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ExxonMobil Asks Court to Overturn Point Thomson Ruling

Exxon Mobil Corp. asked an Alaska court last week to overturn the state's decision to revoke the company's leases in the North Slope's Point Thomson oil and gas field, which hold a significant portion of the natural gas that would be transported on the proposed Alaska gas pipeline to the Lower 48 states.

In its appeal, ExxonMobil asked for a reversal of the state's decision or a remand of the matter to the Alaska Department of Natural Resources (ADNR) with instructions to make a "new and different decision."

ADNR's acting Commissioner Marty Rutherford said Wednesday that she supports former commissioner Mike Menge's decision to strip the Point Thomson leases from ExxonMobil and its partners, BP and ConocoPhillips. Last month Menge, the commissioner under former Gov. Frank Murkowski, made the decision after finding that operator ExxonMobil and its Point Thomson partners failed to issue a viable plan to develop the field (see Daily GPI, Nov. 30).

ExxonMobil and its predecessor companies have held the Point Thomson leases since 1977, and over that period, 22 development plans have been filed on the 106,200-acre unit. In all that time, however, no commercial oil or gas operations have begun.

Recently named acting commissioner by new Gov. Sarah Palin, Rutherford concurred with her predecessor.

"The facts clearly uphold Mike Menge's decision to terminate the Point Thomson Unit agreement," Rutherford said Wednesday. "I agree that ExxonMobil has not met its obligations, and I must deny them the relief they sought in their reconsideration request."

ExxonMobil told the court last week that the ADNR erred in finding that a "reasonable, prudent operator could produce oil and gas at Point Thomson, given the complete absence of evidence in the record showing an economically and technologically viable development plan for oil and gas..." Among other arguments, the company told the court that the agency also erred in concluding that any acceptable development plan include a commitment to commence production by a certain date "even though off-unit transportation facilities necessary to bring...hydrocarbons to market do not exist."

ConocoPhillips and BP filed similar appeals last week. "Point Thomson is a key component in development of a North Slope natural gas pipeline project," noted BP spokesman Steve Rinehart. "We think that's a very important project, a very big deal and one we would very much like to move forward on. Point Thomson is roughly a quarter of the gas reserves that would be part of a gas pipeline project. We believe that Commissioner Menge erred when he dissolved the Point Thomson Unit."

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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