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Vol. 16, No. 20 Week of May 15, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Lawyers get busy again

State, Exxon fight over Alaska’s Point Thomson unit; settlement talks continue

Wesley Loy

For Petroleum News

Court proceedings have resumed in the struggle for control of Alaska’s rich but undeveloped Point Thomson oil and gas field.

But this doesn’t mean months of negotiations between the state and ExxonMobil to try to reach an out-of-court settlement have failed, said a spokeswoman for the Alaska Department of Natural Resources.

The court case, which concerns DNR’s effort to dissolve the Point Thomson unit, currently rests before the Alaska Supreme Court.

Although the high court took the state’s appeal nearly a year ago, the case didn’t advance as DNR and ExxonMobil requested multiple delays in the proceedings to concentrate on settlement talks. In periodic court filings, the two sides said they were making progress toward resolving the complex issues involved.

Recently, however, the court signaled resistance to granting any further timeouts, and on May 5 the state filed its opening brief.

Hefty document

Point Thomson is a rich oil and gas field along the Beaufort Sea coastline just west of the Arctic National Wildlife Refuge. Aside from operator ExxonMobil, major stakeholders include BP, Chevron and ConocoPhillips.

The DNR in recent years moved to break up the unit and invalidate leases at Point Thomson on grounds that ExxonMobil and its partners have failed to develop the field for more than 30 years.

The oil companies went to court to try to preserve the unit.

The 102-page document filed May 5 lays out the state’s appeal of a Jan. 11, 2010, lower court decision that reversed former DNR Commissioner Tom Irwin’s termination of the Point Thomson unit.

Superior Court Judge Sharon Gleason ruled against the state on two counts: First, that the Point Thomson leaseholders were wrongly denied a hearing under a key section of the Point Thomson unit agreement, and second, that the commissioner misused his lawyers and staff, depriving the leaseholders of their constitutional rights to due process.

Negotiations ‘ongoing’

“Alaska is a resource development state,” the state’s opening brief says. “The Alaska economy is largely dependent on resource extraction and a substantial majority of the State’s revenue is derived from oil and gas production and development.”

The brief continues: “This case involves one of the most important resource development disputes in the history of Alaska and centers on an issue that was at the forefront of the minds of the Alaska Constitution’s drafters: oil companies coming to Alaska, discovering massive resources, and then deciding to stall development.”

DNR spokeswoman Elizabeth Bluemink told Petroleum News that “settlement negotiations are ongoing,” despite the resumption of proceedings in the court case.

Now that the state has filed its opening brief, lawyers for ExxonMobil will have a chance to reply.

It’s possible, though, that the state and ExxonMobil might settle and negate the need for further court filings.

Recently, ExxonMobil drilled two development wells at Point Thomson for a proposed natural gas condensate development. The company did so with DNR’s permission, and knowing that the overall fate of the Point Thomson unit remains clouded.

Point Thomson is believed to hold some 8 trillion cubic feet of natural gas and hundreds of millions of barrels of petroleum liquids.

ExxonMobil historically has said development of Point Thomson couldn’t move forward without a multibillion-dollar pipeline to carry North Slope natural gas.



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