An Alaska Superior Court judge at the end of December ruled that the state’s Department of Natural Resources (DNR) was in the right when it rejected the 22nd plan of development for the state’s Point Thomson oil and gas field.

Judge Sharon Gleason directed DNR to hold an additional hearing to provide leaseholder appellants with the opportunity to argue what the appropriate remedy should be when the working interest owners in the play have failed to fulfill their obligation to develop it.

The Point Thomson leaseholders are ExxonMobil, BP, Chevron and ConocoPhillips. The Point Thomson field holds a significant portion of the natural gas that would be transported on proposed gasline/liquefied natural gas (LNG) projects to move gas to the Lower 48 (see NGI, Dec. 10, 2007). The companies have argued the leases cannot be economically developed at this time.

The state’s threat of nullifying the leases has proceeded alongside its pressure on the producers to underwrite a massive pipeline to the south. And litigation over the Point Thomson leases has been blamed for driving MidAmerican Energy away from filing a gasline proposal under the Alaska Gasline Inducement Act (see NGI, Dec. 10, 2007).

Previously, the leaseholders had sought a stay that would have allowed them to retain leases while they fought the state’s earlier decision to take the leases back after the companies failed for years to develop the North Slope field. Their motion for a stay was denied in the spring (see NGI, May 7, 2007). ExxonMobil had asked the court in December 2006 to overturn the state’s decision to revoke the company’s leases.

“This [Dec. 27th] ruling represents another significant step forward in the state’s efforts to develop the valuable oil and gas resources in the Point Thomson reservoir and to hold the lessees to the commitments they made in the unit agreements,” said Gov. Sarah Palin. “We are pleased that the court has affirmed the departments efforts to ensure that the oil and gas in this reservoir is responsibly produced.”

At the remand hearing, DNR will consider arguments about whether termination of the Point Thomson leases is an appropriate remedy or if the state should take another action.

Point Thomson is the North Slope’s second largest natural gas field after Prudhoe Bay. The Point Thomson Unit covers 45 leases on 106,000 acres of state land just west of the Arctic National Wildlife Refuge. It holds an estimated 300 million bbl of oil and natural gas condensates, and 8-9 Tcf of natural gas, more than a quarter of the known gas in all North Slope fields.

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