Alaska charges BP, ExxonMobil with anti-trust violations

Washington (Platts)--20Dec2005

An Alaska state agency hoping to develop a liquefied natural gas terminal
and pipeline has filed suit against ExxonMobil and BP, accusing the producers
of engaging in anticompetitive behavior by refusing to sell their North Slope
gas. 

     Late Tuesday, the attorney general of Iowa said that he and the attorneys
general of Wisconsin, Illinois and Minnesota are reviewing the filing with an
eye to possibly joining the plaintiff's suit. "If we can add resources and
ideas," Iowa Attorney General Tom Miller said, they may decide to join. All
four states are huge users of gas for home heating and Miller said his
constituents are facing 50% hikes in their heating bills this winter.

     Attorneys for the Alaska Gasline Port Authority, a municipal group
created by the state Legislature in 1999, argued that ExxonMobil and BP have
engaged in a variety of means to eliminate competition and block the marketing
of an estimated 35 Tcf of gas.

     The port authority has proposed building an 800-mile pipeline from the
North Slope to Valdez, Alaska, where gas will be liquefied and shipped to West
Coast markets.

     "Their concerted refusal to market this gas results in higher gas prices
that hurt consumers and businesses throughout Alaska and the rest of the US.
This cannot be allowed to continue," said David Boies, the authority's lead
attorney who filed the action late Monday with the US District Court in
Fairbanks, Alaska.

     "The defendants have concertedly undertaken a series of acts and
agreements to prevent the free market from responding to the demand for
natural gas," including squeezing out other North Slope producers and blocking
the development of any gas pipelines connecting the region to North American
markets, the suit charged.

     The complaint also said unsold North Slope gas represents millions of
dollars  in lost royalty payments to Alaska's citizens, while the lack of a an
LNG pipeline project is costing the area 5,000 lost local jobs.

     According to the complaint, BP's refusal to sell gas it owns on the North
Slope constitutes a breach of its charter agreement with the state of Alaska
reached when the state agreed not to contest BP's acquisition of Atlantic
Richfield Co. That contract requires BP to sell gas if reasonable offers are
made.

     The Port Authority has attempted to buy gas from the North Slope
producers for its LNG project but has been unsuccessful, according to the
suit. In a televised interview Monday, Boies said the producers? refusal to
sell the gas caused the authority to lose Sempra Energy as a key customer for
its LNG.

    BP, ExxonMobil and ConocoPhillips are working with the state of Alaska on
a $20-bil all-land pipeline that would take gas from the North Slope across
Canada to Midwest markets.  

     "We have not engaged in anticompetitive practices," a BP spokesman said
Tuesday. "Our gas has always been available to commercially viable
projects. We're not clear that the port authority's LNG project is viable, and
we are focusing our efforts on the project that has the best chance of
commercial success."

     An Exxon spokesman called the suit "simply ridiculous. It's well known
that Exon, BP and ConocoPhillips have been discussing with state of Alaska,
spent hundreds of millions of dollars studying LNG, GTL (gas-to-liquids), and
a [all-land] pipeline and have found the [all-land] pipeline is the best."
"We continue with fiscal negotiations with the state of Alaska," he said,
"and we are in advanced stages of those talks."

    The three supermajors and the state are trying to hammer out an agreement
for the construction of an overland pipeline off the North Slope, through
Canada, and into the midwestern US.

     ConocoPhillips was not named as a defendant in the suit, which claims
that ConocoPhillips itself was forced out of its Milne Point fields on the
North Slope by BP and ExxonMobil abusing their control of the TransAlaska Oil
Pipeline to charge rates that made then-Conoco's efforts unprofitable. 
     
     The port authority's suit also argued that ExxonMobil's refusal to abide
by agreements to develop the Point Thomson Unit gas and gas condensate field
east of Prudhoe Bay provides additional grounds for its antitrust claim.
"Despite repeated requests over the years" from the Alaska Dept. of Natural
Resources for drilling in Port Thomson, "ExxonMobil has submitted, and
continues to submit, annual plans for the PTU that include no drilling,
development or marketing of PTU's gas resources," it said.
 
     "We're disappointed," Exxon's Davis said. "This is indicative of the
suit-happy, litigious society in which we live."

     "We're going to fight this," Davis added. "We're going to fight this
hard."
                             ---Bill Holland, bill_holland@platts.com
                             ---Tim Bradner in Alaska

For more information, take a trial to Platts LNG Daily at
http://www.LNGdaily.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.