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Wrangling continues in Spurr dispute Forest Oil, as former co-owner of spent platform in Alaska’s Cook Inlet, tells court it isn’t liable for decommissioning costs Wesley Loy For Petroleum News
One of the oil companies involved in a court case over who’s liable for the costs to decommission the nonproducing Spurr platform in Alaska’s Cook Inlet is arguing it’s premature to declare a winner because ownership of the structure is unclear.
Lawyers for Forest Oil Corp. offered this and other arguments in a 20-page filing on July 18 in state Superior Court in Anchorage.
Forest opposes a pending motion by Union Oil Co. of California seeking a summary judgment that Forest, not Union, is responsible for a share of the multimillion-dollar cost to decommission Spurr.
The dispute grew out of the 2009 Chapter 11 bankruptcy filing of another company, Pacific Energy Resources Ltd., which abandoned its half interest in the platform. Marathon Oil holds the other half and is the platform operator.
The question before the court is whether the preceding owners of Pacific Energy’s interest — Forest and before it, Union — are potentially liable for decommissioning costs.
Forest’s arguments Texaco and Superior Oil installed the Spurr platform in the late 1960s, on the west side of Cook Inlet. Production from Spurr stopped in 1992, and now it is among a handful of old Cook Inlet platforms facing removal someday.
Forest, in its court filing, offers several arguments for why it’s not responsible for decommissioning costs, as both Union and Marathon have suggested.
First, the question of who will end up owning Pacific Energy’s stake in the platform remains unsettled, and thus who’s on the hook for decommissioning, Forest contends. The company says that, if Pacific Energy dissolves, Marathon as operator in possession, or the state, could inherit the platform interest.
Second, Forest notes that both Marathon and the state have worked out bankruptcy settlements with Pacific Energy that could yield some money for decommissioning. Marathon settled for about $3 million and the state $40 million, Forest’s court filing says.
Third, Forest argues the case simply isn’t “ripe” for declaring a winner — that is, for granting Union’s motion for summary judgment — because Union hasn’t shown evidence that platform decommissioning is imminent and that money is needed.
Lastly, Forest contends that any liability it had ceased when, in 2007, a Forest subsidiary sold Cook Inlet assets including the Spurr platform interest to Pacific Energy.
State’s position The state has a keen interest in the dispute because it’s the landlord and issuer of the lease on which the Spurr platform stands. The lease is ADL 17597.
Lease terms require the eventual dismantlement of exhausted oil and gas facilities, and certainly state officials prefer that industry, not the public, bear the expense involved.
On July 13, the state filed its own response to Union’s motion for summary judgment.
“As between Marathon, Union, and Forest, it makes no difference to the State whether this court declares that Union or Forest has the primary obligation to Marathon to pay for its share of costs to decommission the Spurr Facilities,” wrote Jeff Landry, senior assistant attorney general. “However, if this court declares that Forest is not liable to pay for those costs the State requests that this court confirm Union’s admitted obligation to do so.”
On July 19, parent company Chevron announced its Union Oil subsidiary would sell its Cook Inlet oil and gas assets to Houston-based independent Hilcorp Energy Co.
Asked whether the transaction could affect the Spurr matter, Chevron spokeswoman Roxanne Sinz directed Petroleum News to the press release on the Hilcorp deal, which said financial terms were not disclosed.
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