Exxon Mobil turns to court to keep Alaska leases
Thu Dec 28, 2006 10:42pm ET
yahoo.reuters.com
By Yereth Rosen
ANCHORAGE, Alaska, Dec 28 (Reuters) - Exxon Mobil Corp. (XOM.N: Quote, Profile , Research) has filed a legal appeal challenging the state's decision to start revoking leases for a long-dormant natural gas field on the North Slope that it says may hinder plans for a pipeline.
The appeal, filed last week to the Alaska Superior Court in Anchorage, charges the Alaska Department of Natural Resources with making unreasonable demands on Exxon Mobil and its partners to develop the technically challenging Point Thomson field, just west of the Arctic National Wildlife Refuge.
The appeal seeks to have the court ensure that the companies keep their leases at Point Thomson, even though field development is not imminent and the last well was drilled 23 years ago.
Should the companies lose the leases, the appeal says, the state will be obligated to repay the "substantial sums" spent in the past on acquiring, drilling and developing the field, plus potential lost profits.
Point Thomson, discovered in 1977, holds 8 trillion to 9 trillion cubic feet of natural gas, as well as about 300 million barrels of liquids in the form of natural gas condensates and oil, the Alaska Department of Natural Resources said.
The 116,607-acre (47,190-hectare) unit that was formed to consolidate Point Thomson-area holdings includes leases that date back to the 1960s.
Exxon Mobil is the unit operator. BP Plc (BP.L: Quote, Profile , Research), Chevron Corp. (CVX.N: Quote, Profile , Research) and ConocoPhillips (COP.N: Quote, Profile , Research) hold minority shares. Development has been stymied in part because of high-pressure conditions in the reservoir, said the companies.
Exxon Mobil says the state acted unfairly when it terminated the unit agreement a month ago, according to its legal appeal and an administrative appeal filed to the state earlier this month.
"Exxon Mobil, on behalf of the PTU owners, has complied with the Point Thomson lease agreements, the Point Thomson Unit Agreement and all Alaska statutes and regulations. Litigation related to the termination of the Point Thomson Unit is likely to be protracted," company spokeswoman Susan Reeves said in an email sent on Thursday.
REPEATED EXTENSIONS
Normally, oil and gas leases in Alaska expire after five to 10 years if there has been no commercial development on them. The leases in the Point Thomson unit received repeated extensions, based on leaseholder statements that development of the liquids was underway.
But lack of progress at the unit, where no well has been drilled since 1983, prompted state officials to declare the unit voided and the leases in default. That formal decision was issued on Nov. 27 by Mike Menge, then the state's natural resources commissioner.
Menge's successor, acting Natural Resources Commissioner Marty Rutherford, upheld the revocation decision on Wednesday, rejecting an administrative appeal filed by the companies.
"The facts clearly uphold Mike Menge's decision to terminate the Point Thomson Unit agreement," Rutherford said in a news release. "I agree that Exxon Mobil has not met its obligations, and I must deny them the relief they sought in their reconsideration request."
Reeves said the state's decision to terminate the Point Thomson unit and its leases is a blow to ambitions to develop the abundant North Slope natural gas reserves.
"This is a major setback for an Alaska gas pipeline project since gas supply from Point Thomson is critical for the project," she said in her email.
Dan Saddler, a spokesman for the Alaska Department of Natural Resources, said state officials were reviewing Exxon Mobil's appeal. He said he could not yet comment on the company's legal arguments.
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