Exxon RE Point Thomson: This time we REALLY mean it.....

Posted by Matt Zencey, editorial page editor

Posted: March 3, 2008 - 12:28 pm

Monday morning, Exxon and its partners began their formal case for holding onto the undeveloped oil and gas fields at Point Thomson. A state judge ruled that this hearing is required before the state can take back the leases for failing to develop them since the first discovery in 1977.

The Regulatory Commission of Alaska hearing room, ironically located in rented space at the ConocoPhillips building, was packed with middle-aged guys in suits. I’m guessing that, all told, the assemblage of lawyers, consultants and corporate executives was probably costing upward of $20,000 a hour for being there.

DNR Commissioner Tom Irwin started things off. He rejected any notion that he might be biased and promised to base his decision on the record.

He said he wanted to know:
* How DNR can be assured the commitments in this plan will be met
* Why the plan is retroactive
* Why there are no performance benchmarks
* What happens if the promised work is not performed in a timely manner
* How the plan will ensure “the development and delineation of all resources” (gas, oil and gas liquids) in the unit.

He said the leaseholders’ record of non-development at Point Thomson showed a “clear pattern.”

“DNR’s patience was exhausted when it rejected the 22nd POD (Plan of ‘Development’),” he said. Your job, he told Exxon, BP, ConocoPhillips, Chevron and their phalanx of lawyers, is to convince the state that the pattern has changed.

Some highlights from each company’s opening remarks:

Exxon, regarding the history at Point Thomson: “The path forward is not always a straight line.”

BP: At Point Thomson, “BP has seen the light at the end of the tunnel.”

ConocoPhillips: “Termination is not an appropriate remedy. There must be a material breach . . . Forfeiture must be avoided if at all possible.”

Chevron: “Termination will set back development for years. These owners have unique knowledge and experience . . . . It would take any other group of owners years to replicate” the work our group has done.

One strange aspect of the hearing, which is scheduled to last all week: There is no rebuttal case. Hearing examiner Nan Thomson, working for DNR, can ask questions, but there is no formal critique or presentation to counter Exxon and its partners.

The Alaska Gasline Port Authority did get 15 minutes Monday morning to urge terminating the leases. Attorney Craig Richards reiterated the argument that the leases automatically terminated when the state rejected Exxon’s 22nd plan of development. (Superior Court Judge Sharon Gleason has already rejected that argument, but the attorney offered technical reasons why the state could still assert such a claim.)

If DNR doesn’t terminate the leases, AGPA says the state should NOT let the leaseholders have a multi-year plan, because that makes it too difficult to hold them to their promises. Leaseholders shouldn’t get away with claiming there is no market for Point Thomson gas, AGPA said, because they have a duty to develop a market for the hydrocarbons they have discovered.

Exxon’s Craig Haymes and its attorney then went through a layman’s Q&A covering what Exxon, et al plan to do at Point Thomson and why.

I imagine DNR Commissioner Irwin knew almost all of that already – so I wondered if this “Point Thomson 101” info was for the benefit of the courts, if and when Exxon appeals an adverse ruling.

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