Exxon Mobil claims Alaska owes $800 million for Point Thomson pullback
Published Tuesday, May 13, 2008
JUNEAU — Exxon Mobil Corp. wants Alaska to pay $800 million in damages, claiming Monday the state breached a deal when it revoked gas and oil leases on a North Slope oil field.
Separately, Exxon Mobil, based in Irving, Texas, filed a request for reconsideration of a gas field development proposal it submitted but which was rejected by Resources Commissioner Tom Irwin last month.
Both filings were submitted to the Alaska Department of Natural Resources by Exxon Mobil on behalf of itself and its lease partners over the revocation of Point Thomson oil and gas leases. The dispute, however, has broader implications than a battle over a single field.
Development of the field is considered vital to a successful natural gas pipeline project under consideration by the state.
Point Thomson holds nearly one-fourth of the 35 trillion cubic feet of natural gas reserves the state and the industry hope one day to ship in a gas line to Midwestern markets.
Exxon Mobil is the operator with a 36 percent interest in the field; BP PLC has 32 percent; Chevron Corp. has 25 percent; ConocoPhillips has 5 percent; and minority owners hold the rest.
Exxon Mobil officials could not immediately be reached for comment Monday. A spokesman for BP said the state’s actions to hold up the development proposal is counterproductive.
“The proposal called for real production on a real schedule, and it set the stage for the gas line,” said Steve Rinehart, spokesman for BP’s Anchorage-based offices.
“Now, it could delay for years any gas line coming from the North Slope,” he said. “That’s not in anyone’s best interest.”
Exxon initially said its claim for damages, a document that bore only its name but was submitted on behalf of its partners, was submitted as a “precautionary matter.”
About four hours later, the department received the request to reconsider its decision to reject the plan last month, said Kevin Banks, the state’s director for the oil and gas division.
“I wouldn’t call it a threat,” Banks said of receiving first the damages claim, then the reconsideration request.
“What it’s saying is, ‘You can look forward to a response if the decision doesn’t go our way ...,’” Banks said.
ExxonMobil, BP PLC and Chevron purchased leases 31 years ago allowing them to drill at Point Thomson.
However, they have not produced any oil or gas from the tracts.
The lack of activity prompted the state to try to reclaim the leases in late 2006 and give other companies the opportunity to move forward with development at Point Thomson.
But a Superior Court judge in December ordered state officials to weigh other options before stripping the leases. Two months later, Exxon submitted its 23rd development plan.
The proposal involved a $1.2 billion gas recycling and condensate production project to be developed over six years.
The company said it had already secured a drilling rig and planned to begin development this year.
The Department of Natural Resources ruled the plan’s technical aspects represented a reasonable first step toward development, but still lacked a commitment from the companies to ramp up production, so Irwin rejected it.
On Monday, the companies claimed the decision should be revisited and provide “terms, conditions and assurances under which DNR would approve” the plan or “another appropriate remedy.”
Exxon Mobil’s latest claims, along with the state’s responses, will be due in Superior Court by June 15.
Exxon’s filing was first reported Monday by Anchorage television station KTVA.
Community Discussion
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But don't the ads in the paper and on TV say the oil companies are our friends?
I am SHOCKED!
Would these be the same leases that the oil companies have had for 30 years without any development?
Didn't Exxon take years to decide on Valdez settlement? So, now Alaska should jump because Exxon and partners are now ready? To benefit who?
exxon doesn't want to develop the gas. they have competing interests overseas. They don't want anyone developing that gas.
You only need to look to the state "leaders" for the problem.
There is no free lunch folks and until DNR and all the other idiots in Juneau wise up you can forget about getting the gas. We have become a bunch of greedy people and want it all. It will backfire and you can take that to the banks as a fact!
Juneau needs to get off it's rear and become an asset instead of a road block to just about everything.
Keep in mind that the oil companies owe you exactly nothing. They owe their best effort to make a profit for all of the little people like me who have 401K's and mutual funds.
hstkmtn .... you got it right and without the oil companies you would be sucking wind big time.
James I tend to disagree, if those oil companies would not have realized the potential to make money out of the point thompson area, they would have only been replaced by another oil company that did. The states oil is a raw natural resource that can be developed by any company that is willing to invest the time and money to do it, not just BP, conoco or chevron. It is time to start holding them to the fire and see what they forge, out of potential and performance I chose performance.
JB that is hind sight. Certainly they realized the potential to make money and that is their primary responsibility to the share holder. Do you go to work for free .. of course not and neither do they. In fact their profit margin is horribly low compared to even the local gas station.
Can you even imaging another oil company trying a start up effort. I am not even sure that is possible today. Beating a horse that is almost dead won't make it go faster or further. It will at some point just stop however.
Are you are suggesting we have ours so let's stick it to them and the share holders who made it possible so we can have more ... right? Is that what you really think? This is the Juneau mentality and the road block.
30 years was more than enough time to develop the resource. Too little, too late.
this is what it sounds like when the BIG boys cry.
Well, it sounds to me like they are the ones who need a class action siut against them, after 23 proposals and all the time they have wasted there in the energy crisis we as a whole are all in. I believe that they have lost alot of time and the judge should have thought those things through after all, it all about the bottem line. They have had their chance or should I say chances let someone else do it who is commited to getting results and not just paper work done.
After the way Exxon screwed over the thousands of residents in Alaska over the Valdez oil spill and it took them over 10 years to make a decision to pay for there damages caused not only to the wildlife and water, but to all the residents that made there living from those waters. And now they expect Alaska to jump over something they had 30 years to do...please get over your self Exxon. You've caused Alaska more money and damages then 800 million dollars. It's you who should be paying Alaska. As Fairbanksgas said; "To little, to late!"
Did anyone ever doubt that this would end up in court. Just hope it doesn't take another 20 years, Exxon has a way of dragging it out.
30 years, jeez. That seems to be the competitive nature of the oil industry. Find a good area to fall back on for development later, or just buy all the rights to keep everyone else from drilling on it. Meanwhile, Exxon can pillage the oil from foreign prospects, while not having to worry about big potential reserves getting tapped into by competitors. True that the oil companies have their obligation to make their shareholders money, otherwise they wouldn't have to lay claim to as much as they can and sit on it so they can pursue development in other countries.
has Exxon fell on hard times?
Whaaaaaaaaaaaaaaaaaaaaaa!!!!!!!!
Don't just drill us! Drill us some oil!
Well, not too many tears are being shed by bloggers here about the plight of poor, pitiful, Exxon. I am glad people understand what a bunch of lying dirtbags Exxon is.
Exxon got exactly what they deserved. Tom Irwin and Sarah Palin have made me proud of their resolute firmness- and standing up for Alaska in this matter.
Given that the multinational corporations have corrupted our system of government by bribing numerous policy makers, cheated us on the TAPS tariffs, permanently polluted Prince William Sound, have refused to honor their lease obligations, allowed their pipeline infrastructure to corrode to the point of failure... well...
They are lucky that we don't kick all their greedy, lying asses out of Alaska.
You want to do business here? Then behave in an honorable way. Keep your word. Follow the law.
Otherwise, you do not have the privilege to make money here.
PAY THE MONEY AND RUN !!!
... The Berger Gas lease just went for $2.1 Billion, & it is Offshore = high cost-to-develop. True, it is slightly larger, but I'd estimate $3-8 Billion, for Thomson. More -- if they realize they can ship it by ICEBREAKING TANKER.
... PS: all Exxon asks is the $800 million they paid for it & the wells they drilled. And that is DUMB ! But if they want to be STUPID -- at present value, Thomson has:
$104 Billion Gas,
$33 B in NGLs (Propane, etc), &
$6 Billion in Oil.
...
Of course no one will pay anything for it if you cannot promise not to have a 99.9% tax rate ... Alaska Oil & gas could end up flowing __ONLY__ from Offshore leases.
And that could mean ZERO money for Alaskans.
... It's that State-Constitution "We Don't Keep Contracts" article. Excuse me (I'm not an Alaskan), but can't you be satisfied with over 50% of ... HUNDREDS OF BILLIONS ... instead of __ALL__ of ... NOTHING ??
... PS: let me Applaud the "Deduct it from the Exxon-Valdez award" idea. Of course, it will be hard to say "THE DEAL IS MADE" ... because Alaska can't sign a binding Contract ... right ?
Or does that article mean: it's only not binding for __You__ ?
Pay Alaska the $5 billion plus you owe from the Valdez spill THEN maybe we will think about the possibility of entertaining a suggestion to perhaps come up with a meaningful reply to maybe develop a reasonable, well-thought out, and carefully considered look at what is the best way to not laugh at Exxon's request for compensation for sitting on our gas on the North Slope. They owe us up a $1 billion dollars for using our land to warehouse the gas. Pay up already!
The State of Alaska should file a counter claim and require EXXON Mobil and any other plaintiffs of EXXON'S action to post a BOND in excess of the total value of the Point Thomson undeveloped oil and gas reserves of approximately 7 Trillion cubic feet of gas and all other hydrocarbons in the Point Thomson site, in addition to the all other associated charges of eviction, legal expenses and any other related cost to the State of Alaska for this matter.
Step two: The Alaska Legislature should review the 25% oil tax enacted last year and see if an upward adjustment would be warranted, and remove any language that would allow any rebate of development costs of oil and gas production.
Step three: The Alaska Legislature should enact legislation that would allow local communities and boroughs the unlimited right of taxation on TransAlaskaPipeLine of which EXXON is an owner, and would be within the jurisdiction of said communities and boroughs.
Step four: The State of Alaska should review all other lease holding of EXXON MOBIL and other plaintiffs within the State of Alaska to determine if:
a.) Lease holding agreements have been met.
b.) Non-performance and/or non-development of the lease holdings have lead to higher cost to Alaskans and the State of Alaska.
Step five: The State of Alaska should join with other States, and the federal government in action or actions that investigate price fixing and price gouging that may be occurring with non-production of known but undeveloped oil and gas reserves and refining capabilities.
Why don't we eliminate this nonsense. Let's let the Government comletely run the oil business and not just regulate it. Just like they run social security, DMV, USPS, medicare, medicaid, local, state and federal education programs, IRS, congress, TSA, and the welfare system.
$800 million in damages in revoking leases in Point Thompson?? You've done nothing for 31 years and you never had intentions of developing it until Governor Palin and Tom Irwin brought up taking back the leases.
It's been 18 years since the Prince William oil spill in which hundreds of fisherman went bankrupt when the oil destroyed their fishing and 14 years since they were awarded $5.2 Billion in punitive damages. You've since appealed and gotten the damages down to $2.5 Billion and still refuse to pay while posting almost $10 billion dollar quarterly profits. Congratulations to Gov. Palin and Tom Irwin who have the guts to stand up to the oil companies! If any of you believe the full page ads in newspapers that they are doing so much for our communities, think again, they have been taking us to the cleaners and lining their own pockets.
In recent news regarding Alaska royalty rights from all the oil companies, they replied, "The State's royalty rights are established by the lease contracts, and do not provide for any right for the State to "overlift" royalty oil or gas....That royalty interest is not payable-whether in kind or in value-until the oil or gas is produced and saved and sold or used off lease." Yes, take back the leases and when new leases are sold, make sure their are provisions where Alaska benefits from the resources which THEY own.
Hey Exxon, Did ya not hear the Gov tell ya to not let the door hit ya in the ass on the way out? How bout we smack a $3 billion/yr reserves tax on yo ass? How you like me now Exxon? How you like me now? Take your $800 million claim and stuff it.
It is interesting if you look at oil and gas leases. They want to drill ANWR but they sit on huge tracts of lease holds that are undeveloped. This is how the big boys play, tie up all the gas and oil and only develop it when the market screams and the government gives it to them it on a platter. I say good on you Governor, its time for development. Stranded gas and oil legislation should be on the books. 30 years? I think we should charge interest.
I still think Alaska should refuse to do any more business with Exxon.
Watch out State of Alaska..Exxon-Mobile has more money than you will ever have, thanks to their wholesale thievery perpetuated upon the American people with no regard to the hardships it is causing. Look at how they laughed at the Congressional Committee who questioned them. The Oil Companies own America now..get used to it.
This not my problems
Jay T -- someone on adn.com suggested EXXON might FREEZE Alaska's assets -- just like THEY have done to Venezuela's.
... I guess they own the International Courts too.
More importantly, they ACTUALLY have the b---s to do it.
Someone clue Kevin in that he should be looking for a new Buyer for the Lease. If you do not Panic, you'll Make money.
OMG you people are lost....30 years of non-develpoment? Gas has been used all along to get more oil out!
Just shut up and listen...
Exxon introduced and substantiated the latest plan for developing the oil-and gas-rich tracts.
"The plan of development (PoD) we're proposing today is a firm commitment to drill a minimum of five wells and bring Point Thomson on production by 2014," Haymes said.Unique to this proposal, as opposed to past ones, is that Exxon is committing to a firm timeline.
"When you look at the schedule and the plan of development there are clear milestones every year, almost every quarter, that you can use to monitor performance," Haymes said.
Exxon has proposed and submitted 22 field plans to develop Port Thopmson. The plan will ensure “the development and delineation of all resources” (gas, oil and gas liquids) in the unit. Different steps are needed for each of the resources named. This is all proper procedure for a totally non developed field. Each plan submitted provided reasonable action to be taken by Exxon that provide clear milestones every year. Those were established by the state, that can be use to monitor performance. The first plan consisted of seismic testing, the other 21 plans were different steps to be taken so gas can be drilled and produced as a gas pipeline became a priority. However, there is NO pipeline yet, this is because of the state of Alaska playing a game it cannot win! Besides the fact, why is the state playing aggressivly and being so short sighted about our future? Where would the gas have gone Alaska if naughty Exxon had drilled 3 decades ago before the proper feild work had been done? Nowhere Man! We have lost nothing! Natural gas doesn't go bad, its like money in the bank.....Each plan submitted within these 30 years has got approval from this state. The new development plan calls for $1.3 billion in spending to start producing 10,000 barrels a day by 2014. This plan of development lays out a clear timeline to production. The only way we can produce is if the Producers drill wells and build a gas pipeline.
BTW ...maximizing benefit to the people of Alaska is NOT what the government of the state of Alaska gets out of the deal! It is what the people and their posterity recieve in fiscal stability and that means JOBS and a sustainable life style..
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