State should press leaseholders for Point Thomson development

What others say

Posted: Wednesday, October 19, 2005

The state has just about run out of patience with companies that are sitting on the abundant gas and oil deposits at Point Thomson.

And no wonder.

The first state leases in the area were issued 40 years ago. It has been 30 years since the first big discovery was made there. Point Thomson holds an estimated 8 trillion cubic feet of gas, along with 200 million barrels of liquid hydrocarbons and perhaps another 200 million barrels of oil. The boundary of Point Thomson is only three miles east of the nearest North Slope field that has already been developed.

The companies that have leased this state-owned resource, led by Exxon, have filed 22 different plans of so-called ''development'' over the years. However, it has been nine years since they last drilled a well.

In 2001, the leaseholders agreed to drill another well in 2003, commence development in 2006 and drill at least seven production wells by 2008. They promised to make a critical go/no-go decision on development by the middle of 2003 and pay significant penalties if they decided not to go for it.

They never drilled the well. Instead, they gladly paid a penalty of almost $1 million and kept holding on to most of the leases. They have managed to string the state along for another two years past what was supposed to be the decisive deadline.

The Point Thomson leaseholders had kept the state satisfied by continuing to evaluate a project that produced only natural gas liquids from the reservoir. Those liquids could be pumped by spur line to the web of North Slope pipelines farther to the west. The idea was that the companies would reinject the abundant natural gas until such time as a gas line was available.

But when it was all said and done, the companies shot that idea down.

Now, Exxon and the other companies want to be allowed to sit on the leases until the North Slope gas pipeline is ready to take Point Thomson's gas. Another 10 years, minimum.

Enough, said the state.

''If the Point Thomson Unit Owners have been unable to identify a commercial project in nearly 30 years, it is time to terminate the unit and re-offer the acreage to new lessees who will have the opportunity to develop the state's resources in a timely manner,'' the state told Exxon on Sept. 30. ''It is not in the public interest to grant a state lessee an indefinite extension on development merely because development in their view is not currently profitable enough or is too risky.''

... There's just one complicating factor. Most observers agree Point Thomson's gas is essential to feed any North Slope gas line. Taking a hard line on Point Thomson — taking back the leases and rebidding them, if necessary — could complicate and potentially delay progress on the gas line.

... Judged only by the duty-to-produce requirements in state leases, the state has every reason to take a hard line with Point Thomson. But the state is also trying to wheedle and cajole the North Slope gas holders into building a $20 billion gas pipeline. The state has reason to tread cautiously.

Good on the Murkowski administration for keeping up the pressure on Point Thomson. Just don't do anything so drastic it gives the North Slope's big-three companies more reason to delay progress on the gas line.

— Anchorage Daily News,

Oct. 9



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