Energy

Following state demands, oil producers revise Prudhoe Bay development plan

The largest oil producers in Alaska on Thursday submitted a revised annual development plan for the Prudhoe Bay oil field, the latest step in a monthslong fight between Alaska and producers BP, ConocoPhillips and Exxon Mobil over the seriousness of the companies' efforts to market Alaska's natural gas.

The working-interest owners at Prudhoe Bay believe the updated annual plan is complete and should be approved by the state, said Dawn Patience, press officer for BP in Alaska. Neither BP nor the state would disclose a copy of the plan.

The battle for the information comes with Gov. Bill Walker pushing aggressively to advance a state gas line project that would produce and sell the gas to markets in Asia.

In January, the Walker administration demanded sensitive details about how the oil producers will market their gas at Prudhoe Bay — a request that BP called illegal and unprecedented.

Not satisfied with the answers in BP's original development plan filed in March, or additional responses from the oil companies in an exchange of letters, the administration on June 30 refused to approve the 2016 plan submitted by BP, the unit operator.

Instead, the state gave the producers two months — a period that ended Thursday — to revise the plan. The state also extended the 2015 plan of development for four months, until Nov. 1. State officials now have two months to review the plan and determine the next step.

On Friday, BP would not provide the updated development plan to Alaska Dispatch News. BP lawyers have said the plan and a cover letter outlining the revisions must come from the state, Patience said.

Patience said she could not provide details about the revisions.

"The level of information provided is consistent with the previous (development plans) that DNR has approved each year since 2000," Patience said.

The plan satisfies all the requirements associated with the Prudhoe Bay Unit Agreement and development-plan regulations, Patience said.

The last development plan approved by the state, for 2015, had limited information about major gas sales. In it, BP said the working interest owners would continue to take steps to optimize oil and gas recovery and to address facilities, equipment and operational changes to prepare for major gas sales.

The proposed 2016 plan originally submitted in March contained the same language.

The Division of Oil and Gas received BP's newly submitted plan before the Thursday deadline, said Diane Hunt, special projects and external relations coordinator for the division.

Hunt said the division will not release the materials to the media until it has completed a review to determine whether confidential information needs to be redacted. She said she did not know when the review would be complete, but said the agency will respond within 10 working days, meeting the legal requirement for public information requests.

Hunt said she did not know if the state's requests to the oil producers were met in the newly submitted plan.

The yearly development plan at the giant Prudhoe Bay field typically focuses on oil development, spelling out such things as the number of wells planned and anticipated levels of oil production.

For decades, the oil producers have re-injected the enormous volumes of natural gas at Prudhoe Bay to pressurize reservoirs and help the more valuable oil flow toward the surface.

But state officials have pointed out that the Alaska Oil and Gas Conservation Commission last fall decided natural gas could be removed from the North Slope at a rate of 3.6 billion cubic feet of gas per day to support the Alaska LNG project.

The liquefied natural gas project has involved the oil producers and the state. BP has said it has provided "appropriate collective marketing" information as part of the project, sharing it with key state officials who have signed confidentiality agreements.

That confidential information should not be shared with oil and gas division staff performing their regulatory duties, BP has said.

The division has sought information about what steps will be taken by the producers to sell gas to support an LNG project, including gas pricing terms, gas volumes to be delivered and the identity of parties expected to be involved in "substantive" marketing discussions with the partners.

In May, in a letter sent to the Division of Oil and Gas, BP called the division's request unlawful and said sharing such commercially sensitive marketing information raises significant antitrust concerns under state and federal law.

Walker in June said he doesn't envision enforcing the marketing demand by putting the Prudhoe Bay field leases in default, addressing criticism that his administration would take such a step to force the producers to market the gas reserves.

A default could potentially lead to a foreclosure or eviction effort by the state that the producers could fight in court.

Andy Mack, appointed Natural Resources commissioner by Walker in June, may have to decide whether he will declare the Prudhoe Bay oil producers in default of their state leases.

In a recent interview, Mack said there is a lot of flexibility in how the state's requests can be answered, and suggested there would be a resolution without the need for a default.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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