“This is very troubling. Why, after 40 years of producing billions of barrels of oil, is a company being threatened with eviction?” Giessel asked. “Why are engineers being told they need to violate federal law and tell about a marketing program they don’t even know about (because, they’re engineers, not marketers?) Why does the state government demand information they’ve never asked for before? Lots of questions. Hopefully this is not a step in the state wanting to sue the North Slope out of existence.”
The Alaska Journal of Commerce has a more complete report here.
GOVERNOR DISTURBING THE PEACE
The Department of Natural Resources letter to BP’s Manager of Reservoir Scott Digert discusses BP’s “duty to market the PBU gas.” The letter, in its entirety, has the appearance of the State of Alaska setting the stage for litigation, one attorney said after reviewing the letter.
“No one disputes those implied duties exist under the leases. The argument is about when the duty to market gas must be fulfilled by the companies,” the attorney said.
In its letter, DNR admits, “While DNR acknowledges the proposed use of gas in the current POD time period to enhance the production of oil, the state and WIO’s must prepare for the time when such use will no longer be necessary or appropriate.”
Therefore, DNR acknowledges that the use of the gas is adequately covered for the time period for which the Plan of Development pertains. But since the gas might be needed at some point in the distant future for a gas line that may or may not be built, the State is requiring marketing information now.
“This is saber-rattling for something companies have no obligation to provide in this Plan of Development, in this year’s scope of work,” said one industry analyst reached in Houston. “Sheesh, this governor is not just disturbing the peace. He’s setting the state back a decade. Who is going to trust him now?”
DNR’s says the State of Alaska will give BP “one final opportunity” to provide a compliant plan.
“As previously indicated, the proposed 2016 POD cannot be approved at this time because it is not yet complete. Given the importance of the gas resource to the State and teh need to protect all patties in interest, including the WIOs, DNR wil allow yet more time for an adequate submission on this topic…A modified proposed POD shall be due by September 1, 2016…the 2015 POD (as amended) will expire on November 1, 2016.”
November 1, 2016 is the date when the State could enter into litgation with the companies that provide the oil to the Trans Alaska Pipeline System. Once again, the governor told KTUU’s Austin Baird that he has no intention on entering litigation. But he told the Alaska Dispatch earlier this week he had no intention of defaulting the leases, which he has done, without actually doing.