Our view: Point Thomson -
A good end to the standoff
adn.com
Published: January 28th, 2009 08:43 PM
Last Modified: January 28th, 2009 11:36 PM
In the long-running fight with Exxon over the long-dormant Point Thomson oil and gas field, the state's hard line has finally paid off. The state's threat to take back the leases finally prodded Exxon into beginning development of the huge field after sitting on it for 25 years.
With that new commitment in hand, natural resources commissioner Tom Irwin decided Tuesday that Exxon can keep two of the disputed 31 Point Thomson leases. That decision lets Exxon move ahead with its drilling work this winter. If Exxon abandons its drilling work, or fails to bring the field into production, the leases will automatically revert to the state.
Exxon took a huge gamble by lining up a drilling rig for Point Thomson this winter, and barging equipment to the area, even though it no longer held clear title to any leases there.
That gutsy move resulted in an epic showdown, which the state's decision Tuesday brings to a constructive end. By having a drilling rig poised to go into Point Thomson, Exxon generated some public pressure for the state to give in.
But the state came up with a compromise that saved face on both sides. Exxon gets to keep two leases and a chance to show that it is serious about its promise to do $1.3 billion in development work. The state keeps open the question of who owns the other 29 Point Thomson leases, so Exxon has plenty of incentive to start fulfilling its promises.
That's because Exxon's drilling work gives the company and its partners a chance to hang on to the other 29 leases. The state has moved to repossess them but is holding off a decision for now. To keep the leases, some of which are 40 years old, the companies have to show that they are part of a larger oil and gas field that Exxon has begun developing. That issue is a central question in a pending lawsuit, where the state is trying to negotiate an out-of-court settlement that will keep development moving along.
All along the state's overriding goal has been to get Point Thomson into production as quickly as possible. Point Thomson is far and away the state's largest undeveloped oil and gas field. If a North Slope gas line is going to happen, it will need Point Thomson gas at some point. But the field is a complicated, high-pressure reservoir that takes special expertise to develop.
In theory the state could continue to take a hard line to the bitter end, repossess all Point Thomson leases, and bid out the field to all new buyers. That might net billions more in new state revenue, but it would take years of litigation to produce clear title for new owners.
The faster track is to get Exxon and its partners to do what they should have done years ago -- bring Point Thomson into production. The state's decision Tuesday brings that happy day one step closer to reality.
BOTTOM LINE: The state's hard-line stance on Point Thomson appears to have paid off. |
