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Exxon receives gas field extension

Company has month to appeal lease dispute at Point Thomson

Posted: Wednesday, March 28, 2007

Exxon Mobil Corp. has an extra month to complete its appeal of potential lease termination in the North Slope's Point Thomson oil and gas field, the Department of Natural Resources said Tuesday.

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Point Thomson is the North Slope's second largest natural gas field, after Prudhoe Bay, and lawmakers have called it vital to the success of a prospective gas pipeline.

The field is estimated to hold about nine trillion cubic feet of gas reserves, more than a quarter of the known gas in all North Slope fields.

"You can't do the pipeline without Point Thomson," said Rep. Ralph Samuels, R-Anchorage, who serves on the House Oil and Gas Committee. "It has to be resolved either through the court system or make a deal.

"So if the extension is a sign that they are still trying to work something out and get the development done, then that's a good sign. I'm assuming it is or they probably wouldn't have done it."

Because of pending litigation Department of Natural Resources Commissioner Tom Irwin said he could not comment. Exxon Mobil officials could not immediately be reached for comment.

The dispute is about 18 months old. Alaska officials ruled in 2005 that Exxon Mobil was in default for delaying Point Thomson development by submitting a plan without any sure date for production to begin.

The state threatened to revoke the leases but stayed that decision while negotiating a contract with Exxon and two other oil companies for a $25 billion natural gas pipeline that would take gas from the North Slope to Midwestern markets.

The negotiated contract fell through last year, leaving Exxon Mobil with an October deadline to update its development plan.

The plan the company submitted was rejected in November and the state - under then Gov. Frank Murkowski - revoked the leases. In that plan, Exxon Mobil proposed paying the state $20 million and giving up 20,000 acres to settle its unmet obligations to develop the gas field. The plan included a promise to drill one well in 2009 to better map the extent of the field.

In December, the resources department under new Gov. Sarah Palin reviewed the case and upheld the decision from Murkowski's administration the prior month.

This set off numerous court filings from the oil and gas companies and the state, including the companies requesting a Superior Court to overturn the state's decision.

The extension announced Tuesday comes as lawmakers are reviewing Palin's Alaska Gasline Inducement Act, which her administration hopes will provide the vehicle to ship trillions of cubic feet of natural gas to market.

Exxon Mobil, an Irving, Texas, company is among nearly a dozen companies interested in the project. The company is Point Thomson's field operator for 45 gas and oil leases shared largely by BP, ConocoPhillips and Chevron Corp.

Exxon Mobil now has until April 26 to complete paperwork for the appeal and provide the state its arguments for retaining the leases.

Once that has been submitted, Irwin can take as long as he needs to review the company's materials, said agency spokesman Dan Saddler.

Granting the extension could illustrate the state's effort to resolve the issues outside the courts, said Sen. Gene Therriault, R-North Pole, who serves on the Senate Judiciary Committee.

"It doesn't help your case if you say no to Exxon for the extension, then they say in court, 'Your honor, we made a reasonable request and we were denied,"' Therriault said.

Still, Therriault said he prefers a quick resolution.

"I'm hopeful ultimately the state can get to a negotiated settlement," he said. "Absent that, we should be taking any steps allowed under the terms of the lease to put the leases into production or force the return of the leases so someone else can."



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