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Parnell voices Point Thomson impatience Alaska governor calls out other working interest owners yet to sign onto state deal with ExxonMobil on disputed oil and gas field Wesley Loy For Petroleum News
Alaska Gov. Sean Parnell is unhappy the legal conflict over Point Thomson, a rich but undeveloped North Slope oil and gas field, remains unresolved.
Speaking at the Oct. 27 annual luncheon of the Alaska Oil and Gas Association, a trade association of the state’s oil producers, Parnell said a deal struck weeks ago between the state and Point Thomson unit operator ExxonMobil still lacked the endorsement of the field’s other working interest owners.
The major working interest owners, aside from ExxonMobil, include BP, Chevron and ConocoPhillips.
“We got that Point Thomson settlement done last August, hammering out a resolution of that litigation with the unit operator, ExxonMobil. So what’s the holdup?” Parnell said, speaking to a large audience at the AOGA event in downtown Anchorage. “Well, still, there’s no public word from the other working interest owners about whether they’re going to join us in the settlement with the unit operator and the state.”
Parnell continued: “It’s deeply troubling to me, and should be troubling to you as Alaskans, that this litigation has been pending through three administrations. The state negotiated a resolution with the unit operator, like we were supposed to. But the other working interest owners have yet to finalize the settlement.”
Key for gas line Parnell made his remarks in the context of the state’s longtime goal of building a pipeline to carry North Slope natural gas to market.
Point Thomson gas, coupled with gas reserves in the giant Prudhoe Bay field, is considered important for supporting a pipeline, the governor said.
“Point Thomson gas represents one-fourth of the 35 trillion cubic feet of natural gas reserves that we know exist between Prudhoe and Point Thomson,” he noted.
Point Thomson is located on the eastern North Slope, along the Beaufort Sea coastline next to the Arctic National Wildlife Refuge.
Although discovered long ago, with wells drilled in the 1970s, Point Thomson has seen no production to date. The field is rich not only in gas but holds hundreds of millions of barrels of petroleum liquids. Development would generate jobs, taxes and royalties.
State officials reached the end of their patience with the leaseholders in 2005, launching efforts to break up the unit and take back the state acreage at Point Thomson. Frank Murkowski was governor at the time.
ExxonMobil and its partners have since fought in court to preserve the unit, and the case currently sits before the Alaska Supreme Court. ExxonMobil has cited the lack of a multibillion-dollar gas pipeline as a primary reason why Point Thomson hasn’t been developed.
Reaction to Parnell’s remarks On Aug. 15, during a legislative hearing, Alaska Natural Resources Commissioner Dan Sullivan revealed that a “resolution in principle” had been reached with ExxonMobil to settle the Point Thomson case.
He said ExxonMobil was discussing the settlement provisions with the other working interest owners, and the companies were working out “internal commercial terms.”
But little has been heard publicly since Sullivan’s revelation.
One factor holding up the deal could be the discontent among the other field owners over how they were treated during settlement talks between the state and ExxonMobil. In court filings, lawyers for BP, Chevron and ConocoPhillips complained that the companies had been shut out of the negotiations.
Representatives of those companies were present at the Dena’ina Civic and Convention Center to hear Parnell’s remarks.
Spokespersons for two companies, Chevron and ConocoPhillips, had little to say after Petroleum News asked for comment.
“Chevron does not have any comments to offer on the Governor’s remarks,” Chevron’s Roxanne Sinz said in an email.
“We do not generally comment on pending litigation issues,” said Natalie Lowman, of ConocoPhillips.
BP was a little more talkative.
“The proposed agreement is complex,” BP spokesman Steve Rinehart said by email. “We and other owners had asked to be involved in the discussions, but were not allowed. We are now working with the state and Exxon to understand both the settlement agreement and the development project that is embedded within the agreement.”
ExxonMobil’s David Eglinton offered this: “We are continuing to make progress on settlement, but additional work remains. We remain committed to working with Governor Parnell’s administration and the other working interest owners to finalize a settlement. Settling Point Thomson litigation and securing necessary local, state and federal permits is imperative to maintain the pace of Point Thomson development.”
What sort of development? If the other working interest owners are mad, hopefully they aren’t mad at the state for negotiating, as it customarily does, with the unit operator, Parnell told Petroleum News after his speech.
Even amid the legal conflict, ExxonMobil has made a start toward a Point Thomson development.
Between May 8, 2009, and Oct. 27, 2010, the company drilled a pair of wells at Point Thomson, the first sunk there since the early 1980s. It did so, ostensibly, with the blessing of the other working interest owners.
The “development wells,” as ExxonMobil termed them, are part of a promised $1.3 billion project to start producing 10,000 barrels a day of natural gas condensate by year-end 2014.
That’s a modest volume by North Slope production standards, and the state likely wants something more.
It will be interesting, then, to see what sort of development is called for under the state settlement with ExxonMobil, and whether the deal includes any commitments of Point Thomson gas to a pipeline project.
On another front, ExxonMobil is seeking a federal wetlands permit for Point Thomson production facilities, and the U.S. Army Corps of Engineers is drafting an environmental impact statement. The Corps is scheduled to release a draft EIS any day now, with a record of decision to be signed in August 2012.
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