May 3, 2007 / 12:30 AM / 10 years ago

Judge denies Exxon request in Alaska lease dispute

3 Min Read

<p>A sign shows the price of gas at an Exxon gas station in Portland, Oregon April 26, 2007. An Alaska court denied a request from Exxon Mobil and its partners for a stay that would have allowed the group to hang on to oil and gas leases at the undeveloped Point Thomson field while they fight a state decision to take the leases back.Richard Clement</p>

ANCHORAGE, Alaska (Reuters) - An Alaska court denied a request from Exxon Mobil (XOM.N) and its partners for a stay that would have allowed the group to hang on to oil and gas leases at the undeveloped Point Thomson field while they fight a state decision to take the leases back.

The ruling, issued late Tuesday, is the latest development in a long-running dispute between the state and leaseholders at Point Thomson, a resource-rich but long-dormant area just west of the Arctic National Wildlife Refuge.

The state Department of Natural Resources in November revoked the leases at Point Thomson a year after state officials found operator Exxon Mobil and its partners -- BP (BP.L), Chevron (CVX.N) and ConocoPhillips (COP.N) -- to be in default of development requirements.

The unit holds 8 trillion to 9 trillion cubic feet of natural gas and about 300 million barrels of liquids in the form of natural gas condensates and crude oil.

The state hopes to put Point Thomson leases back on the auction block, where they can be sold to other companies and developed.

In her ruling, Superior Court Judge Sharon Gleason said the state had "persuasively demonstrated that it is in the public interest" for the Department of Natural Resources to continue with the lease termination process.

Gleason said the companies must pay the state a $20 million fine for violating lease terms or post a $25 million bond with the court while the appeals process continues.

Tom Irwin, commissioner of the Alaska Department of Natural Resources, said the ruling was a clear win for the state. "We're standing up for the state's right to protect its resources," Irwin said. "We want our resources to move to market."

Alaska oil and gas leases normally expire after five to 10 years if there has been no commercial development. But the Point Thomson leases, some of which date back to the 1960s, received numerous extensions through the years based on the companies' promises to bring the field into production.

ExxonMobil, the majority owner of the disputed leases, and its partners argue that Point Thomson cannot be developed until a long-planned natural gas pipeline is built from the North Slope. The reservoir there is challenged by unusually high-pressure conditions, the companies have said.

But in previous development plans, Exxon Mobil and the other companies pledged to produce Point Thomson liquids and send them to market through the existing trans-Alaska oil pipeline.

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