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Vol. 16, No. 14 Week of April 03, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Point Thomson impatience

Alaska Supreme Court questions seriousness of settlement talks over disputed field

Wesley Loy

For Petroleum News

The fate of Alaska’s rich but undeveloped Point Thomson oil and gas field has been the subject of negotiations between the state and ExxonMobil for months now.

Many of Alaska’s industry and political players are anxious for a resolution.

And now the Alaska Supreme Court appears to be growing antsy as well, at least to the extent that the talks are holding up the case now pending before the high court.

On March 7, the state and ExxonMobil asked the court to stay the Point Thomson case for another 60 days while negotiations continue.

But the court on March 21 granted a stay of only 45 days — and indicated it’s not inclined to keep the case on hold any longer.

“The parties have received previous extensions of time and stays totaling over 200 days,” the court said in a two-page order. “This amount of extended and stayed time would seem to have been more than sufficient to allow the parties to settle this case if the parties were serious about settlement and had been making deliberate, good faith efforts to do so. No further stay will be granted for this reason absent extraordinary and compelling showing that substantial progress towards settlement is being made and that additional time is very likely to achieve a global settlement.”

A single, unnamed Supreme Court justice entered the order.

Appeal at a standstill

The state, which is trying to dissolve the Point Thomson unit for lack of development by the leaseholders, appealed to the Supreme Court after an adverse lower court ruling in January 2010.

In its appeal, lawyers for the state said they would seek to defend former Department of Natural Resources Commissioner Tom Irwin’s termination of the Point Thomson unit. Superior Court Judge Sharon Gleason of Anchorage invalidated the termination, a victory for ExxonMobil and its partners.

The DNR’s appeal has not advanced at all, as lawyers for the state and ExxonMobil have repeatedly, and together, asked the justices for time to concentrate on trying to work out a settlement of the case out of court. Previously, the high court routinely granted these timeouts, which relieve the lawyers of the burden of writing heavy legal briefs.

Now the Supreme Court is signaling that, barring a settlement or great progress toward a settlement, it’s time to get on with the case. It set a deadline of May 5 for the state to file its opening brief.

In court papers, lawyers for DNR and ExxonMobil have said repeatedly that they are engaged in complex negotiations, and are making progress.

Recently, however, the other major stakeholders at Point Thomson including Chevron, BP and ConocoPhillips have expressed dissatisfaction that they’ve been excluded from the talks, and have not been favored with copies of draft settlement documents.

Nobody saying much

Petroleum News asked representatives of the DNR and ExxonMobil about the status of the negotiations following the Supreme Court’s latest order, but neither side had much to say.

DNR Commissioner Dan Sullivan declined a request for an interview.

“We are cautiously optimistic and making progress, however we can’t discuss any aspects of the negotiations,” said Jonathan Katchen, the DNR’s inter-governmental coordinator and a member of the negotiating team.

Asked why the case hasn’t been resolved yet, Katchen said: “It’s a complicated deal with a lot on the line.”

David Eglinton, an ExxonMobil spokesman in Houston, said by e-mail: “We are continuing to make progress on settlement, but additional work remains.”

The fate of Point Thomson is a hugely important issue for the state, as well as for industry.

Located on state acreage along the Beaufort Sea coast about 60 miles east of Prudhoe Bay, the field contains an estimated 8 trillion cubic feet of natural gas plus hundreds of millions of barrels of petroleum liquids.

Exxon discovered the field in the late 1970s, but hasn’t developed it — to the growing dismay of state officials.

Because the field’s huge gas reserves are considered important for supporting a proposed North Slope gas pipeline, many want to see the legal cloud removed from Point Thomson as soon as possible.

It’s the lack of a gas pipeline — a multibillion-dollar asset — that ExxonMobil has cited as the primary reason the field hasn’t been developed.

Under pressure from the state, ExxonMobil recently drilled a pair of wells at Point Thomson, and has pledged to start producing a modest 10,000 barrels a day of gas condensate from Point Thomson by the end of 2014. The condensate can be piped down the existing trans-Alaska oil pipeline.

But a broader understanding between the state and ExxonMobil on how and when the field will be developed appears to remain in the hands of the lawyers.

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