Oil antitrust suit dismissed by judge

Posted: Tuesday, June 20, 2006

A federal judge on Monday tossed out an antitrust lawsuit alleging two oil companies that control the vast majority of North Slope natural gas reserves are refusing to sell the gas to a pipeline project other than their own.

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The Alaska Gas Port Authority, a coalition of municipal officials from Fairbanks North Star Borough, the North Slope Borough and the city of Valdez, claims Exxon Mobil Corp. and BP PLC conspired to crush competition and stymied the port authority's efforts to develop an all-Alaska gas pipeline.

It asked the judge to issue an injunction that would force the companies to sell the gas.

But U.S. District Judge Ralph Beistline dismissed the case Monday. He said the port authority's lawsuit could upend a competing effort by the state to forge a contract with Exxon Mobil, BP and ConocoPhillips to build a North Slope gas pipeline to Canada and markets in the Midwest.

Beistline said the port authority, as a "political subdivision" of the state, did not have the legal standing to interfere in the laws and policies of Alaska. He agreed with the oil companies who argued that the lawsuit would usurp the states Stranded Gas Development Act which lays out the process for negotiating a contract.

Beistline said the port authority appears "well-intentioned, has accomplished a great deal to date, and may well have a valid plan.

"Decisions, however, regarding who, when, where and how to accomplish this monumental task should involve all interested parties and are best made by the Alaska State Legislature and the people of Alaska," wrote Beistline.

The port authority had not demonstrated that it had the experience, the finances or the ability to consummate the project, he said.

The port authority has argued it is unable to take the necessary steps to move the project ahead without access to the gas.

The group seeks to build an 800-mile natural-gas pipeline from Alaska's North Slope to the port of Valdez, where up to 4.5 billion cubic feet of gas per day would then be liquefied and shipped in refrigerated tankers to West Coast markets.

Gov. Frank Murkowski abandoned the port authority's plan in favor of the oil companies' proposal to build a pipeline 2,100 miles to Alberta, Canada, for an estimated $19 billion. The pipeline would stretch 3,600 miles to Chicago for an extra $8 billion, if Alberta can't handle the estimated 4.5 billion cubic feet of gas per day.

A Stranded Gas Development Act contract proposal on that project is now out for public review and comment. The contract could be up for a vote of the state Legislature later this year.

Daren Beaudo, a spokesman for BP, said the company is pleased the judge's decision will allow the process to move forward.

"A gas pipeline can't be built on lawsuits, advertisements and power point presentations, it has to be built on good business," he said.

Beaudo said the companies have demonstrated their commitment by jointly sinking more than $125 million into technical and engineering studies for the project.

Robert Davis, spokesman for Exxon Mobil, said the companies have negotiated in good faith and taken part in other actions such as discussions with the Canadian government on regulatory issues and ongoing research and technology commitments.

Jim Whitaker, mayor of the Fairbanks North Star Borough and head of the Alaska Gasline Port Authority, said his group is "disappointed but undeterred." He said the port authority is in the process of reviewing the judge's decision and deciding on its next steps.

"This is a long road and we are in it for the long haul," he said.

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