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Vol. 16, No. 19 Week of May 08, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Fortune Hunt Alaska: Tapping ANWR from Pt. Thomson

Kay Cashman

Petroleum News

Although the settlement between the State of Alaska and the Point Thomson unit leaseholders is not expected to include a commitment to produce the Sourdough oil discovery in the unit, a new plan of development will likely do so because there are 100 million barrels of recoverable oil at Sourdough, which sits across the Staines River from the 1002 area of the Arctic National Wildlife Refuge.

Geologists think Sourdough’s reservoir stretches under ANWR’s 1002 area and, if produced, could drain federal oil from the other side of the river. (The Sourdough discovery well is roughly a half mile from the 1002 boundary.)

Legal experts say the feds would have no claim to the oil because they are not allowing development of their adjacent acreage in ANWR.

Hence, since the Sourdough discovery announcement in 1997, state officials have been saying developing the prospect could be the first step to opening the 1002 area to oil and gas exploration and development.

Putting Sourdough into production might prompt Congress to permit a subsurface lease sale in the ANWR 1002 area that would allow directional drilling from adjacent state lands and waters.

Rule of capture prevails

In 1997, Petroleum News asked the chairman of the Alaska Oil and Gas Conservation Commission if the federal government would be able to claim correlative rights if Sourdough was developed — correlative rights would give the feds taxes and royalties on ANWR 1002 oil pumped from Sourdough.

The answer was no. Correlative rights, which AOGCC enforces, do “not protect against drainage,” the chairman 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,” he 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,” the chairman 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, he 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 the commission chairman 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.



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