Nuclear option _______________________________________________________________
alaskanabroad.typepad.com
Resources Commissioner Mike Menge pushed the big red nuclear button this afternoon on Point Thomson, declaring Exxon Mobil and the other leaseholders in default. The decision will surely result in a legal battle that could tie the field up in court for three years. But as Menge said, the unit has been held in limbo by Exxon for nearly 30 years, so what's another three.
A year ago, the Alaska Department of Natural Resources found Exxon in default of its leases for failing to meet the requirements of a 2001 development agreement with the state.
Gov. Murkowski, who approved several extensions on the leases, said he fully supported the commissioner's decision to revoke the leases. Murkowski said he called the head of Exxon in Alaska and governor-elect Sarah Palin to notify them of the decision.
"Basically, Exxon did not choose to meet a development scenerio that the state felt was mandated after so many extensions," Murkowski said.
The decision means Exxon, BP, Chevron and ConocoPhillips must turn over their leases to the state, which can then offer the acreage in a new lease sale as early as October.
The issue of litigation did come up in his conversation with Exxon, Murkowski said. The oil giant is expected to ask a state superior court judge to issue an order barring the state from holding a new lease sale until after it appeals the decision.
Exxon has 30 days to appeal.
"Obviously they weren’t pleased with the decision, but they got the message that the state wasn’t going to extend the leases," Murkowski said.
Murkowski clearly sounded like he expected Exxon to try to reach a settlement with the state instead of letting the leases go to another company, such as Shell or Chevron.
"It gives us an opportunity to move into participation with some of the other potential players," he said. "And you never know, you might get bids from Exxon."
Menge had repeatedly put off making a decision on the unit while negotiations on a potential $25 billion natural gas pipeline were ongoing. His decision signaled that "this contract as currently drafted is not going to proceed," he said.
Jim Clark, Murkowski's chief of staff, said pulling the leases gave the state leverage in negotiating with the companies.
"We expect this to speed up development, despite the litigation, not delay it, because the leverage is back in the state’s hands," he said.
The Point Thomson unit includes 45 leases containing 106,200 acres. The until holds reserves of 9 trillion cubic feet of natural gas and 300 million barrels of oil and natural gas condensates.
Ownership of the unit breaks down this way: Exxon 52 percent, BP 29 percent, Chevron 14 percent, ConocoPhillips 3 percent, and another 1 percent divided among 18 other companies.
Exxon has long argued that the field was uneconomical to develop without a pipeline to carry the natural gas to market. State officials, however, have maintained that the field should be developed as a liquid field for at least five years before tapping its natural gas to avoid waste.
Exxon had offered to pay a $20 million fine and surrender 20,000 acres around the fringes of the unit to settle the dispute.
Exxon still holds a significant portion of the Prudhoe Bay oil and gas field, and therefore would still be interested in negotiating a deal for a gas pipeline. |
