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Exxon Mobil asks court for Alaska oil leases

Exxon Mobil Corp. wants a federal court to overturn the state's decision to revoke its leases in the North Slope's Point Thomson oil and gas field.
/ Source: The Associated Press

Exxon Mobil Corp. wants a federal court to overturn the state's decision to revoke its leases in the North Slope's Point Thomson oil and gas field.

In a court filing late last week, the company asked for the reversal or "in the alternative, to remand the matter to the commissioner with instructions to make a new and different decision."

Alaska Department of Natural Resources acting Commissioner Marty Rutherford has already reviewed the case once and late Wednesday backed the Nov. 27 decision by the former commissioner, Mike Menge.

Menge found last month that Exxon Mobil — which operated the field on behalf of itself and other companies — failed to come up with a viable plan for developing the field's vast reserves. Menge was the commissioner under former Gov. Frank Murkowski.

Recently named acting commissioner by new Gov. Sarah Palin, Rutherford concurred with her predecessor.

"The facts clearly uphold Mike Menge's decision to terminate the Point Thomson Unit agreement," Rutherford said in a statement Wednesday. "I agree that Exxon Mobil has not met its obligations, and I must deny them the relief they sought in their reconsideration request."

This lawsuit is among four, plus a complaint, filed as recently as Tuesday by oil and gas companies.

All are related to the Point Thomson issue, and are now being reviewed by attorneys for the state's natural resources agency.

Stripping ExxonMobil of its leases, set off what the Irving, Texas, company says could be "protracted" litigation and detrimental to any agreement for an Alaska natural gas pipeline.

"This is a major setback for an Alaska gas pipeline project since gas supply from Point Thomson is critical for the project," company spokeswoman Susan Reeves said in an e-mail Thursday to The Associated Press.

"Exxon Mobil, on behalf of the PTU owners, has complied with the Point Thomson lease agreements, the Point Thomson Unit Agreement and all Alaska statutes and regulations," she said. "Litigation related to the termination of the Point Thomson Unit is likely to be protracted."

In the court filing, the company said the Menge "breached a covenant of good faith and fair dealing."

DNR spokesman Dan Saddler said agency's lawyers are reviewing the Exxon Mobil claim as well as related lawsuits filed by BP PLC, Chevron Corp. and ConocoPhillips.

Exxon Mobil and ConocoPhillips had requested Rutherford to reconsider her predecessor's decision to strip the leases.

Rutherford was not required to reply to the oil companies' request for reconsideration. However, she said in their request, the companies indicated Menge's decision that Point Thomson did not contain certified wells implied other units or leases were in danger of being revoked.

Rutherford discounted that, saying the Nov. 27 decision dealt only with Point Thomson. She also did not find other units and leases were going to be terminated.

This is the final administrative action, she said, and will allow the state to eventually reopen the lease sale process to bidders.

That sale could be held as soon as October, but the legal battle could delay the bidding.

Other oil companies being stripped of their leases include BP PLC and Chevron Corp.

Point Thomson is the North Slope's second largest natural gas field, after Prudhoe Bay.

It is estimated to hold about 9 trillion cubic feet of gas reserves, more than a quarter of the known gas in all North Slope fields.

Alaska officials ruled in 2005 that Exxon Mobil was in default for delaying development by submitting a plan without any sure date for production to begin.

The state threatened to revoke the leases but stayed that decision while negotiating a contract with Exxon Mobil and two other oil companies for a $25 billion natural gas pipeline that would take gas from the North Slope to Midwestern markets.

The negotiated contract fell through amid worries that Alaska would be giving away too much to the producers. That left Exxon Mobil with an October deadline to update its development plan.

In the plan rejected in November, Exxon Mobil proposed paying the state $20 million and giving up 20,000 acres to settle its unmet obligations to developing the gas field. The plan included a promise to drill one well in 2009 to better map the extent of the field.

Rejecting the plan, "amounted to an abuse of discretion," according to the lawsuit filed by Exxon Mobil.

Over the last three decades, Exxon Mobil has filed 22 development plans for the 106,200 acres unit. No commercial oil or gas operations have begun in that time.