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Walker: Parnell's Pt. Thomson deal works better for Exxon than Alaska

  • Author: Bill Walker
  • Updated: June 29, 2016
  • Published September 18, 2014

In a recent fundraising email that made its way to a cover story in the Alaska Dispatch News, Gov. Parnell claimed my challenge of his Point Thomson settlement was intended to stop development: "Bill and his law firm are still fighting the state in court to stop the Pt. Thomson project, where over 700 people were working this summer. Alaskans cannot afford the job loss and lost economic momentum a Walker-Mallott ticket will bring."

Nothing could be further from the truth.

Point Thomson is the largest non-producing oil and gas field in North America. The delivered value of its oil and gas is about $160 billion at today's prices.

Much of the core area was leased in 1965 with acreage added periodically over the decades. It was unitized in 1970s, which means the leases have not expired in spite of a lack of production. In 2005 the State was at its wits' end trying to get Exxon to commit to a major gas sale or a 70,000 barrels per day gas cycling project (gas cycling is stripping the liquid hydrocarbons from production and reinjecting the gas). On behalf of the Alaska Gasline Port Authority, I submitted a detailed filing demanding the state terminate the unit for failure to develop. Shortly thereafter, the state pulled the leases in their entirety.

Proceedings were put on hold for a year pending negotiation of Gov. Frank Murkowski's gas line contract. When that failed the state held a hearing at which I was the lead attorney advocating termination of the unit. One of Gov. Murkowski's last acts in office was to terminate the leaseholds for lack of development.

Court appeals ensued. In 2009, during a remand to Gov. Sarah Palin's administration, Exxon committed to drill two wells and to build a small gas cycling project of about 10,000 barrels per day, and to build a 70,000 barrels per day liquids pipeline to connect with Badami in the event a full-sized project was constructed. In return, Department of Natural Resources Commissioner Tom Irwin allowed them to keep two leases (ADL 47559 and 47571). Exxon is currently completing that small project, and I commend former Gov. Palin and Commissioner Irwin for getting it built.

The litigation over the rest of the leases continued until Gov. Parnell settled the case in the spring of 2012. Unfortunately one of the largest oil and gas deals in state history was finalized and all court cases dismissed in secret, without public notice or comment or review by the Legislature, and ostensibly without the right of third parties to challenge its terms. The settlement was not only a bad deal for Alaska, it was blatantly illegal.

Under its terms, Exxon could maintain the entirety of Point Thomson if it completed the small gas cycling project promised under Gov. Palin's administration to keep two leases. The agreement then provided for a series of development scenarios that result in non-core leases being lost if not met. I could write a book on the loopholes, but most of the acreage will be kept through the 2030s if Exxon does nothing further. That is the likely outcome barring further state pressure.

But Gov. Parnell used the settlement contract to eliminate the state's right to apply that pressure. Under the Alaska Administrative Code (Title 11 83.303), the state can only approve development decisions if they are in the public's interest. The state's assessment must include consideration of environmental and economic impact, geological characteristics of the reservoir, and prior and proposed development activity. Yet, Gov. Parnell expressly agreed to waive that oversight to let Exxon develop the field however it wants. He even agreed that DNR would not weigh in on any future development disputes, and to resolve them by arbitration rather than the legally mandated administrative and court processes. This is notwithstanding a 2001 Supreme Court decision that the state and Exxon could not contract around the state's regulations.

In short this was the worst, dirtiest backroom deal in state history. So I challenged the legality of the settlement as a resident of Alaska at my own expense. My goal is not to stop current development, but to ensure the state retains the authority to force more development in the future.

Bill Walker was born into the Territory of Alaska and owns an Anchorage law firm with an oil and gas and municipal law focus. He is an independent candidate for governor.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com

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