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Parnell confirms deal on Point Thomson gas leases

Posted: March 30, 2012 - 1:14pm

JUNEAU — Alaska Gov. Sean Parnell confirmed Friday that a settlement has been reached in the long-running dispute over leases on the Point Thomson gas fields, clearing the way for progress on a major pipeline project.

Parnell had set a Saturday deadline for the major North Slope players to coalesce behind a project that would move liquefied natural gas to market.

He said a settlement was reached with BP PLC, Exxon Mobil Corp., ConocoPhillips and other companies, and the major North Slope players also agreed to align with TransCanada Corp. so work toward a pipeline would be coordinated.

"Ending litigation and reaching alignment are important first steps," Parnell said, but he said additional work remains toward advancing a pipeline project.

The companies said they have agreed on a plan to focus on a large-scale liquefied natural gas project, capable of overseas exports, as an alternative to a pipeline through Alberta, Canada, that would serve North America markets.

"This agreement does not guarantee a major gas line for Alaska, but it certainly moves us a significant step closer," said state Natural Resources Commissioner Dan Sullivan.

Parnell, in his State of the State address in January, set expectations for progress on a major gas line. The first was to have resolution on the disputed leases at the Point Thomson gas fields by Feb. 8, the date the Alaska Supreme Court was to hear arguments in the long-running case.

The second was to have the North Slope's major players — Exxon Mobil, BP and ConocoPhillips — align under an "Alaska Gasline Inducement Act framework" by the end of the first quarter. Such alignment was to include work on a large liquefied natural gas line through Alaska to tidewater that would allow for overseas exports.

By the end of September, Parnell said he expected the companies to have firmer numbers on a liquefied natural gas project, and to identify a specific project and work schedule.

The first of those deadlines — resolution on Point Thomson — was missed. It wasn't until this week, days before Parnell's end-of-the-quarter deadline, that it was resolved.

The inducement act was passed under then-Gov. Sarah Palin as a way to jumpstart a line. TransCanada Corp. holds an exclusive license to advance a line under terms of the act and has been working with Exxon Mobil.

BP and ConocoPhillips, which balked at terms of the inducement act, pursued a rival project to the Lower 48 but that folded last year when it couldn't garner the commitments needed to move forward.

So far, TransCanada Corp., too, has focused its efforts on a line that would serve North America markets. But changes over the last several years, including the rise of shale gas, have led to concerns that there will be little demand for Alaska gas in the Lower 48. TransCanada, which in 2010 held a three-month period of courting producers, seeking commitments, has yet to announce any agreements.

Parnell, in October, called on the Big Three to unite behind a project that allows for liquefied natural gas exports to the Pacific Rim if the gas market has truly shifted from the Lower 48. In January, he met with the executives of Exxon Mobil, BP and ConocoPhillips to discuss ways to advance a line.

A major obstacle was lack of a resolution after the state began pulling leases it believes energy companies have held for too long without developing.

The leases are seen as critical to the fortunes of a gas pipeline, long-sought by Alaskans as a way to shore up revenues amid declining oil production, create jobs and provide a reliable source of energy.

In a letter to Parnell, the CEOs of Exxon Mobil, ConocoPhillips and BP, said getting gas to market won't be easy, noting, among other things, that "unprecedented commitments of capital" for gas development by the companies will first require "competitive and stable fiscal terms" — or taxes and royalties — from the state.

Point Thomson, located 60 miles east of Prudhoe Bay, is Alaska's largest undeveloped oil and gas field, holding an estimated 8 trillion cubic feet of natural gas and hundreds of millions of barrels of oil and gas liquids, Parnell's office said.

 

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