DNR must explain permit denial for Point Thomson

Posted: Friday, November 28, 2008

All across America we could hear the reverberation from the Palin cheerleading squad, "Drill Baby Drill."

As our governor, and then vice presidential nominee, traveled across the nation, we could hear the echoes. Now, back at home, they seem oddly hollow.

Government is often a dichotomy, and sometimes this is acutely painful. This is one of those times.

Alaska Department of Natural Resources Commissioner Tom Irwin recently delivered a press release informing us of his decision to not grant a necessary permit to ExxonMobil allowing the company to continue its work developing the Point Thomson natural gas field on the North Slope.

We find this curious. Exxon has not broken any laws. Numerous permits have been requested, and granted, by the DNR prior; similar permits to the one denied were recently issued to allow work on state land.

To date, of the numerous permitting agencies -- including the Alaska Department of Fish and Game, Alaska Oil and Gas Conservation Commission, state Department of Environmental Conservation, federal Environmental Protection Agency, North Slope Borough and the Natural Resource Department -- the DNR is the sole agency to deny Exxon a permit.

Why would the commissioner grant permits, overtly promoting the expenditures, by Exxon, of more than $100 million over the course of last summer, only to pull the rug out beneath them as they prepare to drill the first well this winter.

Keep in mind, Exxon has put forward a development plan that entails its spending $1.2 billion over the next six years, and in just the past few months has incurred tremendous expense and employed more than 40 Alaska companies and created over 150 jobs.

This move by DNR defies logic. All concerned have a tacit understanding that Point Thomson gas is absolutely vital to the progression of a natural gas pipeline. Anyone who denies this is not being truthful.

In a recent presentation, Kathy Forrester of the Alaska Oil and Gas Commission, an independent state body tasked with directing the extraction of the state's oil and gas, said that Point Thomson needed to be developed and it needed to be developed right away.

So ExxonMobil has committed to developing the Point Thomson field to the tune of $1.2 billion and as seen by the company's spending this summer and fall, is well on its way to doing exactly that.

We know the field from an engineering standpoint is problematic, and the leases, if litigated for, would not be available to a new bidder for years. Even if a different company could obtain the leases to the field, it would take a long time for them to develop the data, getting them exactly to the point where Exxon is today.

It would seem prudent, given the fact that Exxon has the resources, expertise and inclination to continue doing exactly what needs to be done in order to make natural gas available in a timely manner for a gas pipeline project, to let the company proceed.

Interestingly, Irwin, in his rejection of the development plan that Exxon brought forth for Point Thomson earlier in the year, said that "actions speak louder than words." He is right, and Exxon has proven itself as a willing and capable partner.

Since this summer the company has set two conductor pipes, each approximately 160 feet deep and encased them with cement. It has enhanced the gravel pad, installed a fuel tank farm, graded the area, installed a helicopter pad, staged 700 tons of equipment and materials, as well as spent more than $25 million on a drilling rig that can withstand the rigors of this complex, high-pressure field, which is currently staged in Deadhorse.

If completed, the operations at Point Thomson would represent the highest-pressure gas cycling project in the world.

What is the state's strategy? How does this type of action by the DNR compel a natural gas pipeline project? Are Alaskans, via our government, instilling confidence in business that we can be trusted to do the right thing?

DNR Deputy Commissioner Rutherford and Commissioner Irwin will argue that Exxon has missed its chance by not developing the field prior, even though any supposed inaction by Exxon over the preceding 20 years was sanctioned by DNR, not to mention the fact that without a gas pipeline prospect, the development of Point Thomson has never been economical.

This is akin to the argument that the producers have been warehousing the gas. This is patently unfair and smacks of arrogance as the price of gas, until recently, has never been such that a pipeline project was feasible, and without a pipeline, you have no reason to develop the gas field.

It would appear Alaska's government is banking on the public not understanding the details and, therefore, will be unable to discern Irwin's recent actions as underhanded.

After all, to allow Exxon entry into the room, only to pull the rug out from under it, smacks of arrogance to the highest degree.

DNR -- and particularly Tom Irwin -- owes all of us a plausible, reasonable explanation for his actions.

Otherwise we are left scratching our heads and wondering if this administration has another agenda.

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