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Vol. 19, No. 12 Week of March 23, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

CD-5 work to proceed

Federal judge declines to halt construction of ConocoPhillips Alaska oil project

Wesley Loy

For Petroleum News

A federal judge has denied a motion to stop construction on the CD-5 oil project within the National Petroleum Reserve-Alaska.

The ruling cheered ConocoPhillips Alaska Inc., the project developer. A work stoppage now, smack in the middle of the short winter construction season, would have been enormously troublesome and expensive, the company argued.

U.S. District Judge Sharon Gleason’s March 12 decision comes in a case in which some residents of Nuiqsut, a predominantly Inupiat Eskimo village near the CD-5 site, are suing to challenge the federal permit issued for the project.

In her 12-page order, Gleason questioned the timing of the motion, saying it appeared ConocoPhillips was correct in asserting the village plaintiffs waited to file for an injunction “until the moment it would inflict the maximum possible damage and disruption” on the company.

The ruling applies only to the current winter construction season. Gleason left open the possibility for the villagers to seek injunctive relief for future construction seasons.

Industry expands west

CD-5 takes its name from the nearby Colville River Delta.

It will function as a satellite to the large Alpine oil field, which ConocoPhillips operates in partnership with Anadarko and Petro-Hunt.

In addition to the Nuiqsut villagers, the Center for Biological Diversity also is challenging the CD-5 permit, which the U.S. Army Corps of Engineers issued in December 2011.

Lawyers for ConocoPhillips have called CD-5 an unremarkable project that’s being used as a “proxy” in the debate over oil industry expansion into the western frontier.

CD-5 is poised to become the first oil production drill site inside the vast petroleum reserve. The site, however, is on a private inholding owned by Kuukpik Corp.

ConocoPhillips is aiming for first oil from CD-5 in December 2015, with production expected to peak at about 16,000 barrels per day. CD-5 oil will be piped to Alpine for processing.

ConocoPhillips had a tough time getting the green light for CD-5.

The Corps initially denied the permit, saying the satellite could be a roadless development. ConocoPhillips appealed with support from state officials, and ultimately the Corps issued a permit authorizing construction not only of the drill site, but also a six-mile gravel access road and four bridges.

The challengers question why the Corps reversed position on the permit, and charge the agency failed to conduct a proper, up-to-date environmental impact study.

The village plaintiffs filed their motion for a temporary restraining order and preliminary injunction on Feb. 5. They argued the construction could cause irreparable harm to the environment and their subsistence way of life.

‘Could not be a worse time’

ConocoPhillips told the judge an injunction halting construction on the remote project could actually increase the chances for environmental degradation. For example, partially finished bridges could be vulnerable to river ice and erosion during spring breakup.

James Brodie, a ConocoPhillips capital projects manager, said in a written declaration “there could not be a worse time to face an unplanned work stoppage than the March to April time frame.”

The project was more than 10 years in the planning, Brodie said. ConocoPhillips started driving bridge pilings on Jan. 17. The company was to open a gravel mine and build 25 miles of ice road and 170 acres of ice pads. As of February, more than 35 million pounds of project materials had been staged.

Interrupting the work would have affected hundreds of workers and put the project “a year behind schedule and massively over budget,” Brodie wrote. Having to mobilize for an extra ice road season would have cost $105 million, he said.

What’s more, Brodie said, a delay on CD-5 would in turn have delayed another planned oil project, known as Greater Mooses Tooth 1, eight miles farther west.

In considering the legal hurdles for an injunction, Gleason found it was “questionable” whether the plaintiffs had shown they were likely to suffer irreparable harm.

They didn’t help their case by waiting until two months after the construction season began to file their motion, Gleason wrote.

Lawyers for the villagers said they filed for the injunction “almost immediately after learning that Conoco had begun construction.”

But Gleason held the plaintiffs weren’t required to wait until construction began to file their motion, particularly where for over two years ConocoPhillips had “consistently declared its intention to begin construction on CD-5 during the 2013-2014 winter.”

Gleason also found that an injunction wasn’t in the public interest. She noted, for example, that “residents from various North Slope Borough communities, including Kuukpik shareholders who live in Nuiqsut, could lose their jobs and income.”

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