An Anchorage judge has approved legality of a negotiated commercial agreement between ConocoPhillips and Santos, which is developing the Pikka Project on the North Slope on the west side of the Kuparuk field.
Alaska Superior Court Judge Andrew Guidi said the commercial agreement that ConocoPhillips seeks with Santos to use the KRU (Kuparuk River) Roads follows a long-standing precedent and is a customary practice on the North Slope. ConocoPhillips wants Santos to help out with maintenance costs and is trying to negotiate the fee.
ConocoPhillips has allowed Santos to use the industrial road at no cost since 2018, but now construction of Pikka is under way, and ConocoPhillips wants a contract.
It was the state Department of Natural Resources that said Santos could use the road that ConocoPhillips paid for. The state fought ConocoPhillips in court and won in a lower court. That lower-court decision is now reversed, the judge said.
“DNR [Department of Natural Resources] has no legal basis or authority to grant a third party the right to use CPAI’s [ConocoPhillips] leasehold improvements, by Permit or any other means, even though they are built on state land,” the judge rules.
“Granting [Santos] the right to use CPAI’s leasehold improvements also constitutes an impermissible taking under the U.S. and Alaska Constitutions. For both independent reasons, this Court reverses the Commissioner’s December 1, 2022 Decision and vacates the Permit issued by the March 29, 2022 Director’s Decision, effective immediately.”
Although the road was build decades ago, it requires constant maintenance at a cost of $10-20 million per year. To build such a road today would cost in excess of $1 billion, Guidi acknowledged.
The state, although it owns the land, granted the permit for construction of Kuparuk roads to ConocoPhillips and thus cannot simply allow other oil explorers to use that road system for free, Guidi ruled.
Once developed, the Pikka Project, may add 200,000 barrels of oil to s to the 500,000 barrels now flowing down the Trans Alaska Pipeline System, something that will help the State of Alaska’s budget shortfalls.
Whether the State of Alaska will appeal Guidi’s decision is unknown,
Update: The state has just sent out a press release saying it will appeal the ruling. The commissioner of the Department of Natural Resources, John Boyle, came to his position directly from a job with Santos, which may complicate the matter for him and Gov Mike Dunleavy.
Read the ruling here:
Santos should just make a deal to help maintain the road and stop spending all the money on lawyers.
If I remember correctly Santos has tried to make a deal with Conoco but Conoco wanted an absurd amout of money. I think Santos offered a million per year to use part of the road and Conoco countered with 20 million a year. Seems like there was some bad blood and personal issues going on with leadership as well, which led to this point.
The article says it costs $10-$20 million a year to maintain 75 miles of gravel road, which I believe is such BS it would be incredible. A gravel road 75 miles long at a $130K-$250K per mile per year? Hell, I will take that contract in a second. The state of Alaska, which is the king of blowing cash on EVERYTHING it touches, only spends $40K a mile on the Dalton Highway every year, by contrast. Conoco is being the asshole in this deal. The judge should have been more in depth in the ruling.
The judge adopted the “proposed” opinion provided by ConocoPhillips lawyers with a few modest edits.
They did
However, Conoco Phillips wanted to fleece them for $20 million per year.
Let’s stop development of natural resources in Alaska.
Let’s be dependent on “others” for our energy.
Let’s not develop high paying jobs in Alaska, so our kids will leave the state.
Let’s let other countries develop their oil&gas – Venezuela, Brazil, Russia – they don’t care about doing it in an environmentally sound manner.
Leftist ideas are the devil – abortion (child sacrifice), animal rights (anthropomorphism), global warming (worship mother earth), feminism (marxist construct to destroy the foundation of society in the West, the family), Communism/Socialism (place the needs of the group above the rights of the individual).
The Values above are SOOOOO important to the Left – it is the foundation of their “religion”.
DoneWithit: Interesting free association about greenies and other real or imagined modern horrors. What do the demons and devils you mention have todo with this little dust up between two oil companies and the State of Alaska?
Believe me, for 200 MBOPD, Santos can afford to pay for some road maintenance. DoneWithIt, we’re DoneWithYou since you are seriously off-topic.
Joe he is just blowing off steam I hate hippies too. I hate free loaders And left wing numb nut jobsthat don’t appreciate what it takes to keep this country turning. I guess that’s about 1/2 of anchorage I hate. Hmm hadn’t thought about it like that before.
Good for COPA, they’re very good Company and Partner in AK907.
I think most of those roads were built by Arco to kaparuk and soho back in the day. Hopefully they can join forces and share costs @ stop the attorney artery bleed.
You are correct. ARCO built almost all of the roads west of the Kuparuk River. I know – I was there the whole time. And they DO require a lot of expensive maintenance, both summer and winter.
Whatever anyone thinks about the merits of the case, it’s interesting to note it was written and then submitted by the ConocoPhillips lawyers and then seemingly lightly edited and adopted by the judge.
Hmmmmmmm.
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