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ExxonMobil Wins Right to Drill Two Wells in Point Thomson

The Alaska Natural Resources Commission reversed course last week and granted ExxonMobil Corp. and its partners permission to begin drilling operations on two of the 31 contested leases in the Point Thomson Unit (PTU) of the North Slope.

ExxonMobil, BP Exploration (Alaska) Inc., Chevron USA Inc. and ConocoPhillips Alaska Inc. last year were locked out of developing the 106,201-acre field because state regulators ruled that the PTU leases had expired. Predecessor companies that held the PTU leases had failed to obtain approved drilling plans for the PTU in more than 30 years.

The Alaska Department of Natural Resources (DNR) terminated the leases, and DNR's decision was upheld by the Natural Resources Commission last August (see NGI, Aug. 11, 2008). At that time Commissioner Tom Irwin called it a "final decision."

However, the producers continued to argue for their rights to develop the PTU. They unveiled a drilling plan that set a goal to ramp up production by 2014. The commission's surprising conditional interim decision followed an evidentiary hearing between the state and the producers that was held Jan. 12-16, DNR noted. The hearing was continued to Feb. 12.

"I am issuing this conditional interim decision because, in part, Appellants offered testimony that their development plans to drill a well during this winter season could still go forward if DNR provided them with an ice road permit before the end of this month and authorized drilling activities on the leases, " Irwin said Tuesday. "For this reason, I have decided to issue this decision."

Irwin noted that the producers had testified that they were "unconditionally committed" to ramping up drilling this winter with plans to complete two wells, both penetrating the Thomson Sands reservoir, by 2010. To support their commitment, the producers testified that they would mobilize equipment and materials, retain subcontractors, modify a drill rig to make it suitable for the high-pressure sands and obtain all necessary permits.

Based on the testimony, Irwin directed DNR staff to issue the ice road permit "as soon as possible" and to process all necessary permits. DNR said it plans to approve a permit to construct a 50-mile ice road to a remote field on the Arctic Ocean shoreline east of Prudhoe Bay. The road permit previously had been denied.

The producers still have to make their case to explore and develop the 29 other contested leases.

Irwin said, "I am not...ruling on whether any of the remaining 29 leases are engaged in drilling operations, or are extended by another lease provision, because the record is incomplete and there are many outstanding questions" the producers have to address.

ExxonMobil's Bill Brackin said the decision "clears the way for construction of nearly 50 miles of ice roads needed to transport the drilling rig and associated equipment, materials, camps and personnel to the Point Thomson site. This is good news for Alaska and especially for the 50 Alaskan companies and more than 200 people working at Point Thomson today. We are committed and ready to move forward with the Point Thomson Project."

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