Alaska May Revoke Drilling Licenses

Alaska's oil and gas chief is threatening to revoke leases held by Exxon Mobil Corp. and other producers for not drilling the rich fields near the Arctic National Wildlife Refuge.

Division of Oil and Gas director Mark Myers says Exxon Mobil, the operator and largest leaseholder of the 106,200-acre Point Thomson unit, which has sat undeveloped for nearly three decades, has made a "mockery" of their obligation to bring oil and gas from Point Thomson to market.

The producers, which also include BP Exploration (Alaska) Inc., Chevron USA Inc. and ConocoPhillips Alaska Inc., have said it's not commercially viable to develop Point Thomson. But with gas and oil prices at all-time highs, Myers is taking a hard line.

"We believe it's time for the field to come into that development stage," Myers said. "It hasn't made that jump in the last 28 years."

The Point Thomson unit, 30 miles east of Prudhoe Bay and on ANWR's western border, is believed to hold 8 trillion cubic feet of natural gas and hundreds of millions of barrels of oil and condensed natural gas. Unlike ANWR, which has been off-limits to oil companies but could be opened by Congress this fall, all the Point Thomson land has been leased since 1977. The land available for drilling was expanded in 2001.

But not much has happened. Exxon Mobil filed a new development plan this summer that would have delayed drilling even longer. In a decision last Friday, Myers found Exxon Mobil in default, saying the company had no plan to bring Point Thomson into commercial production within a reasonable time.

If a new development plan mapping the path to production for Point Thomson isn't submitted by the end of the year, officials say they could shut the unit down and revoke all 45 leases. Myers says Point Thomson's individual leases call for production by 2009.

Exxon Mobil says developing Point Thomson is not possible without first changing the state's tax and royalty laws and without a gas pipeline from the North Slope. The company proposed folding Point Thomson's development into the gas pipeline fiscal contract now being negotiated with the state, and also delaying drilling deadlines set in 2001 by another two years.

The state rejected the plan, calling it "inappropriate" to tie Point Thomson to the gas line negotiations. Hundreds of millions of barrels of oil and condensed natural gas could be fed from Point Thomson through the existing oil pipeline system, Myers wrote in the rejection.

Exxon Mobil spokeswoman Susan Reeves declined to answer specific questions, but forwarded a statement that said the producers are disappointed with the state's denial and they disagree with the decision. The producers plan to appeal.