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Web posted Sunday, January 22, 2006

Ousted resources chief pans potential gas line deal

By Matt Volz
Associated Press Writer


  Former Natural Resources Commissioner Tom Irwin talks to House Republicans Jan. 12 at the Capitol in Juneau. From the left are Rep. Lesil McGuire, Majority Leader John Coghill and former Division of Oil and Gas Director Mark Myers. AP PHOTO/Seanna O'Sullivan   
JUNEAU - Tom Irwin, the former natural resources commissioner whose questioning of the state's natural gas negotiations cost him his job, told lawmakers Jan. 12 to look at any contract with a close and critical eye.

A fundamental difference of opinion Irwin holds is that the proposed pipeline project may no longer be eligible for special fiscal terms under the state Stranded Gas Act because economic studies show the project is economic without special tax concessions by the state.

Irwin cited modeling of the project done by Econ One, a respected consulting firm, on behalf of the Legislature. The results of that work were made public in legislative hearings last fall, and they show that under a wide range of expected future natural gas prices the pipeline would be very profitable.

The former commissioner said economic analyses of the project done by the Department of Natural Resources is still confidential, but that the results are similar to those reached by Econ One.

"When a deal comes out, we will hear how tough the negotiations were and how hard we had to work to get to this deal," Irwin told legislators in an open meeting of the House Republican majority caucus. "We're going to hear ... how much we're going to make. I worry that we won't know what we could have made. That's up to you all."

Former Division of Oil and Gas director Mark Myers' conclusion was simple: the deal doesn't protect the state's interests.

"The state under this structure, we felt, was taking billions of dollars of unnecessary and unfortunate risk, and it cannot be justified," Myers said.

Irwin was ousted last October after penning a memo to Attorney General David Marquez that questioned the legitimacy of the state's negotiations with BP, ConocoPhillips and Exxon Mobil and the soundness of the proposals included in the deal.

Irwin's removal prompted the resignations of six of his top deputies in the state Department of Natural Resources, including Myers.

Irwin has stayed out of the public eye since then. But on Jan. 12, he and Myers answered legislators' questions before a packed House Finance Committee room on what they see as shortcomings of the deal Gov. Frank Murkowski is brokering.

"I've been taught to negotiate differently," said Irwin, saying the state should be ready to walk away from the negotiating table, use its leverage and avoid setting deadlines. "You're playing or dealing with some of the very best in the world ... and they certainly don't mind using leverage."

Irwin also told lawmakers the ultimate responsibility rested with them.

"Who's going to be the champion for Alaska? Everyone else is going to have one," he said. "Alaska needs a champion, and that's the Legislature."

The state-producer negotiations are to set long-term tax and royalties with the three companies for construction of a proposed $20 billion natural gas pipeline from the North Slope. Very few details are known due to the secrecy of the talks, and the memo - which Murkowski released to the public before removing Irwin - provided the first real glimpse into their substance.

Myers on Jan. 12 provided a detailed explanation of the potential risks and problems Murkowski's negotiators were proposing. They included the risk of the state marketing and shipping its own gas, and the ability to expand the pipeline to attract future gas explorers. He also said the state should consider all three pipeline proposals that were submitted to the state, not just the producers'.

The Alaska Gasline Port Authority and TransCanada submitted applications under the state's Stranded Gas Act, but state negotiations have focused solely on that put forward by the three producers.

Myers said he had people from his division asking whether they can legally prepare a best interest finding document under the Stranded Gas Act that supports a gas contract when the administration's own analysis shows the project is economically viable now.

Also, the Department of Natural Resources staff believed the Stranded Gas Act requires a quantitative analysis of other proposals for a gas pipeline, meaning that of the port authority as well as TransCanda's. No comparison of the other proposals has been done.

In a briefing to legislators late in the 2005 legislative session, Murkowski told lawmakers that such an analysis would be done.

Mike Menge, who replaced Irwin as natural resources commissioner, had his turn when Irwin and Myers were finished. Menge said he considered the individual points raised by Myers and Irwin valid, but added that those points were made outside the context of the whole proposal.

Lawmakers may take a different view when a contract is released, he said.

"I look forward to the opportunity to defend the contract that we're putting together right now," he said.

If a contract is agreed upon, it will then be released for a public comment period before being submitted to the Legislature for approval.

Irwin also addressed the circumstances that led to his ouster. He said he never imagined the memo would be released and that it was meant to help him and his staff understand legal issues.

He considered it a confidential document under attorney-client privilege because it was addressed to the state Attorney General as a request for legal advice. It was copied to the governor and Murkowski's chief of staff, Jim Clark, as a courtesy.

But the message Murkowski apparently took from the e-mail was that Irwin wasn't a team player.

"I was informed that I either agreed with the administration's policy, I was a team player, or I wasn't on the team," Irwin recalled. "I took an oath and that oath was to do what's best for Alaskans, and that's what I did. I could no longer be on the team under those conditions."

Irwin said he came from a world in business where senior managers are encouraged to make individual assessments of proposed projects and present their views, even if they differed from those of top company management's.

Murkowski spokeswoman Becky Hultberg said the governor had moved on since Irwin's dismissal, and declined to respond to the former commissioner's statements.

Last October, the governor said he expected every member of his cabinet to confer with him on major policy disputes as they arise.

House Speaker John Harris, R-Valdez, said the Jan. 12 caucus meeting would be one in a series designed to prepare lawmakers and the public for a gas line. He invited Menge and Murkowski's administration to return the following week for another presentation.

"It's my responsibility, I think, to get as much information out to the people of the state of Alaska as possible," Harris said.

Tim Bradner of the Journal of Commerce contributed to this article. He can be reached at tim.bradner@alaskajournal.com.

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