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Alaska denies Exxon permit for ice road


Mon Nov 17, 2008 6:33pm EST

By Yereth Rosen

ANCHORAGE, Alaska, Nov 17 (Reuters) – The Alaska Department of Natural Resources has denied ExxonMobil Corp. (XOM.N: QuoteProfileResearchStock Buzz) a permit to build a seasonal ice road to carry equipment to an oil and gas field the state says it has seized.

Exxon wants the nearly 50-mile road to transport a rig for drilling wells this winter at Point Thomson, a languishing eastern North Slope field of vast oil and natural gas reserves.

However, Alaska says Exxon and its partners no longer own the Point Thomson leases and the Department of Natural Resources has formally revoked the leases.

“The state does not allow any party to drill on its lands without the state’s permission,” the statement said.

The state’s efforts to revoke Point Thomson leases started in 2005 when the Division of Oil and Gas rejected Exxon’s 22nd plan of development for the field. In that plan, Exxon and its partners declared development must wait for a natural gas pipeline, a project estimated at the time to cost over $20 billion.

The state subsequently rejected Exxon’s 23rd plan of development for Point Thomson, which called for production of at least 10,000 barrels of liquids a day by 2014.

Exxon and its partners have challenged the state’s actions.

The dispute over Point Thomson leases is pending in Alaska Superior Court. State officials have predicted the issue will be resolved in the courts in about two years, and that there will be ready buyers once the leases are put back up for auction.

A study the state commissioned this year estimated that Point Thomson holds 580 million to 950 million barrels of oil and 490 million to 600 million barrels of natural gas liquids.

Exxon’s partners in what the state calls the “former Point Thomson unit” are BP (BP.L: QuoteProfileResearchStock Buzz), Chevron (CVX.N:QuoteProfileResearchStock Buzz) and ConocoPhillips (COP.N: Quote,ProfileResearchStock Buzz). Exxon was the unit’s operator.

An Exxon Mobil spokeswoman said Monday the company still plans to drill this winter.

“We have the right to conduct drilling activities under the terms of the leases which we do not believe have expired,” spokeswoman Margaret Ross said in an email.

“The Point Thomson working interest owners are proceeding with the project and the drilling plan while we seek to resolve the dispute with the State over the Point Thomson Unit. We are hopeful that we will resolve the differences to our mutual satisfaction.”

The Point Thomson unit, an amalgamation of leases that at one time reached over 100,000 acres, was created in 1977. Some leases date back to the 1960s. But there has been no well drilled at Point Thomson since 1982.

(Editing by David Gregorio)


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