State says Exxon violated terms of permit

REGULATORS: Company denies wrongdoing, says work description mentioned use of conductors.

December 27, 2008 

State regulators say Exxon Mobil Corp. violated terms of a permit to do limited work on a gravel drilling pad in the disputed Point Thomson oil and gas field.

A state inspector said he visited the 10-acre pad on Dec. 4 and found a few problems, including two conductors in the ground.

Conductors are lengths of large pipe installed before drilling that, among other things, keep the sides of a hole from caving into the wellbore.

The problem was that Exxon's land-use permit allowed only surface activity, such as staging equipment, and not work below ground, inspector Gary Schultz wrote in a Dec. 15 letter to Exxon.

"The permit did not authorize the installation of conductors, which is the first step in the drilling of the oil wells," Schultz wrote. "This activity was not clearly stated in your application and was not approved. Exxon Mobil may be asked to remove these conductors next summer."

The letter makes no mention of a fine or other penalty.

Exxon and other companies that leased state acreage at Point Thomson are fighting in court to keep the leases, which the state cancelled this year on grounds the companies for decades failed to develop the rich North Slope field.

Exxon has proposed drilling this winter in Point Thomson, but the state has withheld permission as negotiations continue. State officials did, however, give Exxon the permit to conduct preparatory site work.

The installation of the conductors came up in a legislative hearing in Anchorage this month.

Craig Haymes, Exxon's Alaska production manager, acknowledged the company used a heavy crane to auger down about 120 feet deep and then set and cement the conductor pipes in the holes.

But Haymes denied Exxon had effectively done unlawful drilling.

He read from a project description Exxon submitted in applying for the land-use permit: The company would be installing conductors in addition to other work such as staging equipment and fuel tanks and grading the gravel pad.

"All of the work we've done is in accordance with state laws, regulations and permits that have been approved," he said.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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