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Exxon files more Pt. Thomson paperwork Gives court supplemental points on appeal, asking that reconsideration and original DNR commissioner’s decision be reversed Kristen Nelson Petroleum News
Exxon Mobil Corp., the Point Thomson unit operator, has filed supplemental points on appeal in its suit against the Alaska Department of Natural Resources over the department’s November termination of the unit.
Acting DNR Commissioner Marty Rutherford said in a Dec. 27 reconsideration decision that Point Thomson was terminated because “DNR is entitled to terminate a unit which has been known to contain massive hydrocarbon reserves for more than 30 years, but which has never been put into production, when the lessees of the state oil and gas leases making up the unit unequivocally state that they still cannot find a way to put the unit into production.”
The second primary ground for termination, Rutherford said, was failure to submit an acceptable plan of development.
Rutherford also agreed with Menge’s decision that certified wells were not a basis to hold leases, calling the long-standing policy “poor policy.”
“The new policy is in conformance with existing statutes, regulations and agreements. Certified wells will still play a role in appropriate circumstances,” Rutherford said.
ExxonMobil filed suit Dec. 22 in Alaska Superior Court, appealing Menge’s Nov. 27 finding terminating the unit.
Points in Menge’s finding were appealed to Rutherford, who upheld the decision on reconsideration.
In a Jan. 5 filing, ExxonMobil asked the court to reverse the reconsideration decision, as well as the original decision, or to remand the matter to the commissioner, “with instructions to make a new and different decision.”
Other major Point Thomson unit owners, BP, Chevron and ConocoPhillips, have also appealed.
Supplemental points addressed In addition to points made in its Dec. 22 filing, Exxon made a number of supplemental points Jan. 5.
It said the DNR commissioner “erred in finding that there were no certified wells” in the Point Thomson unit, “in revoking previous certifications retroactively,” in finding there were no wells in the unit “capable of producing hydrocarbons in paying quantities” and in terminating the Point Thomson unit.
Exxon said the decisions made by the commissioners “amounted to an abuse of discretion, were entirely unsupported by the evidence in the record, constituted an error of law,” breached the Point Thomson unit agreement “and the covenant of good faith and fair dealing” and violated the rights of ExxonMobil and the other Point Thomson owners “under the takings, due process, equal protection and contracts clauses of the Constitutions of Alaska and the United States.”
Exxon: lack of rule making Listing specific points, Exxon said the commissioner erred in determining that the Point Thomson unit could be terminated on the grounds that it was not yet in production, and also erred in determining the unit could be terminated on the grounds that the lessees have said it could not be put into production.
State regulations deny the commissioner “the power to terminate a unit agreement without judicial proceedings if the unit contains wells certified as capable of producing oil and gas in paying quantities,” Exxon said.
Exxon said the reconsideration decision admits DNR “has changed and intends to change its longstanding policy and established construction of the law with respect to certifying wells as capable of producing oil and gas in paying quantities,” and said DNR “may not make such a change in the law without rule-making under the Alaska Administrative Procedure Act.”
Exxon also said the reconsideration decision “admits that the principles set forth in that decision” will govern Point Thomson “but will not be applied to other leases and other units. Such a decision is fundamentally lawless, in that it seeks to apply different rules to parties who are similarly situated. It is discriminatory, lacking in due process, and a violation of the equal protection clauses of the Constitutions of Alaska and the United States.”
Discretionary determination also an issue Exxon said the reconsideration decision “indicates that whether a lease will be held beyond its primary term will depend, not on the terms of the lease which provide that it may be held if there is a well on the lease capable of producing oil or gas in paying quantities, but on the Commissioner’s discretionary determination as to whether a lessee has made an ‘appropriate commitment’ to explore, produce or otherwise develop oil and gas leases.” Exxon said this is “directly contrary” to lease terms, “and if upheld would amount to an impairment of the obligation of contract and a taking or confiscation of rights granted to the lessees under the leases, in violation of the contracts and due process clauses of the Constitutions of Alaska and the United States.”
Exxon also argued that the commissioner erred in the issues properly before the commissioner for decision, erring “in holding that issues on which no appeal had been taken from the decision of the Director of the Division of Oil and Gas were nevertheless properly before the Commissioner for decision on the ground that they were discussed in public comments of entities who took no appeal from the Director’s decision.”
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