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Alaska Cancels Point Thomson Leases

Alaska Department of Natural Resources (DNR) Commissioner Tom Irwin has canceled almost all of the disputed leases for the Point Thomson oil and gas field in a decision issued last Monday. "This is the final decision" on the consolidated appeal from the decisions of the DNR director of oil and gas terminating the Point Thomson Unit (PTU), the agency said.

Previously, DNR Director of Oil and Gas Kevin Banks terminated expansion leases after they contracted from the unit in December 2006 for failure to meet a drilling commitment set forth in the 2001 Expansion Agreement. ExxonMobil, BP Exploration Alaska and Chevron U.S.A. filed consolidated appeals of Banks' termination decisions. Their primary argument was that DNR erred in refusing to modify the 2001 Expansion Agreement, according to DNR. The companies later abandoned this argument, DNR said.

All but one of the 44 leases was canceled because their primary terms have expired.

For its part, ExxonMobil said it's preparing to begin a drilling program on Point Thomson this winter. However, according to Banks, the acreage is off limits to the producer. ExxonMobil claims that the natural gas at Point Thomson is essential to fill a natural gas pipeline to Canadian and Lower 48 markets that the state is hoping to develop (see related story).

"Point Thomson gas is essential for a successful gas pipeline project," ExxonMobil said in a statement provided to NGI. "The current owners are the only producers that could commit PTU gas to either the TransCanada or Denali pipeline on their proposed schedules.

"There are 27 owners at Point Thomson who are fully committed to bringing the Point Thomson Unit into production. We are preparing to commence the multi-well Point Thomson drilling program this winter, which will move Point Thomson forward to production and allow the owners to prepare to develop the gas for a gas pipeline project."

Asked by a local television news reporter if he thought the companies would try to drill on the unit, Banks said, "I don't think that will happen." He said the producers knew cancellation of the leases was coming and the action is "one step in a process" to getting development going on Point Thomson. Banks said he "fully expects" the companies to appeal the decision.

In April Irwin rejected the 23rd Plan of Development and Operations (POD 23) for the oil and gas field and terminated the PTU (see NGI, April 28). This followed the March announcement by ExxonMobil, the operator of PTU, of a proposal that committed the PTU producers to developing the field, which was discovered 30 years ago (see NGI, March 31). If accepted, the producers' proposal would have resolved the litigation over Point Thomson and held the companies to the unit's POD 23 dated Feb. 19 (see NGI, Feb. 25).

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