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Vol. 15, No. 38 Week of September 19, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Thomson settlement?

Lawyers slow Supreme Court appeal, seek resolution of high-stakes case

Wesley Loy

For Petroleum News

The legal conflict over the rich Point Thomson field on Alaska’s North Slope has seemed quiet for months.

But that hardly means nothing is happening.

In fact, the case could be on its way to ending soon as lawyers for the state and for major oil companies including field operator ExxonMobil try to hammer out a resolution.

The lawyers recently won permission from the Alaska Supreme Court to postpone the filing of certain heavy legal briefs to make more time for what are described as “settlement talks.”

The fight for control of Point Thomson is a heavyweight contest pitting the state against four giants: ExxonMobil, BP, Chevron and ConocoPhillips.

The state and the companies have been at odds since 2005, when the Alaska Department of Natural Resources began taking steps to break up the Point Thomson unit and invalidate leases on the state-owned land. State officials contended that ExxonMobil and the other major leaseholders had failed after decades to develop the field.

The companies sued to try to preserve the unit, and the matter is now before the state Supreme Court, which on May 28 agreed to take DNR’s appeal of an unfavorable lower court ruling.

Point Thomson is a hugely valuable asset, containing an estimated 8 trillion cubic feet of natural gas plus 200 million barrels of condensate. The oil companies simply cannot bear losing it.

Because Point Thomson holds about a quarter of all the known gas reserves on the North Slope, it figures to play an important role in a natural gas pipeline project — an economic development dream the state has long pursued.

To the extent the court battle places Point Thomson in limbo, gas pipeline proponents are hoping to see the litigation wrap up as soon as possible.

Breathing room

Curiously, though it was the state that sought the Supreme Court review — something ExxonMobil and the other oil companies opposed — lawyers for the state went to the high court on Aug. 19 and asked for an extension of the deadline to file their opening brief.

Richard Todd, an assistant attorney general representing DNR, asked that the deadline be moved from Aug. 23 to Nov. 1.

In an affidavit, he explained that DNR wanted the extension “to facilitate ongoing settlement talks.” Todd added that the extension “will enhance the chances of effecting settlement because the parties will be able to devote more time to settlement.”

Todd and Mark Ashburn, a private attorney assisting DNR, further explained that the extension would free the two sides from “unnecessary expense.” They said granting the extension would “promote the likelihood of the parties reaching a final resolution to this and other related matters, and will promote judicial economy.”

The subject of the state’s appeal is Superior Court Judge Sharon Gleason’s Jan. 11 reversal of DNR Commissioner Tom Irwin’s termination of the Point Thomson unit. The state believes Gleason got it wrong and wants the Supreme Court justices to reverse her.

Lawyers for ExxonMobil, BP, Chevron and ConocoPhillips agreed not to oppose a new deadline of Nov. 1 for the state to file its opening brief, provided the state agreed to give the oil companies until Feb. 9, 2011, to file their responding brief.

On Aug. 24, the Supreme Court granted the new timeline.

Development schedule

ExxonMobil badly wants a resolution to the Point Thomson affair as it proceeds with a risky $1.3 billion project in a field under a legal cloud.

To show impatient state officials that, yes, it would get on with development, ExxonMobil in early 2009 rallied the huge Nabors 27-E rig to the remote field, located along the Beaufort Sea coast some 60 miles east of Prudhoe Bay, and punched two wells.

The company aims to begin production of 10,000 barrels a day of gas condensate by year-end 2014.

ExxonMobil was able to do the drilling only with permission from Irwin, who reinstated two leases to accommodate the work.

The state has declared that the remaining 29 leases within the disputed Point Thomson unit have expired. But the oil companies are fighting to keep these leases alive.

Although state officials have talked of reclaiming Point Thomson land and leasing it again, DNR has no plans to offer such acreage in the upcoming North Slope and Beaufort Sea lease sales on Oct. 27, state Oil and Gas Director Kevin Banks told Petroleum News.

The U.S. Army Corps of Engineers is now preparing an environmental impact statement for the Point Thomson condensate project. And PTE Pipeline LLC, a Houston-based affiliate of ExxonMobil Pipeline Co., has applied to DNR for permission to lay a 22-mile pipeline to feed Point Thomson liquids into the existing North Slope pipeline network via the Badami pipeline.

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