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State issues decision on Point Thomson unit expansion and contraction Interim decision last year allowed for non-unanimous working interest owner approval after Murphy wouldn’t agree to plan Kristen Nelson PNA Editor-in-Chief
The Division of Oil and Gas has issued a finding and decision on the application for a second expansion and third contraction of the Point Thomson unit for which unit operator Exxon Mobil Corp. applied in February 2001 on behalf of itself, BP Exploration (Alaska) Inc. and Chevron U.S.A. Inc.
The division said an interim decision last August approved the amended application — reflecting the final agreement reached between the state and the applicants — but did not include the basis for the decision, presented in the finding and decision issued May 23. In response to the 2001 application the division proposed different conditions and there were discussions and counter proposals resulting in a July conditional decision requiring acceptance of terms by all working interest owners.
The decision requires exploration drilling to evaluate the western extent of the Thomson sand reservoir by June 15, 2003; commencement of development drilling by June 15, 2006; completion of seven development wells within the unit by June 15, 2008; and allocation of production to expansion acreage by specified dates. The agreement also increases the royalty rate on eight of the 12 expansion leases and provides for contraction of acreage and dollar charges if the unit owners fail to meet drilling commitments. Murphy only owner not to sign on Atofina Petrochemicals Inc. had objected to the initial application because its leases north of the existing Point Thomson unit were not included and proposed an expansion, but later said it would not submit an expansion application.
All of the working interest owners agreed to the terms except Murphy Exploration and Production Co. In August, the division issued the interim decision, removing the requirement for unanimous consent by the working interest owners.
Murphy appealed the interim decision to the Commission of the Department of Natural Resources; the commissioner has not yet issued a decision.
The division said the amended application approved in the interim decision last year will expedite production and development of the unit area, and with the conditions included in the amended application, the economic benefits to the state outweigh the economic costs of extending the primary terms of leases committed to the unit.
The division said if it had continued to require unanimous consent for approval of expansion and contraction of the Point Thomson unit, and Murphy declined to accept the conditions, most of the expansion acreage leases would have expired — including both of Murphy’s leases. In addition, neither Murphy nor the state would have had the benefit of the working interest owners’ commitment to explore the expansion acreage and develop the unit area within the specified time and under increased royalty rates.
The Point Thomson unit expansion area is approximately 40,364 acres within 12 leases; approximately 7,572 acres within four leases contracted out of the unit.
The revised unit area is approximately 116,607 acres within 46 leases.
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