Pt.Thomson Poker: Irwin folds a weak hand

(1/28/09) It is one of those conflicting moments where you don't know whether to cheer "hurray" or yell "it's about *#$%&!@ time." 

So how about we do both?

The Department of Natural Resources announced today it was backing down from Exxon and allowing them to begin drilling in Point Thomson after wasting both time and money on a legal fight that was doomed from the beginning.

In a brief press release issued late Tuesday afternoon, DNR Commissioner Tom Irwin stated that he "authorized the processing of permits, including an ice road permit, and conditionally reinstated two leases based on the applicable law" which allows Exxon to begin building an ice road that will keep them on schedule for beginning drilling operations next month at Point Thomson.

So after months of listening to DNR Commissioner Tom Irwin posture by saying he didn't trust Exxon, the state had a rock solid case in cancelling Exxon's leases and was prepared to defend them in court, why would Irwin give in to basically the same promises that Exxon offered last March?

Irwin faced the reality that in just a few weeks, he'd get bounced out of court and have his ass handed to him by a Superior Court Judge who had already raised issues about how Irwin and Company violated their own process while engaging in this epic battle against Exxon.

It's been clear for months that DNR was tap dancing around the court house steps, opposing a mediator or the court from ruling on the critical facts surrounding the state's behavior when it came to Exxon's Point Thomson leases.

Irwins behavior seemed odd from a guy who kept telling the media that his case was a slam dunk and he'd be able to re-package those leases and sell them in time to make a gas pipeline happen on schedule.

One would have thought that Irwin would have been crashing down the doors of the courthouse to get a ruling on the leases so he could go about the business of evicting Exxon.

So what prompted Irwin's backing down?

Reality.

The fact is Irwin's legal case has always been weak and he knew it. After a week of testimony, where oil & gas contractors paraded through the DNR's hearing room testifying about the work they had been doing up at Point Thomson, plus the pending date in front of Judge Gleason, Irwin had no choice but to give up a losing fight.

That's good for Alaska.

While many including some at DNR had become too emotional about past Exxon performance, this case boiled 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 proper notification when cancelling the leases and the failure of DNR to acknowledge the actions Exxon undertook to stave off cancellation and satisfy the lease requirements were Irwin's downfall.

The tide started to turn in November when Exxon filed a motion with the court and stated "It is high time that this court resolve the basic issue here, and hold that the leases are still in force."

While Irwin and Company wanted to keep the public focused on Exxon's past behavior, Exxon wanted to keep the court focused on the leases and the contract law that was applicable. Their demand that the court finally rule on the leases and their subsequent hearing with Judge Patrick McKay last month, pushed Irwin into a corner that he could no longer squirm out of.

On Point Thomson, Irwin let his ego write checks his legal case couldn't cash.

Some have suggested that Irwin's decision was timed to match the same day that Governor Palin rolled out her political action committee geared towards a run for the presidency. I don't see any plausible connection between the two.

The real connection I see is that in order for Exxon to build an ice road this winter and get their drill rig over to Point Thomson, they needed permission now. The window to build an ice road is closing fast. 

Irwin was worried about waiting too long and then losing the court fight, which would have ended up costing Exxon the drilling season and and costing Irwin the last bit of credibility he has left.

So what does this mean for Alaska and the future of Point Thomson?

Exxon proceeds with the exact Plan of Development (POD) that they proposed last March. The same POD that Irwin rejected not once but twice saying he didn't trust Exxon.

The State acknowledges that Exxon has legal ownership rights to the leases, thus allowing them to develop Point Thomson.

The Alaskan economy gets the continued benefits of 50 contractors and 200 employees working up at Point Thomson.

Alaska finally gets moving on getting Point Thomson developed which is critical to any natural gas pipeline.

And hopefully Tom Irwin has learned a valuable lesson; if you can't play with the big dogs, stay away from the table.