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Point Thomson’s status remains unclear Two months after Alaska official announces ‘resolution in principle,’ court case over disputed North Slope field plows onward Wesley Loy For Petroleum News
In mid-August, Alaska’s natural resources commissioner signaled the fight over the Point Thomson field was coming to an end — that the state and unit operator ExxonMobil had reached a “resolution in principle.”
But two months later, the conflict remains unsettled as lawyers for the state and the company continue to battle.
The Department of Natural Resources on Oct. 10 filed a new set of papers with the Alaska Supreme Court as part of its continuing effort to break up the Point Thomson unit and reclaim the state acreage there.
The state appears to be pressing on in court as a fallback in case the settlement effort fails.
Point Thomson is a rich but undeveloped oil and gas field along the Beaufort Sea coastline, next to the Arctic National Wildlife Refuge.
Point Thomson ‘mockery’ DNR Commissioner Dan Sullivan announced the resolution in principle during an Aug. 15 legislative hearing.
Sullivan said resolving the dispute involved more players than just DNR and the oil giant.
“ExxonMobil now is discussing the provisions of the settlement with other working interest owners of the unit,” he said, noting they had commercial terms to work out among themselves.
Those other owners include BP, Chevron and ConocoPhillips. The three companies, along with ExxonMobil, are fighting to preserve the Point Thomson unit and the underlying leases.
The state began its quest to take back Point Thomson six years ago, when the state’s oil and gas director at the time, Mark Myers, held that decades of nondevelopment at Point Thomson had made a “mockery” of the state’s rights as a landowner.
Thus far, the oil companies have thwarted the state’s attempts to terminate the unit. But the state is continuing its efforts before the Alaska Supreme Court, where the matter now rests.
Hugely valuable asset DNR appealed to the high court in early 2010, after state Superior Court Judge Sharon Gleason reversed the agency’s unit termination. Gleason held, in part, that the oil companies had been denied a special hearing provided for in the Point Thomson unit agreement. DNR’s lawyers argue no such hearing is warranted.
For a long while, the case remained idle as the Supreme Court allowed the two sides to concentrate on settlement talks.
In recent months, however, the court proceedings picked up.
The case has seen three major filings thus far: DNR’s opening brief, a responding brief from ExxonMobil and its partners, and DNR’s reply brief filed Oct. 10.
It’s clear from this lumbering legal process that reaching a decision from the Supreme Court could take many months. Even then, the high court’s decision might be to remand the case to the Superior Court for further proceedings.
Both sides have said they prefer settling the matter out of court.
Point Thomson is a hugely valuable asset. It holds an estimated 8 trillion cubic feet of natural gas plus hundreds of millions of barrels of petroleum liquids.
ExxonMobil discovered the field with wells drilled in the 1970s. The Point Thomson unit was formed in 1977.
While some have accused ExxonMobil of “warehousing” Point Thomson’s riches, the company has cited the lack of a North Slope natural gas pipeline as a primary reason why the field has never been developed.
A more active ExxonMobil? ExxonMobil is a huge player in Alaska’s oil industry, but its role for many years primarily has been that of investor rather than explorer or field operator. Most notably, the company owns a 36.4 percent working interest in the BP-operated Prudhoe Bay oil field.
ExxonMobil’s profile in Alaska could look very different depending on how the Point Thomson issue shakes out.
Responding to the state’s move to reclaim the acreage, ExxonMobil between May 8, 2009, and Oct. 27, 2010, drilled a pair of wells at Point Thomson, the first wells drilled there since the early 1980s.
The “development wells,” as ExxonMobil termed them, were part of a promised $1.3 billion project to start producing 10,000 barrels a day of natural gas condensate by year-end 2014. The U.S. Army Corps of Engineers is drafting an environmental impact statement for the project.
The state would like to see much larger volumes produced from Point Thomson. In court papers, state lawyers have said DNR officials were wary of ExxonMobil using a “minimal trickle” of production as a way to hang onto the Point Thomson leases. In years past, company executives themselves talked of a project to produce up to 75,000 barrels a day.
Political, gas line impacts Because of the years of frustration over Point Thomson, the terms of any state settlement with ExxonMobil are sure to be closely scrutinized. Politically, the unveiling of a settlement promises to be a defining moment for Gov. Sean Parnell, who will be judged on whether his administration made a good or bad deal.
The settlement also could be important for advancing a natural gas pipeline, long an elusive economic development priority for the state. Point Thomson holds a quarter of the known gas reserves on the North Slope, and many have seen the field as an important bargaining chip in the gas line game.
ExxonMobil currently is a partner with TransCanada Corp. on a proposed gas line from the North Slope to Alberta. TransCanada, a Calgary-based pipeline company, is attempting to recruit adequate gas shippers to support the project.
Sullivan, during his Aug. 15 legislative testimony, hinted the tentative Point Thomson settlement could have a bearing on “commercializing North Slope gas.”
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