Producers reject state demand for details on gas sales

  • The Alaska Division of Oil and Gas and the three major North Slope producers are at odds over details about gas marketing the state is demanding before it will approve the 2016 Prudhoe Bay Plan of Development. The state says it won’t approve the plan without the information, but the producers have responded that they will not provide the division the details about gas marketing and prices sought in an April 11 letter. Photo/File/AJOC

The major North Slope producers and state regulators have considerable differences of opinion regarding what information the state can demand in oilfield development plans.

BP sent a letter to the Division of Oil and Gas May 2 contending that its Prudhoe Bay Plan of Development for 2016 satisfies the requirements in the 1977 Prudhoe Bay Unit Agreement and all state regulations regarding unit development plans.

The company did not provide the detailed technical and marketing information about potential “major gas sales” — a gasline project — that Oil and Gas Director Corri Feige wrote in an April 11 letter that the division would need to approve the plan.

“The division’s (April 11) letter seeks extraordinary additional information concerning ‘the timing and type of activities that will be conducted to prepare for major gas sales,’” BP Alaska Reservoir Manager Scott Digert wrote. “These new requirements asserted by the division are contrary to the terms of the (Prudhoe Bay Unit Agreement) as well as the division’s regulations and the division’s own interpretation of its regulations over many decades.”

ConocoPhillips Prudhoe Area Manager Jon Schultz wrote to the division May 4 that the company supports BP’s May 2 letter.

BP is the operating company for Prudhoe Bay; ConocoPhillips and ExxonMobil are working interest owners in Prudhoe.

Schultz wrote that the company proposes to meet and discuss the requests to “avoid potential confusion and miscommunication between ConocoPhillips and the division, which could conceivably impact other confidential discussions between ConocoPhillips and the DNR and give rise to other issues.”

The ConocoPhillips letter concludes, “At this point, our goal is to understand the context, intent and purpose of the division’s request.”

In a statement, the Division of Oil and Gas said it “appreciates the companies’ responses and is review all of the data and information that has been provided.”

BP’s March 31 development plan told the division the company could not speak about efforts made to market Prudhoe natural gas by the other working interest owners.

Prudhoe Bay and Point Thomson, which is operated by ExxonMobil, are the fields from which the proposed $45 billion-plus Alaska LNG Project would draw natural gas. The companies and the division use the generic term “major gas sales,” referring to any potential gasline project.

The division forwarded the BP and ConocoPhillips letters to the Journal after a records request for all responses to the April 11 letter. ExxonMobil appears not to have responded to the division.

ExxonMobil spokeswoman Kim Jordan said the company would defer all questions on the issue to BP as the Prudhoe unit operator.

Now-retired DNR Commissioner Mark Myers wrote letters in January to all oil and gas unit operators in the state notifying them that the department would be asking for new information in future development plans. When a brief general reference to BP’s work on major gas sales in the Prudhoe Bay plan did not suffice, Feige responded with the more specific April 11 request.

She said in an interview that the division expected the new information to be “pretty broad-brush responses” to help the state establish baseline knowledge about how the operational transition from oil production to major gas sales from the Slope fields would work.

When asked for his input on the issue a spokeswoman for Gov. Bill Walker said it would not be appropriate for him to comment on the apparent impasse because it is a regulatory issue.

Unit operators typically must submit development plans 90 days prior to the annual plan expiration date. The 2015 Prudhoe Bay plan expires June 30.

Development plan years start and end based on when the unit in question was formed and thus do not align with the calendar year.

Elwood Brehmer can be reached at [email protected].

05/11/2016 - 5:00pm