Stalemate between state, producers continues over Prudhoe plan

Simply put, the State of Alaska wants information the big three producers are not willing to hand over about potential North Slope natural gas sales.

Alaska Division of Oil and Gas Director Corri Feige sent a letter to BP Alaska management May 12 reiterating that the 2016 Plan of Development for the Prudhoe Bay will be considered incomplete until the company shares “specific information” regarding its efforts to market North Slope gas in preparation for a gasline project.

BP operates Prudhoe Bay on behalf of ConocoPhillips and ExxonMobil, the field’s other primary working interest owner companies.

The May 12 letter is the latest correspondence in a back-and-forth between the producers and the state that dates back to early in the year.

In January, now-retired Department of Natural Resources Commissioner Mark Myers wrote the first letter to BP on the issue stating the department, which houses the Division of Oil and Gas, would be requesting new technical and marketing information related to prospective “major gas sales” in future unit plans of development.

Similar letters were sent to each oil and gas unit operator across Alaska with the aim of improving the state’s knowledge bank regarding how it can help get the currently stranded gas resources to in-state or export markets, according to DNR officials.

BP firmed up its position 10 days earlier in a May 2 letter to the division contending the new Plan of Development “requirement is outside the scope of current regulations and constitutes impermissible rulemaking,” BP Alaska Reservoir Manager Scott Digert. The division must go through the formal public regulatory process to appropriately change what is required in unit Plan of Development, Digert added.

“In order to adequately evaluate how the (Prudhoe Bay Plan of Development) meets the requirements of (state regulations) and other law, the division needs specific information regarding past and on-going efforts to market gas in both the local and non-local markets,” Feige wrote in the May 12 letter. “To the extent it is contemplated at this time, the division also needs specific commitments and timelines regarding how gas will be marketed in the future. The division acknowledges the various objections raised by BP and ConocoPhillips regard the division’s requests and, again, respectfully disagrees.”

The state has a 25 percent share in the $45 billion-plus natural gas export effort known as the Alaska LNG Project with BP, ConocoPhillips and ExxonMobil. Roughly three-quarters of the gas reserves to feed the AK LNG Project would come from Prudhoe Bay, and the prodigious oil and gas field would undoubtedly be the main driver behind any major North Slope gas sales.

BP’s 2016 Prudhoe Bay Unit Plan of Development submitted March 31 focused on immediate plans to recover oil from the field and contained only a couple paragraphs about its ongoing efforts to support a gas project. It told the division that each working interest owner company would have to submit its own gas marketing information to avoid anti-trust issues among the potentially competing parties.

The current Prudhoe Bay Plan of Development expires June 30, according to the division.

ConocoPhillips responded to the April 11 letter from Feige on May 4, asserting its support of BP’s position and offering to meet with the Division of Oil and Gas about the information requested.

ExxonMobil has not responded to the division, a fact noted in Feige’s May 12 letter. An ExxonMobil Alaska spokesperson has told the Journal the company would defer to BP as the unit operator on the issue.

Look for updates to this story in an upcoming issue of the Journal. Elwood Brehmer can be reached at [email protected].

05/16/2016 - 11:53am