian pipeline-building firm in moving forward with building an Alaska natural-gas pipeline. This no doubt surprised a great many Alaskans who are accustomed to thinking of Exxon as Alaska's adversary, if not as an outright enemy.

Exxon is a corporation, and thus is presumably run by its leaders with an eye toward maximizing corporate profits. This raison d'être prompted Exxon for years to refuse to pay to settle the claims of Alaskans grievously injured in the horrific 1989 Exxon Valdez oil spill. Exxon is also known for dragging its feet in the commercialization of its natural gas reserves (Exxon has held a leasehold interest at Point Thompson).

So many Alaskans probably thought Exxon would be the last representative of Big Oil to step up to the plate and participate in the process created by the Alaska Gasline Inducement Act (AGIA).

While I sympathize with Alaskans' understandable mistrust of Exxon, there are some rational bases for the Exxon in deciding to partner with TransCanada. Among these are profit and healthy returns to shareholders. The incentive to delay natural gas production, because the price of natural gas was low in comparison to petroleum, no longer exists today as it did for decades. Because of the pressure on mankind to take cognizance of the effects of carbon on the global environment - which has yet to be meaningfully internalized in market economics - and because of the relative prices of these commodities, natural gas has become a more alluring resources. Exxon's gasline actions could well reflect the same Machiavellian motives that led to earlier corporate behavior that offended Alaskans.

Critics of last week's announcement noted that the agreement between Exxon and TransCanada is short on details, and they're right. Only time will tell if the agreement to work together produces actual progress. But the same skepticism can be said about the so-called Denali project, put forward by BP and ConocoPhillips. One thing I'm certain of is that Denali would never have come into existence if AGIA hadn't passed. Gov. Palin has continued chipping away at the edifice of Big Oil's intransigence in getting Alaska's natural gas to market. The fact that the holders of the lion's share of the leasehold rights to this gas are now pursuing different strategies - and competing among themselves - shows that Gov. Palin is slowly but surely making progress, which will ultimately benefit all Alaskans.

The other big piece of Exxon-related news came earlier this week with the 9th Circuit Court of Appeals' decision to order payment of punitive damages related to the 1989 oil spill. Originally the jury in the case awarded the plaintiffs $5 billion, later cut in half following an appeal. The United States Supreme Court had then slashed the award from $2.5 billion to a mere $500 million in June, 2008, remanding the case to the 9th Circuit Court for a determination as to when the interest ought to have begun accruing.

The 9th Circuit Court ruled on Monday that the plaintiffs owed Exxon nothing toward its legal costs, and that Exxon owed the plaintiffs nothing for theirs.

Exxon can, of course, try to appeal this most recent ruling to the nation's highest court once again. This would mean even further harmful and insulting delays in final payments to the Alaska Natives, fishermen and other Alaskans whose lives were devastated by the spill. Exxon would have little chance of prevailing, however, because the 9th Circuit Court was performing a narrow task at the explicit direction of the U.S. Supreme Court, but it would match perfectly its prior litigation strategy.

Exxon is today at a crossroads with Alaskans and their political leaders. On the one hand, Exxon voices a desire to partner with the company that currently holds most of the cards and that can make the natural gas pipeline a reality, thus partnering with Alaskans. On the other hand, Exxon has been as slow and difficult as possible in making Alaskans' lives whole after it caused massive environmental catastrophe.

If Exxon really wishes to start over and move forward on the former path, I know what course it will take on the other matter. Exxon's actions will speak far louder than its words.

• Ben Brown is a lifelong Alaskan living in Juneau.



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