Point Thomson field remains in limbo

Hopes for settlement continue as lawyers for Alaska Department of Natural Resources, oil companies press arguments in Supreme Court

Wesley Loy

For Petroleum News

Alaska industry watchers have waited for months for some resolution to the Point Thomson dispute, now parked before the Alaska Supreme Court.

So far, talk that the state and Point Thomson unit operator ExxonMobil are near a settlement of the matter hasn’t proven out.

“We are cautiously optimistic that we can resolve this dispute in the near future,” Elizabeth Bluemink, spokeswoman for the state Department of Natural Resources, told Petroleum News on July 20.

That’s been the official line for quite a while.

Meantime, the lawyers are continuing to joust in court, showing few signs that it’s time to shake hands on a deal to settle a matter worth billions of dollars to both sides.

What’s more, recent court filings indicate ExxonMobil is not alone in pressing the fight with the state. Chevron, a major stakeholder in Point Thomson, recently dealt a legal blow to DNR.

Point Thomson is a rich oil and gas field on Alaska’s eastern North Slope, along the Beaufort Sea coast next to the Arctic National Wildlife Refuge.

Aside from ExxonMobil and Chevron, major stakeholders include BP and ConocoPhillips.

All the companies are fighting in court to prevent DNR from breaking up the Point Thomson unit, which the agency has attempted to do “due to lack of production after three decades of unitization,” the state’s lawyers pointedly remarked in a June court filing.

The oil companies have had considerable success in defending the unit and its underlying leases. The case is before the Supreme Court because a judge in January 2010 reversed former DNR Commissioner Tom Irwin’s termination of the Point Thomson unit, prompting the state to appeal.

The Supreme Court proceedings initially remained static, as the two sides repeatedly asked for time to try to negotiate a settlement out of court.

Now the proceedings appear to be back on track, with the state having filed its weighty opening brief and ExxonMobil on the clock to file its reply brief by Aug. 5.

Chevron enters fray

On June 8, lawyers for Chevron filed a motion asking the Supreme Court to strike part of DNR’s opening brief.

Chevron said state lawyers had improperly raised a third legal question for the high court to consider, in addition to the two that the court previously had agreed to review at the state’s request.

The state’s lawyers argued they had, in effect, posed all three issues in their appeal, and that the questions are “intertwined” in a case that concerns whether DNR had the right to terminate the unit, whether the agency treated the oil companies fairly, and whether their failure to submit what the state considers an adequate plan of development constitutes a “material breach” of the Point Thomson unit agreement.

On June 24, an individual Supreme Court justice ruled in favor of Chevron, striking portions of DNR’s opening brief.

Status in the field

But the Nabors rig ExxonMobil hired to drill the holes was stacked, and no further drilling plans have been announced.

Whether the company’s goal of beginning production from Point Thomson by the end of 2014 remains achievable is unclear.

ExxonMobil has pledged a $1.3 billion development to produce 10,000 barrels a day of natural gas condensate from the high-pressure Point Thomson reservoir.

A lot of wheels are in motion for this project, including an environmental impact statement the U.S. Army Corps of Engineers is preparing and ExxonMobil’s application for a right of way to lay a new $80 million, 22-mile pipeline to carry Point Thomson liquids production west to the existing Badami pipeline. From there, the liquids ultimately would flow into the trans-Alaska oil pipeline.

The main question, it would seem, is whether the oil companies and the state can come to some understanding as to Point Thomson’s ultimate fate.