Open to the public?

State gives producers 30 days to make Prudhoe Bay alignment agreement public; DNR Commissioner says agreement should be part of state’s file

Kristen Nelson

PNA Editor-in-Chief

Commissioner of Natural Resources Pat Pourchot has given the major Prudhoe Bay partners 30 days to make non-confidential terms of the Prudhoe Bay unit alignment agreement public.

In an Aug. 28 letter addressed to Neil McCleary at BP Exploration (Alaska) Inc. — with copies to Margaret Yaege of Phillips Alaska Inc. and Jack Williams of ExxonMobil Alaska Productions Inc. — Pourchot said the Division of Oil and Gas and the Department of Law have a copy of the Prudhoe Bay alignment agreement and carefully reviewed it as part of work on the Charter for Development of the Alaskan North Slope.

“Based on that review,” Pourchot said, “it appears to them that significant portions of the agreement address matters typically found in a unit operating agreement.” The Division of Oil and Gas and the Department of Law also believe, he said, that “parties to the agreement are operating under provisions that differ from the applicable provisions” of the Prudhoe Bay unit operating agreement which is on file with the division.

“As a consequence, they believe the agreement should be filed with the division as a de facto amendment” to the Prudhoe Bay unit operating agreement, Pourchot said.

State of Alaska unitization regulations require that any revision of the unit operating agreement must be submitted to the commissioner before it takes effect.

“We received the letter from Pourchot, are reviewing it and will discuss a response with our partners,” BP Exploration (Alaska) spokesman Paul Laird told PNA Sept. 4.

Fundamental changes

The state has a copy of the alignment agreement obtained under provisions of the Charter for Development of the Alaskan North Slope.

“While the charter generally prohibits ‘any representative of the state’ from divulging to the public information obtained under that provision, the state may do so where ‘required by law,’“ Pourchot said.

“In the Department’s view, the Alaska Public Records Act clearly requires disclosure of those non-confidential terms of the agreement that effectively amend” the Prudhoe Bay unit operating agreement.

Pourchot said that if the alignment agreement has not been filed within 30 days of the Aug. 28 date of this letter, the state will place a copy of the agreement in the Division of Oil and Gas’s Prudhoe Bay unit public file.

Companies have disagreed

Yaege said amendments to the unit operating agreement “remain at this time mere future possibilities that are contingent upon achievement of alignment with the non-signatories to the alignment agreement and execution of a formal amendment by all working interest owners.”

McCleary told the division that BP, as Prudhoe Bay operator, is bound by terms of the Prudhoe Bay unit agreement, which can only be amended by 100 percent agreement of the working interest owners. Until recently (see story this page), not all of the working interest owners had accepted the alignment agreement.

Williams said full Prudhoe Bay alignment “would provide the basis for undertaking significant modifications to the” unit operating agreement.

“At this time, however, no amendment to the PBUOA has occurred,” Williams said.

Prudhoe Bay owners finalize alignment

Kristen Nelson, PNA editor-in-chief and Kay C

All of the companies holding leases within the Prudhoe Bay unit have reached final agreement to align their working interests, Prudhoe Bay unit operator BP Exploration (Alaska) Inc. said Sept. 3.

The approximate working interests for all areas and reservoirs in the unit are: ExxonMobil 36.40 percent, Phillips 36.07 percent, BP 26.35 percent, ChevronTexaco 1.16 percent and Forest 0.02 percent.

Prior to the alignment, working interest owners at Prudhoe Bay owned different percentages of the oil rim and the gas cap, based on the location of their leases in the unit.

The companies will cross assign interests in leases, BP said, and when the process is complete each working interest owner will hold a uniform interest in every lease within the unit.

Alignment began in 2000

Alignment at Prudhoe Bay began with an agreement among BP, ExxonMobil and Phillips Alaska in April 2000 that grew out of BP’s acquisition of ARCO and the sale of ARCO Alaska assets to Phillips Petroleum. As these sales were about to be completed, ExxonMobil sued over preferential rights and field operatorship.

When the dust cleared, ownership at Prudhoe was aligned between the three owners.

The April 2000 agreement removed “the need for lengthy and complex agreements between parties with different interests,” the companies said at the time. They also said alignment “may contribute to improved timelines for new economic developments” within the Prudhoe Bay unit by eliminating the need for those complex agreements.

The 2000 agreement made BP the operator of the entire Prudhoe Bay unit — ARCO had previously operated the eastern half. The Alaska Division of Oil and Gas approved BP’s application for change of unit operator at Prudhoe Bay in July 2000.

Forest Oil Co. agreed to the alignment in 2000.

Negotiations drag on

ChevronTexaco was the last to sign on. Chevron and Texaco were separate companies when the alignment process began: Chevron held less than 1 percent of the oil rim and the gas cap; Texaco held less than 1 percent in the oil rim.

Bob Howard, vice president and general manager of ChevronTexaco’s Alaska unit, based in Houston, told PNA Sept. 4 that the delay in coming to an agreement was just a matter of negotiating an equity position that ChevronTexaco thought was equitable.

The original equity offer made by BP, ExxonMobil and Phillips to Texaco and Chevron after the acquisition of ARCO Alaska’s assets by Phillips was not satisfactory, he said. ChevronTexaco, Howard said, has since negotiated a new agreement with the other owners which gives ChevronTexaco a new, more favorable equity position.

“We are satisfied with our equity position and the new alignment agreement,” Howard said.