Clock is ticking on state dispute with Prudhoe Bay leaseholders

Prudhoe Bay. The Department of Natural Resources has refused to approve the oil field’s 2016 Plan of Development until operator BP includes detailed marketing information for its massive gas reserves. (Photo courtesy of BP)
Prudhoe Bay. The Department of Natural Resources has refused to approve the oil field’s 2016 Plan of Development until operator BP includes detailed marketing information for its massive gas reserves. (Photo courtesy of BP)

The clock is ticking on a dispute between Gov. Bill Walker’s administration and the state’s largest oil producers.

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The Department of Natural Resources has rejected the annual plan for Prudhoe Bay, demanding detailed new information on how North Slope companies plan to market the field’s natural gas reserves.

But companies have resisted, arguing the information the state wants either does not exist or would be illegal to hand over.

Thursday, Sept. 1, was the deadline for the field’s main operator, BP, to submit a new plan. The state now has 60 days to respond.

This fight started back in January, with a letter from former Natural Resources Commissioner Mark Myers. The letter asked BP to include detailed information on its efforts to market the field’s oil and — more to the point — natural gas reserves.

That request was new because right now there isn’t a clear path for major gas sales from Prudhoe Bay. The state and North Slope producers have been trying to build a pipeline to bring that gas to market for decades. At the time of the letter, the state was in a four-way partnership with the main Prudhoe Bay leaseholders — BP, ExxonMobil and ConocoPhillips — though that partnership is now dissolving, as the state takes control of the project.

When BP submitted its plan in March, the Division of Oil and Gas responded with a bullet-point list of details it still required — including potential customers, volumes and pricing terms for natural gas sales.

BP refused, calling the state’s request “extraordinary,” “unprecedented,” and “unlawful.” The company argued, in part, that sharing marketing information with competitors — including the state — would violate antitrust laws.

BP also said much of the information the state wants simply doesn’t exist, because nobody is currently selling gas from the North Slope. And it pointed out the state was well aware of its major efforts to monetize its gas, through the Alaska LNG project.

ExxonMobil and ConocoPhillips both sent letters supporting BP’s position.

The state wasn’t satisfied. On June 30, Division of Oil and Gas Director Corri Feige sent a letterdeclaring the Prudhoe Bay 2016 Plan of Development incomplete. The Division extended the previous year’s plan and gave BP two months to try again.

With the new plan submitted, the state has until November 1 to respond. (BP’s most recent letter and updated plan have not been released publicly; the Division said it will release the plan once it has been reviewed for confidential information.)

It’s unclear what will happen if the state rejects the plan again. A company can’t operate a field without an accepted plan of development  — so in theory, at least, the dispute could disrupt production at Alaska’s largest oil field.

But a Division of Oil and Gas spokesperson insisted that’s not in the cards, saying the state is confident it will get the information it wants, and the Division can issue another extension — or more — if needed.