Point Thomson Expansion Leases
Returned to State
February 24, 2009
The ongoing progress the Department of Natural Resources (DNR)
continues to make toward its goal of resolving the legal disputes
over the Point Thomson area. Earlier last week, ExxonMobil surrendered
eight leases in the Point Thomson area, comprising about 17 percent
of the leases in the former unit area. DNR can now begin the
process of reissuing these leases for development.
The eight leases were the subject of a 2002 Expansion Agreement
under which ExxonMobil agreed to drill at least eight wells and
begin producing oil in 2006 in exchange for the state's agreement
to add those eight leases and five others to the then-existing
unit. ExxonMobil agreed to pay the state a $20 million penalty
and relinquish the leases without legal action if they failed
to meet those drilling commitments.
Those wells were never drilled. ExxonMobil paid the $20 million
penalty with interest in the summer of 2007, but the company
also filed a legal action in Superior Court to retain the expansion
leases rather than return them in accordance with the agreement.
Through a stipulation filed with the court earlier this week,
however, ExxonMobil has acknowledged it is not entitled to retain
eight of the leases and has returned them to the state.
Quoting a news release from the Office of the Governor, these
events reflect continuing progress in this administration's efforts
to bring the world-class resources in the Point Thomson area
to market. Because the state has diligently pursued its legal
options and strictly enforced its contractual rights, ExxonMobil
is now preparing to mobilize a rig and begin to drill a well.
For the first time in more than 25 years, Exxon will be drilling
a well at Point Thomson.
In a recent decision, DNR Commissioner Tom Irwin conditionally
granted ExxonMobil and its partners the right to operate on two
leases. Those two leases comprise less than 5 percent of the
original unit area. ExxonMobil and its partners have promised
to drill a well on each of those leases by the end of 2010, and
to construct a pipeline and processing facilities to bring those
leases into production no later than 2014. If these commitments
are not honored, these leases will automatically terminate.
A decision on the status of the other leases that expired when
the unit was terminated is pending before Commissioner Irwin.
A hearing was held earlier this year, and the appellants have
until the middle of March to file post-hearing briefs. Commissioner
Irwin will make a decision after reviewing all of the evidence
filed and the briefs.
An appeal of DNR's decision to terminate the Point Thomson Unit
is pending in Superior Court before Judge Gleason.
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