GUEST COMMENTARY: Point Thomson lawsuit intended to protect Alaska interests

In a recent fundraising email that made its way to a cover story in the Alaska Dispatch News, Gov. Parnell claimed my challenge of his Point Thomson settlement was intended to stop development: “Bill and his law firm are still fighting the state in court to stop the Point Thomson project, where over 700 people were working this summer. Alaskans cannot afford the job loss and lost economic momentum a Walker-Mallott ticket will bring.”

Nothing could be further from the truth.

Point Thomson is the largest nonproducing oil and gas field in North America. The delivered value of its oil and gas is about $160 billion at today’s prices.

Much of the core area was leased in 1965 with acreage added periodically over the decades. It was unitized in 1970s, which means the leases have not expired in spite of a lack of production.

In 2005, the state was at its wits’ end trying to get Exxon to commit to a major gas sale or a 70,000-barrel per day gas cycling project (gas cycling is stripping the liquid hydrocarbons from production and reinjecting the gas).

On behalf of the Alaska Gasline Port Authority, I submitted a detailed filing demanding the state terminate the unit for failure to develop. Shortly thereafter the state pulled the leases in their entirety.

Proceedings were put on hold a year pending negotiation of Gov. Murkowski’s gasline contract. When that failed the state held a hearing at which I was the lead attorney advocating termination of the unit. One of Gov. Murkowski’s last acts in office was to terminate the leaseholds for lack of development.

Court appeals ensued. In 2009, during a remand to Gov. Palin’s administration, Exxon committed to drill two wells and to build a small gas cycling project of about 10,000 b/d, and to build a 70,000 b/d liquids pipeline to connect with Badami in the event a full-sized project was constructed.

In return Natural Resources Commissioner Tom Irwin allowed them to keep two leases (ADL 47559 and 47571). ExxonMobil is currently completing that small project, and I commend Gov. Palin and Commissioner Irwin for getting it built.

The litigation over the rest of the leases continued until Gov. Parnell settled the case in the spring of 2012. Unfortunately one of the largest oil and gas deals in state history was finalized and all court cases dismissed in secret, without public notice or comment or review by the Legislature, and ostensibly without the right of third parties to challenge its terms. The settlement was not only a bad deal for Alaska, it was blatantly illegal.

Under its terms Exxon could maintain the entirety of Point Thomson if it completed the small gas cycling project promised to Gov. Palin’s administration to keep two leases.

The agreement then provided for a series of development scenarios that result in non-core leases being lost if not met. I could write a book on the loopholes, but most of the acreage will be kept through the 2030s if Exxon does nothing further. That is the likely outcome barring further state pressure.

But Gov. Parnell used the settlement contract to eliminate the state’s right to apply that pressure. Under 11 AAC 83.303 the state can only approve development decisions if they are in the public’s interest.

The state’s assessment must include consideration of environmental and economic impact, geological characteristics of the reservoir, and prior and proposed development activity. Yet Gov. Parnell expressly agreed to waive that oversight to let Exxon develop the field however it wants.

He even agreed the Department of Natural Resources would not weigh in on any future development disputes, and to resolve them by arbitration rather than the legally mandated administrative and court processes. This is notwithstanding a 2001 Supreme Court decision that the State and Exxon could not contract around the state’s regulations.

In short this was the worst, dirtiest backroom deal in State history. So I challenged the legality of the settlement as a resident of Alaska at my own expense. My goal is not to stop current development, but to ensure the state retains the authority to force more development in the future.

I have posted a copy of the relevant documents on my campaign website, I encourage Alaskans to review those materials, and to decide for themselves who is advocating for our interests.

Bill Walker was born into the Territory of Alaska and owns an Anchorage law firm with an oil and gas and municipal law focus.

09/25/2014 - 8:50am