December 28, 2007 / 6:17 AM / 10 years ago

Alaska judge backs rejection of Point Thomson plan

ANCHORAGE, Alaska (Reuters) - The state of Alaska acted properly when it rejected as inadequate a development plan for the long-languishing Point Thomson oil and gas field on the North Slope, a state judge ruled on Thursday.

A sign displays prices at a gas station in Washington July 27, 2006. The state of Alaska acted properly when it rejected as inadequate a development plan for the long-languishing Point Thomson oil and gas field on the North Slope, a state judge ruled on Thursday. REUTERS/Yuri Gripas

Superior Court Judge Sharon Gleason said the Alaska Department of Natural Resources (DNR) had the right to reject a plan proposed by operator Exxon Mobil Corp and its Point Thomson partners. That 2005 rejection led to the state’s December 2006 revocation of the Point Thomson unit’s leases.

But Gleason also ordered the department to hold another hearing on how the state should handle Point Thomson leases, giving Exxon Mobil another opportunity to hold onto its acreage.

Point Thomson, on the eastern North Slope, holds 8 trillion to 9 trillion cubic feet of natural gas and hundreds of millions of barrels of liquids, both crude oil and natural gas liquids. It has never produced oil or gas, however, even though some leases in the now-dissolved unit date back to the 1960s.

Alaska Gov. Sarah Palin called the ruling good news for the state and its attempts to assert control over its oil and gas.

“This ruling represents another significant step forward in the state’s efforts to develop the valuable oil and gas resources in the Point Thomson reservoir and to hold the lessees to the commitments they made in the unit agreement,” the Republican governor said in a statement.

“We are pleased that the court has affirmed the Department’s efforts to ensure that the oil and gas in this reservoir is responsibly produced.”

Exxon Mobil and its partners — BP Plc, Chevron Corp and ConocoPhillips — have argued that the technically challenging unit cannot be developed commercially until a massive natural gas pipeline is built from the North Slope. No well has been drilled at Point Thomson since 1983.

The Point Thomson partners are trying to hold on to the leases nonetheless, and have sued to keep them.

Exxon Mobil took heart from the fact that Judge Gleason opened the door to another hearing on whether or not it would be able to retain its lease on the acreage.

“We are pleased that the Superior Court reversed the DNR’s decision terminating the PTU. The Superior Court decision confirms that the DNR action terminating the PTU was wrong,” Exxon Mobil spokeswoman Kimberly Johnson Brasington said in an email. “Exxon Mobil and the other PTU interest owners will continue to work with the DNR to resolve this issue.”

The state argues that the partners were obligated either to produce the liquids — sending them down the existing trans-Alaska oil pipeline — or relinquish the leases so they could be auctioned off to another developer.

Most oil and gas leases sold by the state expire after five or 10 years if they have not been developed. The Point Thomson leases were granted a series of extensions, based on successive development plans submitted by Exxon Mobil and its partners.

The plan rejected by the Department of Natural Resources was the 22nd submitted by the Point Thomson partners.

Editing by Bernie Woodall and Braden Reddall

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