State responds to Irwin's questions

Posted: Friday, October 28, 2005

Alaska Attorney General David Marquez responded Thursday to legal questions about a gas line contract that Department of Natural Resources Commissioner Tom Irwin asked last week.

In Irwin's critique, which led to him leaving office, he said he was concerned about the legality of the proposed agreement with three oil producers to build a pipeline with the state to transport natural gas from the North Slope.

"We have obtained extensive knowledge that we did not have at the beginning of these negotiations through the use of outside consultants and our modeling of the various alternatives available to the state," Irwin wrote in his letter.

The point of his e-mail was to seek advice on whether people in the department are operating within legal limits, it said.

At the heart of his concern was the state referring to the gas as "stranded," as defined in the Stranded Gas Development Act.

Irwin is concerned he and his staff could be held liable and damage could be done to the state if he signs the required preliminary fiscal interest findings when data indicates that the gas is not stranded.

Irwin argues that natural gas should not be defined as stranded while it enjoys a favorable market price, which of this quarter is $14 per thousand cubic feet. When the Stranded Gas Act was passed by the Alaska Legislature in 1998, the price of gas hovered around $2 and $3.

Producers said it would not be profitable at that time to develop the gas, therefore it was called "stranded." The act allows the governor to host exclusive negotiations with producers for a pipeline and keep them confidential. Without the act, all 60 legislators would be participating in the process.

Also, if the gas is not stranded, the industry is required to market the gas.

Attorney General Marquez argued in a press conference yesterday that until producers have a means to transport the gas from the North Slope, he considers the gas to be stranded.

Marquez concluded that the issues raised by Irwin may result in the Legislature amending the contract, if one is reached, when the body reviews it for approval.

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