Ogan Blasted by Fairbanks North Star Borough Mayor in Open Letter. Charges very serious, tone scathing. Letter provided below.

As the News-Miner reported yesterday, Fairbanks North Star Borough Mayor and former state GOP legislator Jim Whitaker wrote Sen. Scott Ogan (R-Evergreen) an open letter in which he practically accused Ogan of sideing with North Slope producers against the interests of the state of Alaska. Whitaker also seems to imply that Ogan should resign from the legislature if he continues to favor producers over the state.

I have obtained a copy of the three page letter. Here it is with some minor formatting changes required to post it on this blog:

July 27, 2004


Senator Scott Ogan
Chair, Senate Resources Committee
Alaska State Legislature


Senator:

Your telephone call yesterday was surprising and inappropriate. During that call, you stated that you were “not going to allow the upcoming (Joint Sen. Resources / LB&A) hearing to get out of control”, as you felt it had at the previous hearing when Robin Brenna gave his testimony; which you characterized as: “an attorney going into full attack mode against the producers”.

You further stated that his testimony “had the producer’s panties in a wad”; and you inferred that you had assured the producers you would not let that happen again, out of fear that a potential project might be hampered. In an apparent attempt to prevent any such discomfort on the part of the producers, you stated that any testimony I might present to the committee on behalf of the Alaska Gasline Port Authority would have to be pre-submitted in writing and reviewed by you before you would allow it. When I replied that a constraint of that nature was unacceptable, you replied that you would “think about it and get back to me.” You have not done so, therefore, I am submitting this testimony to you and the public concurrently.

Senator Ogan, the request from Bonnie Robson, the consultant to the Legislative Budget and Audit Committee for Alaska Natural Gas Pipeline Issues, is very clear, the subject matter for discussion is to be: “What is your company willing to offer on access beyond what is required by law?”

My testimony was going to be, and still is as follows:

Current Alaska law provides for a broad policy directive:

• the Alaska Constitution, Article 8, sections 1 and 2 that directs “It is the policy of the State to encourage… the development of its resources by making them available for maximum use consistent with the public interest. And that The legislature shall provide for the utilization, development, and conservation of all natural resources belonging to the State, … for the maximum benefit of its people.”

• AS 38.35 The Right of Way Leasing Act – “The natural resources of this state… and in its land for transportation of these resources …toward markets both in and out of the state are capable of making a significant contribution to the general welfare of the people of this state. It is the policy of this state that the development, use, and control of a pipeline transportation system be directed to make the maximum contribution to the development of the human resources of this state, the increase in the standard of living for all of its residents, the advancement of existing and potential sectors of its economy, the strengthening of free competition in its private enterprise system, and the careful protection of its incomparable natural environment.”

• AS 43.82 Stranded Gas Development Act - “maximize the benefit to the people of the state of the development of the state's stranded gas resources”

Unfortunately, with the passage of HB 290 by the twenty-first Alaska Legislature in 2000, that broad policy directive is precluded in that the law puts an overwhelming burden on local utilities and communities to commit to purchase, for firm transportation, a definitive amount of natural gas without knowing what their future demands will be, without knowing what the tariff rate will be, or the methodology for gas valuation will be, or from whom they will purchase gas or even if it will be available.

Further, HB 290 exempts a North Slope natural gas pipeline from a requirement to serve as a “common carrier” for anything other than in state use of gas. There is no realistic provision in law that requires the owners of a gas pipeline to provide access for out of state shipping capacity to any other would be competitor.

Simply put, despite a broad policy directive to the contrary, it is probable that under existing law, Alaska’s communities will have limited access to North Slope natural gas. Further, it is probable that would-be competitors will be precluded from shipping natural gas, thereby eliminating the potential for a competitive free enterprise market, from which all Alaska benefits.

Fortunately, timely solutions do exist. When HB 290 passed, it was clear that a time of reckoning lay before us; when the legislation would have to be reviewed and changed. We knew that because, while HB 290 was the best we could do at the time, ultimately it did not meet out constitutional obligation. That time is now. The first set of solutions will require that the law be changed to provide a more probable opportunity for community access and competitive access for would be gas explorers and producers. A second solution is public ownership of a North Slope natural gas transportation system. The Alaska Gasline Port Authority, a municipal entity created in 2000 by an overwhelming majority of voters, and the Alaska Natural Gas Development Authority, a state entity, created by initiative in 2002 and approved by a significant majority of voters, are both committed to ensuring access to any would be producer and also committed to providing access to supply for all Alaskan consumers; be they utilities, industrial, or other user groups.

Ready markets exist for Alaskan natural gas. The supply / demand dynamic is such that the economics of a project are predictable and positive. Supply, at a fair value, must be made available to the project that most benefits Alaska and Alaskans. It is the Legislature’s constitutional responsibility to ensure that supply, at fair value, be made available. That responsibility and subsequent action may from time to time require a reasonable legal and commercial confrontation or negotiation between the Legislature and the major leaseholders of Alaska’s North Slope natural gas: British Petroleum, Exxon and Conoco-Phillips.

A negotiation or confrontation of this nature between the State as the owner and the leaseholders is necessary and healthy; after all, much can be gained or lost on both sides. The Legislature’s responsibility is to fairly gain a maximum benefit for the people of Alaska.

Individual legislators who will not or cannot accept that responsibility should resign; to do anything less is tantamount to a breach of the public trust, which is conveyed to them upon taking the oath of office.


N. Jim Whitaker
Mayor, Fairbanks North Star Borough