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Murphy appeals Point Thomson decision, charges forced integration Company tells Department of Natural Resources that only Alaska Oil and Gas Conservation Commission can force unitization — and then only after a hearing Kristen Nelson PNA Editor-in-Chief
Murphy Exploration & Production Co. has appealed the Aug. 29 approval by the Department of Natural Resources, Division of Oil and Gas, of the expansion-contraction agreement for the Point Thomson unit.
Murphy, a minority working interest owner at Point Thomson, has asked for repeal of the Aug. 29 decision and reinstatement of the July 31 decision, with a Dec. 31 deadline for parties to file written consent.
Murphy is also requesting a hearing.
In a Sept. 10 letter to Division of Oil and Gas Director Mark Myers, who signed both decisions, William Gage Jr., senior landman with Murphy, said that Murphy "was never a party to the application or the approval process" and thus is "uncertain of the status of our leasehold interest" in the Point Thomson unit.
The company's formal Oct. 4 appeal to DNR Commissioner Pat Pourchot, from attorneys Robin Brena and David Wensel of Brena, Bell & Clarkson, P.C., of Anchorage, said that DNR's August decision is inconsistent with Alaska law:
"If other lessees desire to integrate their interests with Murphy's interest," the appeal said, "such integration should either be negotiated or the proper statutory procedure should be followed. Additional time for negotiation and disclosure would be of benefit to the parties. Regardless, the DNR's informal attempt at integration violates Alaska law and must be reversed." Others approved The division's July 31 decision, approving a contraction-expansion agreement for the unit and requiring various drilling commitments, required unanimous approval of working interest owners by Aug. 15. On Aug. 13, the division granted Murphy an extension to Aug. 30 to approve the agreement.
The division received written acceptance from all of the other working interest owners in the expansion-contraction leases on Aug. 15. The division said Aug. 29 that after it extended time for Murphy, all of the other working interest owners sent the division written notice that they agreed to continue to be bound by the terms and conditions even if Murphy did not accept them by Aug. 30.
Division of Oil and Gas Director Mark Myers said in the Aug. 29 letter that the approving working interest owners "have sufficient interest in the unit area to have reasonably effective control of unit operations." Murphy charges forced integration Murphy's attorneys said in its appeal that it did not consent to the expansion-contraction agreement, "nor did Murphy consent to the integration of its interests in its leases… Nevertheless, in its August Decision the DNR approved the Application and integrated the Units."
The appeal also said that no petition was ever submitted to the Alaska Oil and Gas Conservation Commission and no hearing was scheduled or held:
"The DNR simply imposed the integration upon Murphy."
Compulsory unitization falls under the purview of the AOGCC, not DNR, Murphy's attorneys said. They cited Alaska Statute to the effect that the commission can force unitization, but only after it has made a finding, following proper notice and hearing.
DNR, Murphy's attorneys said, lacks the authority to integrate units absent the consent of all the working interest owners.
Murphy is requesting a hearing and a pre-hearing conference to establish procedures and factual issues to be decided. Point Thomson owners moving toward development Subsequent to the August approval by the division, the Point Thomson working interest owners moved ahead with development plans, and submitted an 18th plan of development, which Myers approved Sept. 14. Unit operator ExxonMobil Production Co. told the division that during the 18th plan of development, working interest owners will select a location for a delineation well, contract for a rig, file permit applications, continue environmental studies, initiate preliminary engineering and complete reservoir simulation modeling.
ExxonMobil told the division in the 18th plan of development that the Point Thomson working interest owners plan to seek expedited permit approvals to be able to begin continuous development drilling no later than 2006.
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