State may use subpoena in fight over gas

Point Thomson becomes battleground on numerous fronts

Posted: Thursday, May 03, 2007

Alaska state oil regulators say they want to work cooperatively with Exxon Mobil Corp. to determine how much natural gas can be taken from the disputed Point Thomson field on the North Slope.

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But the chairman of the Alaska Oil and Gas Conservation Commission has made it clear the state has subpoena power to get the data it needs, should the company decline to supply it.

The state would prefer not to subpoena the information, however.

"We do have subpoena power, and then that raises all sorts of legal issues and that translates into time," said John Norman, chairman of the commission.

The commission is responsible for making sure the state's petroleum resources are not wasted. If too much natural gas is taken from a field too soon, it can limit the ability to extract oil that is there as well.

Oil companies hoping to open a field must apply to the commission for an "offtake" permit, which the commission issues after conducting technical analyses.

Point Thomson's gas is thought to be critically important to making a natural gas pipeline viable, but offtake rates have not been studied.

Exxon Mobil manages what's known as the Point Thomson Unit, a collection of leases in a field owned by Exxon Mobil, BP and ConocoPhillips.

After decades of failing to fulfill what the state said were obligations to develop Point Thomson, the state last year began canceling the leases, prompting multiple legal and administrative appeals from the companies involved.

Norman told senators at a Capitol hearing that the commission preferred to work cooperatively with Exxon Mobil. The company earlier agreed to help the commission with the study, but then said it wouldn't.

The commission has sent Exxon Mobil a written request for clarification, Norman said.

"Lets give Exxon a little time to make a formal decision," he said.

"We've put it in writing, asked them formally to make a decision and say 'No, we're off,' or let the work begin," he said.

Exxon Mobil spokeswoman Susan Reeves did not respond to multiple requests for comment about Point Thomson.

In response to a question from Sen. Kim Elton, D-Juneau, during a Senate Finance Committee hearing, Norman estimated that the commission had spent $200,000 dollars or so hiring consultants and getting ready for the study.

It has not considered making a claim against Exxon for that expense, he said.

Fellow Commissioner Cathy Foerster recommended that the state continue working cooperatively with Exxon as long as it can.

"Before we damage our relationship with Exxon, we need to get them to come to a decision," she said.

The commission is doing a similar offtake study at Prudhoe Bay, where Exxon has an interest, but where field operator BP agreed to work with the state.

"The commission had two pathways we could have gone," Norman said.

One of them was to begin the study and subpoena the information; the other was to seek voluntary cooperation.

Norman said the Prudhoe Bay operator chose to work cooperatively on the study.

On Monday the state won a legal victory in the Point Thomson legal case. An Anchorage judge refused Exxon's request to delay the legal fight over the leases.

"This decision represents forward progress in our efforts to put these leases in the hands of a company that will responsibly develop them and bring the significant gas reserves in the Point Thomson area to market," said Gov. Sarah Palin in a statement issued after the hearing.

The judge ordered the producers to pay the $20 million penalty they promised the state if they did not develop the leases, or to post a bond with the court for $25 million.

There are thought to be at least 8 trillion cubic feet of gas at Point Thomson, part of the 35 trillion cubic feet of known reserves on the North Slope.

• Pat Forgey can be reached at patrick.forgey@juneauempire.com.



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