Exxon Mobil vows to fight Point Thomson decision

Company says it will appeal NRC denial

Published Friday, June 13, 2008

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Exxon Mobil says it will appeal the state’s decision to terminate the Point Thomson unit.

Natural Resources Commissioner Tom Irwin on Wednesday turned down the Irving, Texas-based oil giant’s request for reconsideration of his April 22 decision to disband the unit.

Exxon was “extremely disappointed” by the department’s decision, Margaret Ross, spokeswoman for the company, said in an e-mail Thursday.

“We plan to appeal this action and will pursue all alternatives to protect our rights to develop these resources,” she said.

Ross said the company submitted a plan to develop the massive North Slope oil and gas field that was responsive to the state’s requirements, including a commitment to begin production within a few years. Exxon was promising to spend $1.3 billion across the next six years to drill five wells, with production of 10,000 barrels a day of gas condensate to begin in 2014.

“Our plans include beginning drilling this year and we have already hired Alaskans, secured a rig and ordered long-lead materials for this purpose. The plan would provide jobs for over 200 people this winter,” Ross said.

In his written decision, Irwin said he found good reason to doubt that Exxon was sincere in planning to develop the 106,200-acre unit in a timely manner. Exxon has had control of the unit for more than 30 years.

Exxon and its partners made a good-faith offer to develop the unit, Ross said.

“The owners provided significant assurances that they would meet their commitments, including a provision for unit termination if we did not meet key milestones included in the plan of development,” she said.

Exxon plans to move forward with its development plan while it challenges Irwin’s decision, Ross said.

“Despite the DNR’s decision, we are continuing plans to begin drilling this coming winter,” she said. “We have the right to conduct such drilling under the terms of the leases, which have not yet expired.”

Exxon is perplexed because prior to 2005, when the state first rejected Exxon’s development plan for the unit, the state consistently approved its development plans for Point Thomson, Ross said.

“Consistent with the instructions of the court, the owners believe the updated plan is an appropriate remedy for DNR rejection of plans of development that were submitted in 2005 and 2006,” she said.

Kevin Banks, director of the state Division of Oil and Gas, said previous plans were approved on the basis of Exxon’s promises that development was “just around the corner.” Those promises were never realized, Banks said.

Exxon has continually blamed delays in development on the technical challenges of producing the highly pressurized field and on the lack of a gas pipeline connecting the North Slope to Lower 48 markets to commercialize the gas.

Exxon and the other leaseholders have spent $800 million on the unit to date, and have a comprehensive technical understanding of its reservoirs, Ross said. Exxon has drilled 18 wells in the unit, but no new wells have been sunk since 1982.

Exxon also is challenging Irwin’s authority to disband the unit.

“We believe the DNR Commissioner has no legal basis to terminate the unit and doing so will lead to further court appeals, which will take an indeterminate number of years to resolve and delay PTU development to the detriment of the state of Alaska and the PTU owners,” Ross said in an e-mail.

Point Thomson, located 60 miles east of Prudhoe Bay, is estimated to hold about a quarter of the North Slope’s 35 trillion cubic feet of natural gas reserves and is considered a cornerstone of any future gas pipeline project.

The field also is believed to contain between 580 million and 950 million barrels of oil. There is some dispute whether the field’s oil resources should be produced before tapping its gas, in order to maximize production.

The decision creates “tremendous uncertainty” about whether gas from Point Thomson will be available for a gas pipeline project, Ross said.

The Legislature is in special session considering a pipeline proposal by TransCanada under the Alaska Gasline Inducement Act. ConocoPhillips and BP are pursuing a separate pipeline project outside of the state’s process. Both projects estimate first gas could flow to market as soon as 2018.

A state Superior Court judge is set to review the commissioner’s decision on June 15. A decision is expected this fall.

Exxon could take its fight to keep the unit to the state Supreme Court if it loses at the Superior Court level.

Exxon holds a 36 percent stake in Point Thomson. Other owners include BP with 32 percent, Chevron with 25 percent, ConocoPhillips with 5 percent and about 20 others with about a 2 percent stake combined.

Representatives of BP and Chevron declined to comment on the decision.

Community Discussion

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  1. eat_or_heat
    6/13/2008, 12:57 a.m.
    Suggest removal

    WAAA WAAA WAAA

    For being the big boys Exxon sure does a lot of crying- like a little girl who lost her barbie doll.

  2. eat_or_heat
    6/13/2008, 12:58 a.m.
    Suggest removal

    WAAA WAAA WAAA

    For being the 'big boys' Exxon sure does a lot of crying- like a little girl who lost her little dollie.

  3. SmallBob
    6/13/2008, 1:29 a.m.
    Suggest removal

    F Exxon! Who gives a sweet GD what Exxon says anymore? The sooner we get these guys out of Alaska altogether the sooner we can recover from decades of their occupancy. Hey, have you noticed BP's new Propaganda ads starting up again? We need to have a web site dediacted to running their ads and then post repsones from regular Alaskans on You tube with the link. Then we can all vote and give the winner a free gallon of heating fuel. I see the CEO of Exxon just got a $ 41.5 million dollar raise through 2008-9.

  4. out_in_the_cold
    6/13/2008, 3:05 a.m.
    Suggest removal

    EXXON you had an opportunity to fulfill your obligations for the Point Thomson lease, AND YOU DIDN'T.

    You had ample time make compensation the victims of the EXXON Valdez oil spill disaster, AND YOU DIDN'T.

    And ALASKA is not afraid to meet you in any COURT. Because OUR cause is Just and the merits are based in Truth and Law.

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