BP eases back Alaska oil output due to dispute

ANCHORAGE, Alaska (Reuters) - BP has shut in about 850 barrels per day of production at the giant Prudhoe Bay oil field in response to an interim court ruling in a legal dispute over lease payments owed to a family with landholdings on the North Slope, a spokesman said Wednesday.

BP’s shutdown is in response to a letter sent to the company last week from the U.S. Bureau of Indian Affairs. The BIA told BP that it must temporarily stop producing or risk potential lease cancellation.

The site is a Native allotment granted to the late Andrew Oenga, a local Inupiat hunter and fisherman who used the site as a camp to harvest traditional foods.

BP eventually leased the site from Oenga and his heirs, and built drill facilities there.

The Oenga family has accused BP of expanding its operations at Heald Point without permission and in underpaying rents. The family also accuses the BIA, responsible for administering the leases, of breaching its management obligations.

BP and the BIA have denied the charges of underpayment and mismanagement.

That BIA directive ordering a well shutdown was in response to an ruling issued by the U.S. Court of Federal Claims. Under that ruling, issued in November and unsealed on December 21, damages owed to Oenga’s heirs are estimated at up to $5.3 million.

“Production impact will be minor, well within the normal daily swing in production from the North Slope. It is a tiny fraction of our production,” Rinehart said in an email.

The affected production amounts to only a small sliver of the total output at the Greater Prudhoe Bay Unit, said Steve Rinehart, spokesman for BP Exploration (Alaska) Inc. The shutdown, which started last Thursday, affects two production wells and one injector well at a single drill site, Rinehart said.

According to the Alaska Oil and Gas Conservation Commission, production from the Raven oil pool, the area in question was 25,456 barrels, or 849 bpd, in November.

Total North Slope production in 2010 averaged 644,000 barrels per day, with about 347,000 barrels coming from Prudhoe Bay and associated fields, according to state figures.

The affected site is a small peninsula called Heald Point, the subject of a land-use dispute stretching back to the 1970s.

Production at the Niakuk field, which is also conducted from that Heald Point site, continues and is unaffected by the BIA directive and court order. Niakuk produced 110,613 barrels in November 2010, averaging 3,687 bpd, according to the AOGCC.

Editing by David Gregorio