Wells justify keeping Point Thomson, oil companies say

Posted: Tuesday, May 15, 2007

ANCHORAGE - Major oil companies hope seven old wells drilled on the Point Thomson oil and gas field will allow them to keep leases the state is trying to take back because of a lack of development.

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Lawyers for Exxon Mobil, BP, Chevron and Conoco Phillips in court filings say state officials incorrectly dismissed the significance of the seven wells and took an unlawful shortcut to cancel the leases.

State Superior Court Judge Sharon Gleason of Anchorage, in a 10-page ruling May 1 on a procedural issue in the complex case, wrote that the oil companies "have made a clear showing of probable success" on challenges they've raised. Among those challenges is that the state Department of Natural Resources, which oversees the oil and gas industry, committed an "apparent violation of its own procedural regulations."

Ken Boyd, a former state oil and gas director now working as an industry consultant, said state officials took "unprecedented" and improper action in downgrading the status of the wells, which were drilled beginning in the 1970s to discover and assess the field's oil and gas.

Point Thomson is worth billions. State officials for years have been frustrated that the oil companies have not developed the field, which could mean significant taxes and royalty.

Former Gov. Frank Murkowski in November announced the state would take back the state land and lease it to companies more eager to develop. Gov. Sarah Palin, who took office in December, has backed Murkowski's move.

Exxon and the other oil companies contend Point Thomson is a remote and technically difficult field that's not economic to develop, particularly because the North Slope lacks a natural gas pipeline.

After the Murkowski decision to take away the leases, the oil companies sued the state.

Point Thomson covers 106,000 coastal acres near the Arctic National Wildlife Refuge. Exxon holds the biggest share, 53 percent, followed by BP with 29 percent, Chevron with 14 percent and Conoco and several others with a combined 4 percent.

The field is significant for the natural gas pipeline project that Alaska officials hope to see built.

Along with Prudhoe Bay 60 miles to the west, Point Thomson is one of two North Slope oil fields that together holds 35 trillion cubic feet of natural gas. Point Thomson accounts for about a quarter of the total, plus an estimated 300 million barrels of oil.

State officials years ago certified the seven wells within the field "capable of producing oil or gas in paying quantities." Certified wells confirm a potentially large discovery and strengthen and extend a company's lease under state law.

Attorneys for oil companies argue that state officials, when they moved to reclaim Point Thomson, went too far in declaring that the seven wells were no longer to be considered certified as capable of producing. They say that denied the companies a fair chance in court to argue for keeping the leases.

Lawyers for the state say the wells were plugged and abandoned long ago and cannot be considered as capable of producing oil and gas.

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