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May 2006

Vol. 11, No. 22 Week of May 28, 2006

Court dismisses Point Thomson lawsuit

Governor chastises Port Authority for ‘ill-founded’ litigation; AGPA says action reflects concern about producers’ undue influence

Rose Ragsdale

For Petroleum News

A state court judge dismissed a lawsuit May 16 filed by the Alaska Gasline Port Authority against the State of Alaska, saying the port authority failed to state a claim and calling the litigation premature.

The suit, filed in Alaska Superior Court early this year, charged the Alaska Department of Natural Resources with breaching its management obligations regarding oil and gas leases in the Point Thomson field on the eastern North Slope.

The port authority also asked that DNR should be enjoined from further action to approve development at Point Thomson, and that the department give the port authority a public hearing on the matter.

The court denied all three requests, noting that a ruling in the port authority’s favor would not give AGPA the gas it needs and that the port authority has an administrative appeal pending with DNR.

Gov. Frank H. Murkowski announced the court’s action May 18 and chastised the port authority for filing the suit in the first place.

“It’s this type of ill-founded litigation that takes up too much of the state’s time and resources,” Murkowski said. “The Legislature, in the Stranded Gas Development Act, directed the governor to negotiate a business agreement. We take the approach that negotiation is better than litigation, and it’s the path we will pursue.”

AGPA worries

But the litigation stemmed from the port authority’s concern that the State of Alaska would “roll over” once again for North Slope gas producers ExxonMobil and BP on developing the gas resources at Point Thomson, Bill Walker, AGPA’s attorney, said May 23.

“After 28 years, there’s been no development decision at Point Thomson,” Walker said. “Former DNR Commissioner Tom Irwin was required to make a decision by Dec. 31, but he resigned. His replacement immediately gave the oil companies an extension. The court said that until DNR takes action, we don’t have anything to argue. Now, we have to wait until May 31 to see what they will do.”

DNR Commissioner Mike Menge has said he will wait on the outcome of negotiations for a fiscal contract for development of a natural gas pipeline from the North Slope before determining what comes next for Point Thomson, Bill Van Dyke, acting director of the state Division of Oil and Gas, said May 24.

Menge could not be reached for comment.

Walker said the port authority also worried that state officials would include Point Thomson in the Alaska Stranded Gas Act, legislation originally aimed at marketing the estimated 27 trillion cubic feet of gas at Prudhoe Bay. Point Thomson, about 60 miles east of Prudhoe Bay near the border of the Arctic National Wildlife Refuge, is believed to contain another 8 tcf of gas. ExxonMobil has delayed developing the unit for nearly three decades without suffering significant penalties from the state, he said.

“The state wants to open ANWR, and we support that goal,” Walker said. “But we think it’s a little disingenuous for the oil companies not to be required to abide by the terms of their leases at Point Thomson. Why not develop what you already have?”






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