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Vol. 12, No. 22 Week of June 03, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Exxon looks to AOGCC

Petitions commission to form new Point Thomson unit after DNR termination

Kristen Nelson

Petroleum News

Exxon Mobil Corp., whose unit at Point Thomson was terminated by the Alaska Department of Natural Resources late last year, has petitioned the Alaska Oil and Gas Conservation Commission to form a Point Thomson Sand unit.

In response, the commission has scheduled a July 10 hearing to consider whether the petition should be stayed.

The commission said Exxon is seeking to unitize all or a portion of the oil and gas leases that were part of the unit agreement with DNR dating from 1977. The commission said the petition was filed April 16 and noted that there are legal proceedings on both the unit termination and the termination of leases within the unit.

In a May 25 public hearing notice the commission said that given the ongoing judicial and administrative proceedings, its July 10 hearing, at 9 a.m. at the commission’s Anchorage office, will focus on whether the petition “should be stayed or held in abeyance pending resolution of these other proceedings.”

Oil and gas units in Alaska are typically formed under the authority of DNR as the landowner but AOGCC also has authority to approve units to prevent waste, ensure maximum recovery of hydrocarbons and protect the rights of all affected leaseholders.

Nan Thompson, DNR Division of Oil and Gas unit section manager, told Petroleum News that “DNR will be participating in this AOGCC proceeding as the landowner.”

86,354 acres in proposed unit

The application lists 41 tracts proposed for inclusion with a total of 86,354 acres. Exxon said the Point Thomson unit approved by DNR in 1977 included 18 oil and gas leases, some 40,768 acres. The Point Thomson Unit No. 1 well was drilled in 1977; a total of 18 wells have been drilled in or near the unit area.

The unit was expanded twice and contracted four times, Exxon said. Last November (when DNR terminated the unit) it included all or part of 45 oil and gas leases, some 106,000 acres.

Exxon said it has appealed the DNR’s decisions terminating the unit to the Alaska Superior Court. That appeal is pending and the status of the unit is uncertain, the company said.

Because of the DNR decision and the uncertainty of the status of the Point Thomson unit, working interest owners “have not been able to ensure that their interests are voluntarily integrated,” Exxon said, and following the DNR decisions, DNR as the representative of the royalty owner “has taken other actions that indicate voluntary integration of interests to provide for the unitized management, development and operation of the land within the unit area is not feasible at this time.”

Exxon: AOGCC has authority to unitize

Exxon said in its petition that the commission “has jurisdiction of this matter pursuant to AS 31.05.027 and AS 31.05.110.”

The first reference is to the portion of the Alaska Oil and Gas Conservation Act that gives the commission authority over all lands where the state’s police powers run. The second reference is to the commission’s authority to order units.

Exxon said the commission “has jurisdiction, power and authority, and it is its duty to make and enforce orders and do the things necessary or proper to carry out the purposes of section 110. ExxonMobil has not been able to obtain the voluntary agreement of all persons owning interests in the” Point Thomson tracts to integrate their interests.

In a development plan submitted with the unit petition, Exxon said focus would be on gas sales development from the high-pressure gas-condensate field within the Point Thomson Sand unit with a continuation of the technical work necessary for the field’s owners to be able to participate in an open season for a gas pipeline project.

A single well is planned, into the Thomson Sand reservoir, to further define reservoir characteristics and to help select an optimum development plan, with drilling estimated for the 2009-10 winter drilling season.

Exxon also said the Point Thomson owners will “progress sharing of confidential PTSU technical data” with the commission via a data room process. Once that process is completed, “a request for approval of a conservation order to authorize the desired gas offtake rate from the Thomson Sand reservoir will be submitted,” with the submittal timed to allow the commission to issue its conservation order prior to the open season for a gas pipeline. Exxon said Point Thomson owners would also work with the commission to apply for other pool rules needed to develop Point Thomson.

What the commission will consider

The commission said that at its hearing it would consider a number of issues, including: whether it should stay the petition or hold it in abeyance; whether and how resolution of pending litigation and administrative proceedings would affect the commission’s decision on the petition; whether staying the petition or holding it in abeyance adversely affects the petitioner or other parties; whether staying the petition would “result in waste, threaten greater ultimate recovery of hydrocarbons, or fail to protect correlative rights of persons owning interests in the tracts of land affected”; and whether staying the petition “in the interest of comity (deference to proceedings under other jurisdictions) will promote more efficient resolution of all relevant issues.”

The commission said it would accept written comments in addition to oral statements at the hearing.

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Clarification on Point Thomson lawsuit, motions

In the May 27 issue of Petroleum News there is a story about yet another judicial ruling in favor of the state on the Point Thomson unit.

The article is about a May 22 decision by Alaska Superior Court Judge Sharon Gleason denying procedural motions from former Point Thomson leaseholders that would have effectively delayed the court’s hearing of the main Point Thomson lawsuit, which was filed by ExxonMobil, BP, Chevron and ConocoPhillips after the state terminated the eastern North Slope unit late last year.

The May 22 decision, handed down by the same judge who will be hearing the main Point Thomson lawsuit, ruled on two of the pre-trial procedural motions the former leaseholders have filed — earlier in May another judge ruled in favor of the state on another motion.

In the May 27 article, Petroleum News did not make it clear that the court has consolidated all of the pre-trial procedural motions on the commissioner’s decision to terminate the unit, and that there are no more procedural motions pending. In fact, the deadline for pre-trial motions has passed. (That does not mean the former Point Thomson leaseholders won’t file another procedural motion. However, after the deadline the court can simply refuse to hear them or roll them into the main lawsuit, as the court has done to date.) Gleason is sticking to her original schedule for the Point Thomson lawsuit, which is June 22 for briefs from the former leaseholders, July 23 for the state’s brief and Aug. 13 for a reply from the former leaseholders.

There is “likely to be oral argument in late August or September and a decision in the fall,” a state official told Petroleum News on May 24.

—Kay Cashman