Sunday, July 1, 2012

Walker appeal debated; State says Anchorage attorney has no basis to challenge Point Thomson settlement

Wesley Loy
For Petroleum News

Lawyers for the state are asking a judge to throw out Bill Walker’s challenge to the recent Point Thomson settlement.

In a motion to dismiss filed June 18 in state Superior Court in Anchorage, the state argues the settlement is simply not subject to appeal.

“The court has no jurisdiction to hear this purported administrative appeal,” the state’s motion says. “There is no provision in Alaska law permitting Mr. Walker to file an administrative appeal of the Attorney General’s entry into the Point Thomson Settlement.”

Walker, an Anchorage attorney and former candidate for governor, is challenging the Point Thomson settlement as a “citizen taxpayer.”

He argues the agreement resolving the conflict between the state and leaseholders in the Point Thomson oil and gas field is illegal and a bad deal for the state.

State Attorney General Michael Geraghty and Natural Resources Commissioner Dan Sullivan finalized the settlement with Point Thomson unit operator ExxonMobil and its partners on March 29.

The agreement contains provisions designed to push the undeveloped eastern North Slope field to first production.

It was lack of development on the state leases at Point Thomson, decades after a major discovery there, that festered into what was a major legal conflict between the state and the oil companies.

State touts deal

The state’s motion argues the attorney general has “broad authority” to settle litigation, such as that surrounding the Point Thomson unit, in a manner that “he or she believes to be in the best interests of the State.”
The state further argues that under the principle of separation of powers, the attorney general’s exercise of his or her settlement authority is not subject to legislative or court review.

The motion notes that the “specific terms of the Settlement, the development it has spurred, and the jobs it has created are not relevant to the legal issues in this motion,” but state lawyers nevertheless ballyhoo the deal.

“As a result of the Settlement, the Point Thomson Unit, the largest undeveloped oil and gas field in Alaska, and perhaps North America, is moving toward development,” the motion says.

The settlement has terms requiring ExxonMobil and the other working interest owners, or WIOs, to start producing hydrocarbons from Point Thomson or else face penalties such as loss of acreage or unit termination.

The motion cites a June 12 hearing before the state Senate Judiciary Committee in which Walker testified that Alaskans and contracting companies going to work on Point Thomson was “music to my ears.”

“Yet the relief Mr. Walker seeks by filing this appeal is to invalidate the entire Settlement, leaving the State with no binding work commitments from the WIOs and potentially stopping all Point Thomson development in its tracks,” the state’s motion says.

Walker’s opposition

On June 27, Walker and his attorney and law partner, Craig Richards, filed an opposition to the state’s motion to dismiss.
The opposition argues the motion is “premature” and should be denied.

Walker, in his appeal, questions the legality of the Point Thomson settlement on numerous levels. State officials failed to put the deal out for public comment, and failed to obtain legislative approval for some provisions, Walker says. He further contends the agreement contains no firm work commitments, and Point Thomson leaseholders could choose a wasteful development option to exploit the field’s rich gas reserves while leaving valuable liquids behind.

Richards argues Walker does have the right to appeal the Point Thomson settlement under the Administrative Procedure Act and DNR regulations.

Cases the state’s lawyers cite in their motion to dismiss “do not support the propositions that the Attorney General can enter into settlement agreements in contravention to Alaska law,” Richards says.

The idea that terms of the Point Thomson settlement “cannot be challenged by anyone in any forum” is an “implausible assertion,” he says.

The state is trying to avoid having the agreement “subjected to outside scrutiny,” Richards argues.

Democrat legislators skeptical

In early May, ExxonMobil submitted a plan of operations for its Point Thomson project to the state Division of Oil and Gas.
As called for under the settlement agreement, the company is pursuing an “initial production system” to produce 10,000 barrels per day of natural gas condensate from the field. The project will involve up to five development wells — two of which were previously drilled and suspended — on three pads.

The project also includes construction of a new 22-mile pipeline to carry Point Thomson liquids west to the existing North Slope pipeline network at Badami.

On June 22, nine state legislators, all House Democrats, sent the DNR commissioner a letter raising concerns about “the lack of firm timelines” or work schedules in what they called the “plan of development.”

“Given Exxon’s history of not developing this huge resource, Alaskans deserve to know not just what they plan to do, but when they plan to do it. Otherwise, our resource could sit in the ground for another thirty years, and we cannot accept that,” House Democratic Leader Beth Kerttula of Juneau said in a press release.

ExxonMobil’s plan of operations does include a schedule estimating first production in 2016.