COURT SPANKS IRWIN ON PT.THOMSON
NEW! Subscribe to RSS Feed
January 12, 2010: Late Monday afternoon, Superior Court Judge Sharon Gleason announced her long awaited ruling on DNR's cancellation of the Point Thomson Unit Agreement (PTUA).
In a clear victory for the Point Thomson Operators (PTO) Exxon, Chevron, BP and Conoco, Judge Gleason rebuked DNR's action in a stinging 29 page decision.
"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."
For the last four years the debate over the fate of the Point Thomson leases has raged from legislative committee rooms and talk radio programs to editorial page offerings fueled by emotion and misstatement of facts.
I wrote about the state's case last year:
In fact the state's case is so incredibly weak, during the hearing last week, the state's oil & gas director was passing out talking points to the media that consisted of nothing more than emotional arguments and half truths.
"Judge Gleason rejected Exxon's central arguments on appeal and ruled that the state properly placed the unit in default and that it had the authority to administratively terminate the Point Thomson unit," one of the talking points read.
Conveniently, DNR forgot to include the critical other half of Judge Gleason's decision.
In December 2007, Judge Sharon Gleason ruled that the state had the authority to terminate the unit, but not before allowing Exxon and the unit partners the ability to propose a final remedy.
andrewhalcro.com 1/19/09
Background
On December 26, 2007 Judge Gleason ruled that while the DNR had the right to reject the 22nd plan of development (POD) filed by the Point Thomson Operators (PTO), DNR must allow for a remedy under the law as simply rejecting a POD does not constitute grounds to cancel the leases.
"This court strived to make clear that the contractual rights of the parties were not fully resolved, concluding that "rejection of a proposed plan of development does not result in automatic termination under the PTUA"
Judge Gleason found that DNR violated their own regulations governing the PTUA by denying the Point Thomson operators due process by failing to allow them a required hearing under section 21 of the PTUA.
Section 21 of the PTUA expressly lays out the limits on what DNR can force a leaseholder to do.
In her ruling, Gleason rejected several DNR arguments that a section 21 hearing was not appropriate. DNR argued that section 21 wasn't applicable because it doesn't apply once DNR has rejected a proposed POD.
Gleason responded, " the court disagrees."
She went on to write that the application of section 21 is not limited to only those situations were DNR seeks to modify an existing POD. She cited subsection ii which states, "DNR's powers under section 21 shall not be exercised in a manner that would..alter or modify the rates of production..in any case."
Her ruling went on to say that because DNR had cancelled the leases because of its dissatisfaction with the rate of development & production of the PTU, the operators were entitled to a section 21 hearing.
DNR also argued that section 21 didn't apply because there is no ongoing production in Point Thomson. Again, Gleason rejected the argument, responding that section 21 of the PTUA encompasses not only situations where there is active production, but also the situation in which the rate of production is zero.
Then DNR stretched their argument to say that Judge Gleason's December 2007 ruling precluded such a section 21 hearing. However Judge Gleason shot that down immediately.
"DNR accords too broad of an interpretation to the use of the term "remedy" in this court's December 2007 decision. Gleason went on to write that the only way to reach a remedy is by enforcing section 21...which of course means granting the PTO's a section 21 hearing.
DNR went on to argue two more points about section 21 which Gleason summarily dismissed by ruling, "This court finds DNR's argument in this regard to be unavailing."
But the biggest blow was Gleason's admonition of the DNR for violating the PTO's constitutional right to due process.
The PTO's argued that they were not accorded a neutral decision maker during their administrative hearing and DNR staff violated ex parte rules.
In the PTUA remand proceedings, Commissioner Irwin was advised by the same attorneys who had represented the agency in this second appeal. In addition, Irwin allowed DNR Manager Nan Thompson to serve as a hearing officer after she had previously represented DNR back in 2007 when the agency was defending its first decision.
And we all know how unbiased Nan Thompson has been about Point Thomson.
It was her email that I wrote about last year that showed just how bitter DNR felt about Exxon and the Point Thomson operators.
In a April 25, 2007 email, ten months before Thompson sat as a hearing officer on the Point Thomson issue, she wrote, "I think EM (Exxon Mobil) has instructed their troops to try and create a record that the state is blocking EM's effort to develop these leases so they can make a record in court. Posturing, rather than a sincere effort to move the project forward, is the more likely motivation."
Gleason agreed with the PTO's citing an Alaska Supreme Court ruling stating, "When an administrative official has participated in the past in any advocacy capacity against the party in question, fundamental fairness is normally held to require that the former advocate take no part in rendering the decision."
In Gleason's finding on this point she wrote, "DNR's litigation counsel should not have been providing legal guidance to the Commissioner at the remand hearing, nor should DNR's agency representative in the first appeal have served in the position of hearing officer at the remand proceeding."
From here, Judge Gleason has ordered the parties to provide the Court with further briefing regarding whether the Court should again remand this matter for an administrative hearing or retain jurisdiction and conduct the hearing with a special master.
I predicted this defeat last year and my friend Rick Rydell has been calling this shot for even longer.
The only thing keeping this legal dispute going is Irwin, Thompson and DNR Deputy Commissioner Marty Rutherford, who between the three of them don't have any idea how to get out of this mess without losing all credibility and embarrassing themselves.
andrewhalcro.com 1/19/09
While many including some at DNR had become too emotional about past Exxon performance, this case boils down to one thing and one thing only; contract law.
As we detailed in a previous blog last week, the state had clearly violated their own process in the rush to take back the leases which made their court case as weak as a wet paper sack. The lack of due process when cancelling the leases and the failure of DNR to acknowledge the actions Exxon undertook to stave off cancellation and satisfy the lease requirements are Irwin's downfall.
andrewhalcro.com 1/29/09
This was an embarrassing loss for the state and yet another indication that DNR Commissioner Tom Irwin and his crew are over their heads. Meanwhile the state has burned a ton of cash only to get bounced out of court.
Gov. Parnell...how much more can this state afford from your DNR?
I'd say, not much at all.
NEW! Subscribe to RSS Feed