Point Thomson Expansion Leases Returned


Point Thomson Expansion Leases Returned to State

February 19, 2009, Juneau, Alaska – Governor Sarah Palin today noted 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 this 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.

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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