Point Thomson field remains stuck in limbo

SUPREME COURT: Major stakeholders fight to keep state from breaking up unit.

July 23, 2011 

Alaska industry watchers have waited for months for some resolution to the Point Thomson dispute, now parked before the Alaska Supreme Court.

So far, talk that the state and Point Thomson unit operator Exxon Mobil are near a settlement of the matter hasn't proven out.

"We are cautiously optimistic that we can resolve this dispute in the near future," Elizabeth Bluemink, spokeswoman for the state Department of Natural Resources, said last week.

That's been the official line for quite a while.

In the meantime, attorneys continue to joust in court, showing few signs that it's time to settle a matter worth billions of dollars to both sides.

What's more, recent court filings indicate Exxon Mobil is not alone in pressing the fight with the state. Chevron, a major stakeholder in Point Thomson, recently dealt a legal blow to DNR.

Point Thomson is a rich oil and gas field on Alaska's eastern North Slope, along the Beaufort Sea coast next to the Arctic National Wildlife Refuge.

Aside from Exxon Mobil and Chevron, major stakeholders include BP and Conoco Phillips.

All the companies are fighting in court to prevent DNR from breaking up the Point Thomson unit, which the agency has attempted to do "due to lack of production after three decades of unitization," state attorneys pointedly remarked in a June court filing.

The oil companies have had considerable success in defending the unit and its underlying leases. The case is before the Supreme Court because a judge in January 2010 reversed former DNR Commissioner Tom Irwin's termination of the Point Thomson unit, prompting the state to appeal.

The Supreme Court proceedings initially remained static, as the two sides repeatedly asked for time to try to negotiate a settlement out of court.

Now the proceedings appear to be back on track, with the state having filed its weighty opening brief and Exxon Mobil on the clock to file its reply brief by Aug. 5.

On June 8, lawyers for Chevron filed a motion asking the Supreme Court to strike part of DNR's opening brief. Chevron said state lawyers had improperly raised a third legal question for the high court to consider, in addition to the two that the court previously had agreed to review at the state's request.

The state's attorneys argued they had, in effect, posed all three issues in their appeal and that the questions are "intertwined" in a case that concerns whether DNR had the right to terminate the unit, whether the agency treated the oil companies fairly, and whether the companies' failure to submit what the state considers an adequate development plan constitutes a "material breach" of the Point Thomson unit agreement.

On June 24, an individual Supreme Court justice ruled in favor of Chevron, striking portions of DNR's opening brief.

Despite the legal cloud hanging over the field, Exxon Mobil has drilled a pair of wells at Point Thomson with DNR's permission. But the Nabors rig Exxon Mobil hired to drill the holes was stacked and no further drilling plans have been announced.

Whether the company's goal of beginning production from Point Thomson by the end of 2014 remains achievable is unclear.

Exxon Mobil has pledged a $1.3 billion development to produce 10,000 barrels a day of natural gas condensate from the high-pressure Point Thomson reservoir.

A lot of wheels are in motion for this project, including an environmental impact statement the U.S. Army Corps of Engineers is preparing and Exxon Mobil's application for a right of way to lay a new $80 million, 22-mile pipeline to carry Point Thomson liquids west to the existing Badami pipeline. From there, the liquids ultimately would flow into the trans-Alaska oil pipeline.

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