Tapping ANWR from PTU

Rejection of Point Thomson unit plan confirms state’s interest in Sourdough

Kay Cashman

Petroleum News

Although ExxonMobil’s most recent plan of development for the eastern North Slope Point Thomson unit did not include a commitment to produce the Sourdough oil discovery, a settlement with the State of Alaska — or a new leaseholder’s plan of development — will almost certainly do so because geologists think Sourdough’s reservoir stretches under ANWR. Since the 100-million-barrel Sourdough discovery announcement in 1997, state officials have said developing the prospect could be the first step to opening ANWR to oil and gas exploration and development.

Oil produced from Sourdough would, in fact, be the first oil drained from the 1002 area of the Arctic National Wildlife Refuge, and possibly prompt Congress to permit a subsurface lease sale that would, at the very least, allow access to western ANWR reservoirs by drainage, and possibly directional drilling, from adjacent state lands. Most of those reservoirs, including Sourdough, are in the defunct Point Thomson unit, although the Sourdough wells were drilled and paid for by BP and Chevron, not Exxon and other unit owners.

If, for example, Sourdough were developed and produced on the state side and the feds don’t hold a lease sale for their side of the reservoir, legal experts say the federal government probably wouldn’t be able to claim any revenue from federal oil drained from Sourdough’s state leases.

In his April 22 rejection of Exxon’s plan of development, Alaska’s commissioner of natural resources, Tom Irwin, made it clear that the Palin administration, like those that preceded it wants a commitment to produce Point Thomson’s “considerable oil reserves,” including the Brookian discoveries at Sourdough and Flaxman (see map with this article) adjacent to ANWR. (Other wells along the border in the Point Thomson unit might also hold oil, but not all well results have been made public.)

BP and Chevron received permission to drill Sourdough from Point Thomson operator Exxon in the early 1990s. BP subsequently drilled two wells in the prospect, which lies in the southeast corner of the Point Thomson unit, adjacent to the Staines River that runs along the border between ANWR and Point Thomson (it’s not on the map but it runs along the red line that is ANWR’s western border).

ANWR’s 1002 area is roughly a half mile from the Sourdough discovery well.

Rule of capture prevails

Johnston said no. Correlative rights, which AOGCC enforces, do “not protect against drainage,” he said. The rule of capture would prevail.

What correlative rights do is ensure adjacent landowners have “the opportunity to extract their fair share of the resource,” Johnston said. If a landowner does not wish to drill on his side of the property line, that’s his choice.

“The federal government does not have to lease this land. Nobody is compelling them to lease it.” But if the feds do not lease the 1002 acreage that is adjacent to Sourdough, then the “rule of capture applies,” he said.

The rule of capture is the same federal law that applies to the ownership of a wild horse that roams across several property lines — whoever captures it, owns it, Johnston said.

Attorneys interviewed by Petroleum News agreed, as did a 2003 article in Duke University School of Law’s Alaska Law Review, which said, “The owner of the drained land has no legal remedy, but may protect his rights by drilling a well of his own in order to capture the same resource.”

But Johnston and Robert Corbisier, author of the law review article, said there was also a possibility of AOGCC forcing unitization of Sourdough, and including ANWR acreage in the unit — something the agency might have to do under its legal mandate to prevent the waste of oil and gas resources.

That issue, and others, will be explored in part two of this series.