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Alaska Supreme Court to hear Point Thomson dispute

Wesley LoyPetroleum News

The state and Exxon Mobil are scheduled to go to school Feb. 8, and each will be looking to teach the other a lesson.

The topic for the day is Point Thomson, a heavyweight legal struggle between the state and the oil giant for control of a lucrative oil and gas field on Alaska's North Slope.

The Alaska Supreme Court is ready to hear oral arguments from the two sides, with West High School in Anchorage as the venue. The justices occasionally take their proceedings out of the courtroom and into the community under an initiative called "Supreme Court Live."

Argument is set to begin at 10:30 a.m., with each side allotted 30 minutes to talk.

Certainly, the student audience can expect to hear some high-stakes stuff, given the extraordinary value of the Point Thomson field and its importance for a proposed Alaska natural gas pipeline.

But if Gov. Sean Parnell has his way, the kids will be disappointed and the Supreme Court hearing will be called off.

PENDING SETTLEMENT

Point Thomson is located along the Beaufort Sea coastline, next to the Arctic National Wildlife Refuge. Exxon Mobil is operator of the field, with other major owners including BP, Chevron and Conoco Phillips.

Although rich in oil, and even richer in natural gas, the field hasn't been developed decades after its discovery. The companies have cited technical challenges and the absence of a multibillion-dollar North Slope gas pipeline.

Lack of development is the crux of the court dispute. The state, tired of waiting, is trying to dissolve the Point Thomson unit and reclaim the state acreage, while Exxon Mobil and its partners are trying to preserve the unit and keep their leases.

Point Thomson is regarded as important for supporting an Alaska gas pipeline, as the field holds about a quarter of the Slope's known 35 trillion cubic feet of gas.

In mid-August, the Parnell administration revealed that a "resolution in principle" had been reached with Exxon Mobil. But to the governor's growing consternation, the other leaseholders have yet to sign on to the deal.

And so the court case continues.

Parnell made note of the situation in his State of the State address to the Alaska Legislature last week.

"Here's a road map to a gas line in Alaska's interest: First, these companies need to agree to resolve the Point Thomson litigation," Parnell said. "If no settlement in the state's interest can be reached with all parties, the state will fight for Alaska's interests at the Alaska Supreme Court hearing on Feb. 8 in Anchorage."

ALIGNING ON GASThe governor had much more to say on the topic of moving Alaska North Slope gas to market -- a long-frustrated economic development dream for the state.

He repeated his recently stated view that a pipeline to the southern coast of Alaska for liquefied natural gas exports is now the option he would like to see the oil companies pursue. In recent years, the focus has instead been on a conventional gas line into Canada and from there to the northern Midwest.

"During the first quarter of 2012, Alaska expects these producers to formally align under an Alaska Gasline Inducement Act framework," Parnell said. "This alignment must include work on a large-diameter liquefied natural gas line through Alaska to tidewater."

Meantime, a state agency, the Alaska Gasline Development Corp., continues to work on a different gas line project, Parnell said.

"By third quarter of 2012, the two projects, one under the Alaska Gasline Inducement Act with the aligned parties, and the other under the Alaska Gasline Development Corp., will complete discussions determining what potential exists to consolidate projects," Parnell said. "The AGDC has valuable ongoing work. It is already engaged in an Environmental Impact Statement process for an in-state gas line route to tidewater. And the AGDC has a 417-mile state right of way in hand, assets useful in a consolidated project."

2013 GAS TAX DEBATE?

Parnell continued: "By third quarter 2012, Alaska expects the companies to harden their numbers on an Alaska liquefied natural gas project. By that time, they will identify a pipeline project with an associated work schedule.

"If these milestones are timely met, the 2013 Legislature can take up gas tax legislation designed to move the project forward.

On Jan. 5, Parnell met in Anchorage with the chief executives of all three top companies operating in Alaska -- BP's Bob Dudley, Jim Mulva of Conoco Phillips, and Exxon Mobil's Rex Tillerson.

In his speech to the Legislature, Parnell said the meeting made for a "productive discussion."

"Teams from the companies have been working diligently to align on a gas project," Parnell said. He also said the Department of Natural Resources, and state lawyers, had been working hard to resolve the litigation issues.

Parnell noted that in the 24 hours preceding his State of the State speech, he'd talked again with all three CEOs "to get a progress report."

"I ascertained that while teams were diligently working, agreement on key issues has not yet been reached."


By WESLEY LOY
Petroleum News