A Superior Court judge says the state Department of Natural Resources tap-danced all over ExxonMobil's constitutional rights to procedural due process in a dust-up over development at Point Thomson on the North Slope.
Given the department's unfathomable animus for the industry, especially its favorite bogeyman, oil giant ExxonMobil, it is no surprise. After all, DNR's fear and loathing of the industry is what triggered the comically ill-advised Alaska Gasline Inducement Act that cost us $500 million -- so far.
What is a surprise is this: Gov. Sean Parnell has not sacked DNR Commissioner Tom Irwin or demanded his resignation because of the Point Thomson debacle. Parnell, running for governor, should do one or the other -- soon. It is beyond the embarrassing stage. Nobody would blink if Irwin and the DNR went the full mile to protect state assets and natural resources, but it is quite another thing when they become obstructive.
The court decision shows Irwin and the DNR were unfair in dealing with ExxonMobil and its partners about Point Thomson -- and it does not take a law degree to sort that out.
Why, you might ask, should anybody care about Point Thomson? It's a wind-blown natural gas and condensate field some 55 miles east of Prudhoe Bay smack in the middle of nowhere. Field pressures are frighteningly high and present myriad development challenges, but it is believed to hold about 25 percent of the known gas reserves in the state, or somewhere between 8 trillion and 9 trillion cubic feet of gas and 200 million barrels of condensate.
Here's the key: The state needs Point Thomson gas like Wimpy needs hamburgers. It is the linchpin for a large-diameter, $30 billion gas line to carry North Slope gas south but apparently nobody told Irwin or the DNR.
ExxonMobil (formerly Exxon) and the DNR joined in March 1977 to sign the Point Thomson Unit Agreement -- Exxon as unit operator, joined by partners BP, Chevron U.S.A. and Conoco Phillips.
Part of that agreement, Section 21, has been at the center of the ongoing fight. It gave the DNR commissioner power to make changes to the agreement under certain circumstances, but only after giving the partners notice -- and a hearing.
For the first several years, everything was fine. In August 2005, it blew up. The DNR believed ExxonMobil was dogging it at Point Thomson.
Lawmakers such as Sens. Hollis French, now a Democratic gubernatorial candidate, and Bill Wielechowski chimed in, claiming ExxonMobil had been "warehousing" its gas and stalling -- despite its having spent $800 million on the field over the years.
ExxonMobil submitted its 22nd development plan to DNR. It was rejected in September 2005. The DNR canceled leases in the Point Thomson Unit. ExxonMobil's failure to submit what Irwin saw as an acceptable plan prompted him to terminate the unit. Exxon modified its plan. Rejected. A 23rd plan. Rejected.
Irwin said he did not trust ExxonMobil.
Section 21 questions about notice and hearings -- who gets them and how many and when -- have been center stage in one courtroom after another since then.
In her 29-page ruling, Superior Court Judge Sharon Gleason noted ExxonMobil believes the DNR's high-handed approach was "constitutionally inadequate," providing "no neutral decision-maker, adequate notice and adequate discovery, an appropriate burden of proof, an adversarial hearing in which DNR staff participated as a party and preclusion on ex parte contacts between the decision maker and any party."
In other words, Exxon correctly feels it did not get a fair deal and Gleason slapped down Irwin and the DNR at every turn, gutted every argument.
"Because the contractual agreement between DNR and the appellants precludes the termination of the Point Thomson Unit in these circumstances without consideration of 'good and diligent oil and gas engineering and production practices,' and because DNR failed to accord the appellants their constitutional right to procedural due process in the remand proceeding, DNR's decision is reversed," Gleason wrote.
Where it will go from here is anybody's guess. Appeals? More court time lost?
At this critical time in state history, with oil production sliding and a gas line more important now than ever before, it is silly to continue a culture of obstructionism at the Department of Natural Resources. If top DNR officials cannot deal with the oil industry, cannot follow the law or their own rules, it is time for a change.
Paul Jenkins is editor of the Anchorage Daily Planet.
PAUL JENKINS
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