An agreement has been reached between Oil Search (Alaska), a subsidiary of Santos, and ConocoPhillips Alaska for the use and maintenance of the Kuparuk River Unit Road. The agreement resolves a years-long dispute over the gravel road access within the Kuparuk River Unit to fields like Pikka, Quokka, and Horseshoe.
Located 40 miles west of Prudhoe Bay, Kuparuk River Unit is the second-largest oil filed in America, built by Arco Alaska on state-owned land and operated by ConocoPhillips.
The roads are critical for accessing the projects on the North Slope.
Pikka, a project of Oil Search, is to the west of Kpaus, and to get to it, the company needs to use the Kuparuk Road System, as building a new road network is impractical and costly.
But ConocoPhillips has been spending $10-20 million annually to maintain the roads, which would cost over $1 billion to build in today’s dollars. ConocoPhillips offered the use of the roads for $95 million over 20 years, but Santos argued that $60 million was a fair amount, and said that state ownership of the land entitled the company to use the roads without high fees.
The conflict arose after the informal arrangement had been used from 2019 to 2022. As Pikka moved toward full-scale development, ConocoPhillips sought more formal compensation, with an anticipation that use of the roads would increase.
Oil Search (Santos) sought a permit from the Alaska Department of Natural Resources to use the road without paying ConocoPhillips, and DNR granted the permit, based on an assertion that it has authority over the land and that the public interest would be served by granting access. ConocoPhillips appealed the decision, arguing that it was, in essence, underwriting the expenses of another company.
Santos and ConocoPhillips have now settled the dispute by signing a Kuparuk River Unit Road Use and Maintenance Agreement, retroactive to Jan. 2. Santos will withdraw its legal appeal.
The agreement ensures that Oil Search can proceed with Pikka, which could add 120,000 barrels a day to the Trans Alaska Pipeline System, at peak production.
ConocoPhillips issued a statement: “ConocoPhillips Alaska is pleased to have signed a commercial agreement with Santos for the use of the Kuparuk River Unit (KRU) road system. The long-term road use agreement follows precedent and recognizes the long-standing custom and practice on the North Slope for operators to enter into commercial agreements governing third-party use of private improvements and facilities, including the KRU road system.”
Good.
The State’s position trying to jam ConocoPhillips was goofy.
Judge Guidi got it right at the trial level.
The appeal by the State was questionable.
Get on with production and glad the appeal is canned.
This illustrates a huge problem. Despite the fact that Prudhoe Bay is the biggest oil field anywhere in North America, how come we have so few companies operating there?
The answer is the large guys do everything possible to limit competition. This costs Alaskans billions of dollars. Road access turns into a legal fight. Same with dewatering facilites, and pipeline gaterhering points. Note that Alaska has paid billions and billions of dollars to subsidize (corporate welfare) this work, but still we have limited companies (competition) there.
When, for example, roads are built across state lands, esp. with our money, one company should never be allowed to deny access.
The legislature dithers, and never fixes these problems.
Bet you a $100 to $1 that Conoco has been deducting the expense of those roads from tariff . I was hauling gravel building those roads in late seventies . They were easily and cheaply built by Tennessee Miller’s Frontier Construction in the summer and fall . First job on slope at 18 . Bigger problem is that it has slowed the production schedule down at Pikka . This has cost millions of dollars of state royalty oil to be delayed . Thanks Conoco
You are spot on Dan. Since we have a net profits system, Conoco and the other use every possible deduction. They even deduct lobbying expenses.
Probably legal expenses as well . At one time CP and state were working together on preventing Santos access . That is some wacky lawfare my friend . The state in a joint effort to prevent access to oil field development ? How’s that benefit the peoples oil . You need a prostitute and lawyer for the same thing . Nuts
If you ever have driven the gravel roads in Kuparuk during breakup, you’d understand the upkeep on the roads if the traffic increased to be a heck of a lot more than the normal traffic. And who’s gonna pay for it? You or the tourists?
Maybe they should be paved ? Worked on haul road and they pave their runways on slope .
Thank you Conoco Phillips and Santos to work out the deal for the betterment of Alaska. I have been watching this process for years and your decision stands in favor of all. Thanks again.
Great news.
Fantastic!!! Hope I can get on a road crew there, better times are coming!! 🎉