Anchorage Daily News

An Exxon Mobil executive told state lawmakers Tuesday the company is plowing ahead with a drilling campaign in a dormant North Slope oil field that figures heavily into plans for a natural gas pipeline.The oil giant is making the preparations even though the fate of the Point Thomson field is tied up in a court battle with the state.

Craig Haymes, Exxon's Alaska production manager, said the company hopes to iron out differences with state officials so the drilling can start this winter.

"We want to settle," he said. "We don't want to litigate."

State legislators are in the middle of a special session on the natural gas pipeline, and are holding hearings this week at the Howard Johnson hotel in downtown Anchorage.

Point Thomson is considered important for a gas line because it holds about a quarter of the known 35 trillion cubic feet of gas on the North Slope.

But Point Thomson, which Exxon discovered in 1977, has a tortured history as well as geologic challenges that call into question whether its gas reserves will be available for a gas line anytime soon.

The field 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.

Tired of waiting for Exxon to get on with development, former Gov. Frank Murkowski in 2006 took the first steps toward breaking up the 106,201-acre field and revoking leases held by Exxon and other companies including BP and Chevron.

Murkowski's successor, Gov. Sarah Palin, has continued the hard line against the lease holders, who sued the state to try to keep control of the field. Last week, Palin's natural resources commissioner, Tom Irwin, rejected Exxon's drilling plan, which the company offered as a way to satisfy the state.

On Tuesday, Haymes outlined elaborate and expensive plans to mount a drilling campaign in the field, despite the unsettled court fight and Irwin's rejection.

Exxon is spending $20 million to outfit a rig for drilling unusually brawny wells capable of handling Point Thomson's extreme subsurface pressure, Haymes said.

Also, in the next two weeks Exxon expects to award contracts with companies to barge in equipment and to build an ice road and airstrip to support the drilling.

The $1.3 billion project will put 200 people to work this winter, with production of 10,000 barrels a day of petroleum coming by 2014, Haymes said.

He also told lawmakers that allowing the drilling plan to proceed is the fastest path toward making Point Thomson gas available for a pipeline that could be built in a decade or so.

Haymes gave each lawmaker a glossy brochure titled "Point Thomson Project - Commitment to Produce," and during his speech he asked his managers in the audience to stand.

The whole presentation seemed to shout, "We're serious."

But some lawmakers were skeptical, asserting Exxon had many chances to develop Point Thomson but didn't.

"It's mighty nice of them to finally get busy now that they're worried that they are about to lose their leases," said Rep. Harry Crawford, D-Anchorage.

"I know that Exxon is a fabulous company with incredible resources," said Rep. Carl Gatto, R-Wasilla. But he said he has a hard time believing Exxon, likening the company to a teenager who promises his mom, "I'll get up on time tomorrow, I swear."

The question, Gatto added, is how a judge would view Exxon's plan.

Nan Thompson, of the state Division of Oil and Gas, told lawmakers an Anchorage Superior Court judge is expected to rule on the Point Thomson case by the end of the year.

That likely will spawn a state Supreme Court appeal, which could take two more years.

Sen. Charlie Huggins, a Wasilla Republican and chairman of the Senate Resources Committee, said he'd rather see the oil companies and the state get together and talk out a resolution.

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

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