December 28, 2006 --- Vol. 12, No. 92December 2006

Rutherford upholds Menge decision terminating Point Thomson unit

Acting Commissioner of Natural Resources Marty Rutherford has upheld the Nov. 27 decision of former Commissioner Mike Menge terminating the Point Thomson unit.

In a Dec. 27 decision Rutherford denied requests for reconsideration and affirmed the decision “in all respects.”

“The facts clearly uphold Mike Menge’s decision to terminate the Point Thomson unit agreement,” Rutherford said in a statement. “I agree that ExxonMobil has not met its obligations, and I must deny them the relief they sought in their reconsideration request.”

ExxonMobil and ConocoPhillips had requested reconsideration of the unit termination, and of a finding by Menge on wells certified capable of production in the unit by previous directors of the Division of Oil and Gas.

Menge said that because these were exploration wells which had been plugged and abandoned they were not capable of production. He said there were no wells certified capable of production in the Point Thomson unit. Certification of wells is used to hold non-producing leases beyond their initial term.

ConocoPhillips and ExxonMobil requested reversal of the finding that the Point Thomson unit contains no wells certified as capable of producing and reversal of the decision to terminate the unit, and argued they had no notice that the commissioner would rule on the certified wells issue.

Rutherford said lessees had notice of the certified well issue and said both ExxonMobil and the Alaska Gasline Port Authority argued the issue in appeal paperwork before the Nov. 27 decision.

“Lessees do not on reconsideration challenge the grounds for unit termination” in the Nov. 27 decision, which were “unwillingness to commit to put the unit into production” and failure to submit an appropriate plan of development. “Instead, the focus of reconsideration is the collateral finding that the PTU does not contain wells certified as capable of producing in paying quantities.”

The department said the Point Thomson unit covered 45 leases on approximately 106,000 acres of state land just west of ANWR. It holds an estimated 300 million barrels of oil and natural gas condensates and 8 trillion to 9 trillion cubic feet of natural gas.

Note: See story in Dec. 31 issue of Petroleum News, available online at noon Friday.

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