Posted on 01/13/2010 5:07:49 AM PST by thackney
In a state-versus-oil company battle with major implications for the development of Alaska's untapped North Slope gas, a state judge this week issued a ruling in favor of oil companies.
State Superior Court Judge Sharon Gleason said the state violated Exxon Mobil and its partners' constitutional right to due process last year when it terminated their Point Thomson unit -- potentially the second-most lucrative collection of gas leases on the Slope.
The oil and gas field sat undeveloped for decades though the state and Exxon had signed an agreement creating the Point Thomson unit in 1977. The goal of creating the unit was to make it more efficient to produce oil and gas from leases held by multiple companies.
The state began tussling with Exxon over the lack of drilling at Point Thomson during Gov. Frank Murkowski's administration, and the next two governors have carried the dispute forward.
The Alaska Department of Natural Resources rejected a couple of Exxon's development plans for Point Thomson, saying the company's commitments were too weak. When he terminated the unit last year, DNR Commissioner Tom Irwin said he couldn't trust Exxon to carry out its latest plan.
But Exxon protested, saying the time was now ripe to develop Point Thomson. Since then, the state has allowed Exxon to drill on two of the unit's 31 leases.
Exxon began the work last winter and says it hopes to start producing liquid gas condensate, to be fed into the trans-Alaska pipeline, by the end of 2014.
(Excerpt) Read more at adn.com ...
Was the Judge’s rationale based on procedural issues? If so then she did not really make what I might call a moral statement. She just said all of you go back and fill out your paperwork correctly then come back when your ducks are in order. Regardless I think it’s obvious that the oil companies have violated the spirit if not the written word of their lease/contract with the people of Alaska.
If a lease is signed, there should be some expectation that the reserve will be developed.
There is also an expectation that the State should not reject more than two dozen development plans while complaining that this high pressure natural gas field is not being developed.
For decades, the State referred to this field as a Natural Gas field. When they decided to take the field back (after the gas pipeline looked probable) they started referring to the Natural Gas liquids (condensate) as oil to gain public support.
The reality is that as the Gas Pipeline became likely, this field suddenly became more valuable.
From what I’ve read, Exxon chose not to develop the lease because bringing more gas on line would deflate the value of their existing production. It’s more or less what is happening today.
The field can not be brought into full production without the Gas Pipeline.
The field is not large enough to pay the cost of the Gas Pipeline without significant other Gas Fields in production.
The production they are trying to proceed on requires producing mostly gas, separating out the liquids by lowering the pressure, massive compression to re-inject the gas into the +10,000 psi reservoir, then add the 70~85 degree API gravity liquid into the pipeline oil.
This method is expensive and wastes a lot of the Natural Gas re-injecting the remaining gas to be produced again later.
It throws away future gas production to produce a little butane and propane today. It is a wasteful process for political gain today.
Either Exxon or the state of Alaska had the cart before the horse...
The gas pipeline should have started two decades ago.
The judge ruled based on the facts of the case.
A DNR employee was the hearing officer for example. As much as folks love to bash oil companies, they are the source of the money that keeps Alaska afloat.
Pt THompson was isolated and really had no product to sell, the gas may have had value to reinject in the oil filed to free more product. Still would have required a pipeline, well heads and other expense.
It ain’t Dallas up here. Weather and distance are factors most folks in the L48 just cannot appriciate.
I’ll buy that. Still have a feeling it’s not over though.
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