Exxon Mobil Corp. can't be trusted to keep its latest promise to develop a huge North Slope oil and gas field that's lain dormant since its discovery decades ago, a top state official decided Tuesday.
The decision denying Exxon's proposed development plan means the fate of Point Thomson - which figures prominently in plans for a proposed natural gas pipeline - remains bound up in state court.
Exxon Mobil, the top leaseholder in the 106,201-acre field, in February offered the state a $1.3 billion drilling plan in hopes of halting the state's legal effort to break up the field and possibly lease the acreage to other companies.
Exxon managers touted the plan as an "unconditional commitment" to start producing from the field.
But in a 78-page decision issued Tuesday, state Natural Resources Commissioner Tom Irwin sternly rejected Exxon's development plan - its 23rd over the years - saying the company and other leaseholders repeatedly broke past commitments and have engaged in "a constant shell game" for more than two decades.
Irwin, who presided over a court-ordered hearing on the plan in March, questioned the credibility of oil company executives who testified and concluded that allowing the companies "another opportunity to delay development of this valuable state resource is too risky."
Exxon and other Point Thomson leaseholders have 20 days to ask Irwin to reconsider. Then the matter moves back into state Superior Court.
Exxon spokesmen asserted Irwin's decision essentially locks the company's drilling rig out of the field, where Exxon vowed to start work on up to five wells and employ 200 people this winter.
"We're surprised and extremely disappointed," Exxon said in a written statement. "We plan to appeal this action and will pursue all alternatives to protect our rights to develop these resources."
Exxon added that it believe Irwin "has no legal basis" to break up the field's leases and that doing so will lead to years more conflict in court.
Steve Rinehart, a spokesman for BP, the second-largest Point Thomson leaseholder, said his company also was disappointed and that Irwin's decision could delay a natural gas pipeline.
Point Thomson is located on the Beaufort Sea coast next to the Arctic National Wildlife Refuge, about 60 miles east of the giant Prudhoe Bay oil field.
It holds an estimated 8 trillion cubic feet of natural gas - about a quarter of the Slope's known 35 trillion cubic feet. It also holds several hundred million barrels of crude oil and a liquid form of natural gas known as condensate.
Development of the field would mean huge tax and royalty revenue for the state.
Exxon drilling led to discovery of Point Thomson's huge gas and oil reserves in 1977. But the company hasn't developed the field because of the lack of a gas pipeline and the field's extreme subsurface pressure, which would require tougher, costlier wells to subdue, Exxon managers say.
Irwin, in his decision, said Exxon and other leaseholders have looked to "warehouse" Point Thomson while concentrating on projects elsewhere in the world.
Because of its rich natural gas reserves, Point Thomson is considered a vital piece of any pipeline plan to ship gas to the Lower 48 or abroad.
Two pipeline proposals are now on the table - one from Calgary-based TransCanada Corp. and another from a partnership of Conoco Phillips and BP.
Exxon, which isn't part of either pipeline proposal, told the state when it submitted its latest development plan in February that it would pledge its share of Point Thomson gas to a pipeline project so long as it received terms as good as those of other companies with gas to ship.
But Exxon's plan didn't impress Irwin.
He said its $1.3 billion proposal to produce 10,000 barrels of gas condensate - a small amount in the context of total North Slope production now averaging 750,000 barrels a day - was a "modest" step to exploit a hugely valuable field.
Anyway, Irwin wrote, Exxon and other Point Thomson leaseholders can't be trusted to keep their word. He noted, for example, that the latest plan of development has a loophole giving Exxon an out based on "permitting delays."
"Approval of this plan merely serves as an invitation for Exxon Mobil to abandon this project under the guise of permitting delays or denials," Irwin wrote.