Harding quit Arc’s board after the company acquired a stake in the BassGas project, where Clough is embroiled in a legal dispute regarding cost overruns and construction delays.

Arc will assume a 12.5% interest in BassGas via its $US189.6 million ($A229 million) asset acquisition from Wandoo Petroleum.

Harding said he was disappointed to be leaving the company.

“Unfortunately, having given the issue considerable thought, I have come to the conclusion that I will be seen to be unable to fulfill my duties to shareholders as both a director of Arc and chairman of Clough, given the dispute between the BassGas project participants and Clough,” he said.

“I have chosen to resign from the Arc board to prevent any perception of conflict of interest and to ensure that I am not in any way failing to fulfill my duties to shareholders.”

Arc chairman David Griffiths thanked Harding for his three-and-a-half year contribution as a director.

“Although Mike’s resignation is a loss, the imminent commencement of Gary Jeffery as executive director – operations provides a new skill set to the board from an extremely experienced industry professional,” he said.

“In recognition of the board’s preference to have a majority of independent directors the board will undertake a search for a new independent director to join the Arc board in due course.”

The BassGas dispute has been referred to an arbitrator, who is expected to deliver his findings on liability by mid-year and his decision on the amount of damages later in 2007.

But if any party chooses to appeal, a final resolution of the dispute could be delayed until next year.