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Vol. 16, No. 5 Week of January 30, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

New Point Thomson delay

Alaska Supreme Court stays case; Chevron left out of talks to settle field dispute

Wesley Loy

For Petroleum News

The legal struggle for control of the Point Thomson field on Alaska’s North Slope remains on hold before the state Supreme Court, deepening apprehension over the direction of settlement talks between ExxonMobil and the state.

One major Point Thomson stakeholder, Chevron, recently complained that it has been left out of the talks.

It was the state that took the dispute to the Supreme Court about a year ago, after a lower court struck down former Department of Natural Resources Commissioner Tom Irwin’s termination of the Point Thomson unit.

The case since hasn’t advanced an inch.

Lawyers for the state, with ExxonMobil’s support, twice requested and received extensions of the deadline for the state to file its opening brief, a key document in which the DNR would lay out its major arguments. The two sides told the high court the extensions would free them up to concentrate on trying to reach a settlement.

On Jan. 11, the court granted yet another break in the case, this time a 60-day “stay of proceedings,” again at the request of the state and ExxonMobil.

Negotiations continue

“A stay would promote the likelihood of the parties reaching a final resolution of this and related matters,” lawyers for the state and ExxonMobil said in a Jan. 6 joint motion.

“DNR and ExxonMobil have been engaged in settlement discussions for many months,” the motion said. “But resolution of the development issues associated with the Point Thomson oil and gas unit are very complicated.”

The motion continued: “These settlement discussions are on-going and progress has been made in them.”

The fate of Point Thomson is a huge concern for the industry and for the state’s political leaders. The field is rich especially in natural gas, which is seen as important for supporting a proposed North Slope gas pipeline.

The state ignited the legal conflict over the field beginning in 2005, when DNR officials began making moves to reclaim the state acreage at Point Thomson. The state is dissatisfied that ExxonMobil and the other leaseholders at Point Thomson have failed to develop resources discovered decades ago.

To date, no production has come from Point Thomson, located along the Beaufort Sea coast about 60 miles east of Prudhoe Bay.

Under pressure, ExxonMobil recently drilled two wells at Point Thomson for a promised gas condensate development. But the field’s continuing legal limbo could have implications for the company meeting its pledge to begin production by the end of 2014.

Chevron wants in

Chevron is a major stakeholder at Point Thomson, along with BP and ConocoPhillips. All three companies have joined with unit operator ExxonMobil in fighting the state’s attempt to break up the unit and invalid the underlying leases.

The leaseholders have great incentive to hang onto Point Thomson, as the field holds resources worth billions of dollars.

After the state and ExxonMobil filed their motion asking the Supreme Court for a stay, Chevron filed a response consenting to the stay but complaining about its role in the settlement talks.

“DNR and ExxonMobil represent that they have been engaged in settlement negotiations for many months, but those negotiations have not included Chevron or, upon information and belief, any of the other (leaseholders) in this proceeding,” Chevron’s filing said. “Because no complete settlement of the existing claims and controversies can occur without the involvement and approval of all of the parties, Chevron has respectfully requested to be invited and permitted to participate in the settlement discussions related to the Point Thomson Unit. Those requests have gone unanswered. Chevron is thus concerned that the current discussions, at best, inevitably will lead only to a further set of discussions that must include all of the parties. Continuing in this fashion, therefore, is not reasonably likely to lead to a prompt and efficient resolution of this or any related proceeding.”

Under the Supreme Court’s order granting the stay, parties in the case must file a “joint status report” by March 7.

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