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Wednesday, December 13, 2017
HomeAlaska NewsGovernor rejects Exxon’s Point Thomson plan of development

Governor rejects Exxon’s Point Thomson plan of development

EXPANSION PLANS TOO VAGUE, ADMINISTRATION SAYS

In a six-page letter of dense legalese posted somewhere on the Division of Oil and Gas web site, the Walker Administration has rejected ExxonMobil’s expansion plan to develop gas at Point Thomson. The division has done so without noticing either the company or the public.

Hawkins

Must Read Alaska got ahold of the letter this morning. It demands Exxon make much more specific commitments to produce gas from the leases it has.

The governor ordered Exxon to go back to the drawing board and submit a revised plan by Oct. 13. It was a split decision: The initial production system that is under way is approved, but the Administration has nothing good to say about the expansion plan.

The move is in line with other approaches the Walker Administration has taken to companies operating in Alaska’s oil patch. But it also reveals an underlying old grievance he has against Exxon and a settlement that he once sued the state over. Exxon has always been a burr in Walker’s saddle.

The “Division … finds that the Expansion Project Planning POD is inconsistent with the Settlement Agreement and on that basis denies it,” the Administration wrote in a letter signed Aug. 29.

In a brief statement, the company said it was aware of the letter from the Department of Natural Resources, but had not reviewed it and was unable to comment. But the company also said “ExxonMobil has been, and will continue to be, in full compliance with the Pt. Thomson Settlement Agreement.”

The expansion plan covers increased production of condensate and shipment of gas to the Prudhoe Bay Unit.

With the Alaska LNG Project a pipe dream, ExxonMobil plans to reinject natural gas from its Point Thomson field into the Prudhoe Bay oil and gas pool, which would satisfy the 2012 settlement agreement with the Parnell Administration.

That particular agreement was fought in court by Gov. Walker when he was a private practice oil litigator. The case was never resolved before he became governor, which made it awkward, since he was now suing the state in which he was the top official. He ended up dropping the lawsuit.

ExxonMobil submitted its long-term plan, which was a concept, to the Division of Oil and Gas at the end of June. The idea to reinject the gas now to get more oil from fields makes sense, because the value of gas is low and there is no way to commercialize it in Alaska at this time.

Exxon had hoped to be part of the Walker Alaska LNG project, but that is not consistent with settlement agreement, since they are on different timelines.

But for the Administration, the Exxon plan conditioned certain deliverables on being able to get commercial contracts. In other words: All the risk of developing a gas project without a market. The company’s plan also didn’t go into enough detail for the Walker Administration:

“Exxon’s proposed POD is also inconsistent with the Settlement Agreement because it lacks the level of detail the WIOs committed to provide with this POD. For example, Paragraph 4.6.4(b) requires the POD to include ‘the number of drill wells, well locations, and completion plans.’ The proposed POD states only that “[t]wo new production wells and one new disposal well would be drilled at Central Pad.’ Exxon failed to include the bottomhole locations of these potential wells or any detail about its plans for completing the wells.

ExxonMobil operates Point Thomson, with BP as its primary partner, and has poured $4 billion into developing the gas field since the settlement with the State in 2012. Production of oil and gas condensate started last  year, and now the company is expected to expand production, but must have the Walker Administration’s approval.

Getting the gas from Point Thomson to Prudhoe calls for a 62.5-mile gasline that would link three new wells at Point Thomson, according to the plan, bringing the total number of wells to five.

Exxon would prefer to create a gasline project, but there is none on the horizon. However, ExxonMobil Alaska Production Manager Cory Quarles has committed that the company will make gas available to Walker’s Alaska LNG Project effort, “under bilateral, mutually agreed and commercially reasonable terms.”

The company just as likely could walk away from the leases and work elsewhere in the world. And it might have to, since the State has taken such a hostile position over the past three years.

 

The Walker Administration had not released any announcement of the rejection of Exxon’s plan by mid-morning.

This story is developing and will be updated.

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Suzanne Downing had careers in business and journalism before serving as the Director of Faith and Community-based Initiatives for Florida Gov. Jeb Bush and returning to Alaska to serve as speechwriter for Gov. Sean Parnell. Born on the Oregon coast, she moved to Alaska in 1969.

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