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Critics pan Point Thomson settlement They say deal seeking to compel development of rich Alaska North Slope field is seriously lacking; state officials argue otherwise Wesley Loy For Petroleum News
Alaska’s settlement of the Point Thomson dispute, which Gov. Sean Parnell announced on March 30, has begun to draw some flak.
Among the critics are Bill Walker, an Anchorage attorney and a 2010 candidate for Parnell’s job.
Walker, represented by another attorney in his law firm, appeared April 27 at a Senate Judiciary Committee hearing on the settlement. Anchorage Democratic Sen. Hollis French, also a former Parnell challenger, chairs the committee.
The hearing featured invited witness Mark Myers, who gave the settlement a thoroughly negative review. It was Myers who, as state oil and gas director in 2005, launched a get-tough policy against ExxonMobil, operator of the Point Thomson oil and gas field.
Myers said the state made a poor deal to settle the legal conflict over Point Thomson and bring the field into production.
At the conclusion of his testimony, French asked him whether he would have signed the settlement had he been the state’s natural resources commissioner.
“If I had been commissioner, I would not have signed this deal,” Myers said.
Good deal for ExxonMobil Myers, a geologist with extensive knowledge of Point Thomson, gave an interesting overview of the field’s complexity. Despite its technical challenges, the field is a “crown jewel” that could hold 1 billion barrels of technically recoverable oil and condensate and 7 trillion cubic feet of gas, he said.
State officials have long pined for ExxonMobil to begin producing from the field, which is on state leases, and they have accused the company and its partners of “warehousing” Point Thomson while pursuing opportunities elsewhere in the world.
Myers, in 2005, held the Point Thomson unit in default for lack of development. That ultimately escalated into an huge legal fight between the state and the companies, who went to court to defend the unit.
The March 30 settlement cut off the litigation and laid out a new schedule for developing the field.
But the deal does not guarantee any production from Point Thomson.
Myers raised numerous concerns about the lengthy and densely written settlement, saying it appears to offer plenty of ways for ExxonMobil and its partners to avoid development and still hang onto most or all of the unit acreage.
“I’ve spent months across the table negotiating with Exxon, and they are world-class,” Myers said. “I bear them no malice for a wonderful job of negotiating here. The fact is they negotiated a very, very strong agreement, and they’re very good at it and very knowledgeable.”
Among his concerns: The state Department of Natural Resources relinquishes its normal unit management authority for several years under the settlement, and the development options in the deal “are at the sole discretion” of the field’s working interest owners.
Myers, went on to become director of the U.S. Geological Survey after he ended his role as state oil and gas director in late 2005, also said he fears the deal might give ExxonMobil the option to develop Point Thomson mainly as a gas field, leaving petroleum liquids stranded underground. This would be very costly to the state, Myers said.
Officials defend settlement State Natural Resources Commissioner Dan Sullivan, who led the state’s negotiations on the Point Thomson settlement, did not appear at the hearing.
In a letter to French, he explained he was in Washington, D.C., in part to impress upon federal officials the need for timely permitting for the first phase of Point Thomson development.
That development is a gas cycling project to collect gas condensate for shipment down the trans-Alaska oil pipeline. ExxonMobil already has drilled two wells for the project, which needs a wetlands permit from the U.S. Army Corps of Engineers to move forward.
Sullivan, in his letter, said the Point Thomson deal is like all settlements, entailing compromise and risk.
“It is important to note that in this case, there was significant risk to the state in staying the course on litigation that literally had no end in sight,” he wrote.
Other state officials, including Attorney General Michael Geraghty, defended the settlement at the hearing.
“In my opinion, the Point Thomson litigation was a major impediment to the commercialization of Alaska’s natural gas,” Geraghty said.
Point Thomson is believed to hold about a quarter of the 35 tcf of known natural gas on the North Slope.
Like several governors before him, Parnell is trying to bring about construction of a multibillion-dollar pipeline project to market the stranded gas.
Reconsideration rejected Walker, in a 16-page letter dated April 17, asked Sullivan to reconsider the Point Thomson settlement.
He argued the settlement was illegal and not in the state’s best interest — a huge deal done with “no public process.”
The letter further said the Point Thomson leaseholders could maintain most if not all of the unit acreage “with little or no additional work commitments.”
Parnell administration officials, however, have insisted the deal has real teeth, that the companies are “on the clock” to keep development promises or progressively lose acreage.
On April 26, Geraghty responded to Walker’s appeal to Sullivan.
“Settlements entered into by the State of Alaska are not subject to administrative challenge, by reconsideration or otherwise,” Geraghty wrote.
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