November 14, 2007

The Kaselehlie Press

Peilapalap, Pohnpei - On October 31, Pohnpei Acting Attorney General Salomon Saimon called the Kaselehlie Press to tell us that contrary to what we had printed in three articles, Lt. Governor Jack Yakana never signed the Chief Executive Council's Resolution recommending that the FSM Congress pass the law establishing an FSM Fuel Corporation.

When Congress was in the process of approving the terms of sale and purchase of assets agreements and the fuel supply contract between the FSM Petroleum Corporation and MOMI, extensive recess conversation centered on a telephone call that reportedly said that the Chief Executive Council had "unanimously" passed a resolution urging Congress to pass the bill. Senator Dohsis Halbert and Senator Frederico Primo both expressed surprise that Lt. Governor Yakana of Pohnpei had signed the resolution. Senator Halbert went so far as to say that there must have been some kind of mistake that they would find out about later.

Senator Primo, on the record asked what the urgency on the matter was. He said that he had seen with his own eyes that Lt. Governor Yakana signed the resolution of the CEC endorsing bill. He was likely referring to Presidential Communication 15-59 "Pohnpei has a different stand at the moment. To me, to approve this resolution, Speaker, I am sorry to say this in front of all the members -it's just like swimming up in the current. I don't know if I can get there."

President Mori in Presidential Communication 15-59 which was received by Speaker Figir's office on the same morning that Congress passed the bill establishing an FSM Petroleum Corporation, had attached to it, resolution 2007- 1-01 signed by the representatives of all four States and the President three days earlier. The resolution Wednesday, November 14 - 27, 2007 News though it did mention that the Governors had been briefed on the importance of the urgent need to update the national energy policy, it was really a resolution urging Congress to pass the President's reorganization bill. It was unanimously signed by all of the members of the CEC.

Never delivered to Congress was the resolution that said members "unanimously agree to support the initiative, and following internal review and approval, the execution thereof." It requested "the FSM Congress to favorably consider the passage of CB # 15-39 that accommodate the specific concerns of the States with respect to the divestiture provisions, and land and facility leasing arrangements."

On November 5th when we asked about it the CEC Secretariat faxed a copy to the Chief Clerk nearly two months after the law had passed though each of the resolutions said "Be it further resolved that certified copies of this Resolution be sent to the Speaker of the 15th FSM Congress." Speaker Figir's secretary said that his office had never received a copy of any of the CEC resolutions other than the first one.

The resolution was adopted by the CEC but it was not, as the resolution claimed, unanimous. It was signed by President Mori, Governor Simina of Chuuk, Governor Weibacher of Kosrae, and Governor Anefal of Yap but it was not signed by Lt. Governor Yakana of Pohnpei.

The press release issued by the FSM Public Information Office on September 12 didn't mention that by the time the CEC adjourned, Pohnpei State still was not ready to sign on and hadn't done so. The release said, "But up to the time immediately before the Conference, two of the states were still not ready whether they want to be part of the FSM Petroleum Corporation or to join with other partners to form their own companies.

In his opening remarks, President Mori said he hoped a consensus would emerge at the end of the two-day conference on whether the FSM would ultimately have the Petroleum Corporation. "At the end of the Conference, the Council adopted several resolutions, one of which expressed support for the Petroleum Micronesian Corporation idea and called on the FSM Congress to pass the pending legislation. Before adjournment of its Second Special Session also during the first week of September, 2007, the FSM Congress passed the bill on final reading and is now readied to be signed by President Mori".

Even Speaker Nelson Pelep of Pohnpei State Legislature in his letter to Governor David that listed six reasons why Pohnpei should not sign onto the plan thought that Lt. Governor Yakana had signed the resolution. He said in the letter that the signature was based on certain assurances about the plan (See the October 3, 2007 issue of The Kaselehlie Press). Acting AG Saimon said Pohnpei State Leaders are still not ready to sign on to the FSM Petroleum Corporation because of the same concerns Speaker Pelep listed in his letter. Additional concerns have been raised by Governor David in a letter he sent to President Mori. Saimon said that Pohnpei's stance has not changed and Congress should not have been surprised about that. They'd been saying that they weren't happy with the plan even before it was passed by Congress. Saimon said that the FSM Petroleum Corporation has signed a preliminary multi-million dollar loan agreement with the Bank of Guam with contingencies that must be met before the loan can be made. One of them is that all of the States must sign the Mobil Oil of Micronesia, Inc. agreement with the FSMPC. That is something that Pohnpei may never do, at least not until their legitimate questions are answered in a way that they are able to accept.

Pending legislation in Pohnpei State would establish a Pohnpei State Petroleum Corporation. The State is looking to build its own fuel storage tanks and go into competition with MOMI for fuel supply.

According to Saimon, Pohnpei has had at least two offers from major suppliers to compete with MOMI in the State. Tan Holdings, and its fishing company, Luen Thai, is not one of the two. At one time the company was interested in supplying fuel for Pohnpei Utilities Corporation but they have changed their minds and have advised Pohnpei State to sign the MOMI agreement. Pohnpei State has serious concerns about the problem of completely indemnifying MOMI from any responsibility for environmental cleanup. Saimon said, "Of course this is a good deal for the stockholders [of MOMI]. They won't have to pay to clean up the site but is it a good deal for us?"

He said that Pohnpei would be obligated to purchase 7,000,000 gallons of fuel each year and that if they fell below that level they could be fined $30,000,000 by MOMI. On the other hand, if MOMI doesn't keep it agreements, he said they would be fined $2,000. Not mentioned in Speaker Pelep's communication is that a non-negotiable term of the contract is a forum selection clause in which MOMI, an FSM Corporation and FSM would be subject to the terms of Singapore law in the case of arbitration. Saimon said, "What does Singapore have to do with it?" He said that arguably, Singapore has different laws and wondered why MOMI had made that clause non-negotiable. He said that Pohnpei's representative to the FSM Fuel Task force had kept everything to himself. Saimon said the representative had documents that said, "For Your Eyes Only. What is this, a James Bond movie?" He said that the Governor knew in broad terms what was going on with the negotiations but was not privy to any of the details.

He is disappointed with the fact that the Pohnpei State Attorney General was not a part of the FSM Fuel Task Force. He said that the AG's from the other three States had been represented and he didn't know how some of the terms of the contract remained there. Perhaps it was because both Chuuk and Yap were in a weak position for bargaining since their contracts with MOMI were nearing expiration. He said that Governor David lost sleep over the situation. Saimon said that David very nearly signed the contract not wanting to deprive either Chuuk or Yap of fuel by his actions, but when he found out that both of the States had options his decision not to sign became firm at least until Pohnpei's concerns can be met.

He said that within the next few days Pohnpei would be asking MOMI to stick to the 1996 fuel supply agreement. He said that he was well aware that the worldwide price of oil had increased to $100 per barrel and that it was bad timing for Pohnpei. He said that though it looks like Mobil has increased pump prices because of the world wide price of oil he thinks that Pohnpei is being "punished."