Gubernatorial candidate Bill Walker says Gov. Sean Parnell is wrong to accuse him of wanting to delay progress at ExxonMobil's Point Thomson project, a field that sat undeveloped for decades but is now less than two years from production.
Walker, owner of Anchorage law firm Walker & Richards, filed a lawsuit in 2012 challenging a settlement between the state and Exxon and partners that essentially created a development plan behind closed doors. Walker argued that the deal illegally sidestepped legislative and public input and gave away the state's power to ensure the field would be fully developed for the benefit of Alaskans.
"It was a significant, a significant concession from Alaska," one that was unnecessary because the state likely would have won in court, Walker said. "Our concern is that left unchallenged, this creates a new way of doing business in Alaska that sets a dangerous precedent," with huge decisions made in private that go beyond the scope of the issue being litigated.
A state official said the settlement will allow a chance for future public input if one of three key development steps is taken in 2019 or earlier.
Walker's lawsuit now awaits a decision from the state Supreme Court, something attorneys say could come soon. But it won't be on the merits of Walker's arguments.
A Superior Court judge in 2012 dismissed the case, ruling that the settlement was not an administrative action subject to the administrative appeal Walker had filed, said Cori Mills, an assistant attorney general. Instead, the court instructed Walker to file the case as an original action.
"Instead of doing so, he appealed to the Alaska Supreme Court," said Mills.
For the merits to be argued, the Supreme Court must decide the case was properly filed and remand it back to Superior Court, said Mills.
Meanwhile, Parnell is blasting Walker, accusing him of stalling development. In a recent fundraising email -- the one that mistakenly reached state employees earlier this month -- Parnell said the state under his governorship has "made historic progress on the natural gas pipeline" and that Point Thomson is finally being developed more than 30 years after discovery.
"Bill Walker has his own plan for a gas line which would set aside the historic progress we've made and cause another delay in the project," Parnell said. "Bill and his law firm are still fighting the state in court to stop the Pt. Thomson project, where over 700 people were working this summer. Alaskans cannot afford the job loss and lost economic momentum a Walker-Mallott ticket will bring."
The Point Thomson field, with 8 trillion cubic feet of natural gas, contains a quarter of the North Slope's known natural gas reserves. It's considered pivotal to the $45 billion to more than $65 billion Alaska LNG project that is moving forward but won't receive a final investment decision until at least 2018.
At Point Thomson, however, Exxon recently completed construction of a 22-mile pipeline as part of a $4 billion gas-cycling effort. Exxon would pull condensate oil from the natural gas and put it in the trans-Alaska pipeline. The gas must be pumped back into the ground because there's currently no gas line to carry it to market.
Ten thousand barrels a day of condensate oil is expected to flow beginning in early 2016, in what's known as the initial production system. The flow could increase to up to 70,000 barrels of liquid condensate daily, depending on what Exxon learns from the initial production.
Walker said he did not sue to stop the development. In fact, he said, he played an instrumental role in the events that led up to the initial production system, including filing an agency demand in 2005 calling on the Department of Natural Resources to terminate the Point Thomson unit.
The demand, filed on behalf of the Alaska Gasline Port Authority, laid out the arguments on why Exxon and its partners were in default on the project after decades of refusing to develop the field. The demand called on the department to make gas from the field available to the port authority's natural gas pipeline project.
"I'm not taking credit, but when people say I'm trying to stop Point Thomson, that's pretty hard for me to swallow," Walker said. "I elevated the issue" with the agency demand, a public hearing on the topic and even a lawsuit at the time that focused on concerns over the public being excluded from a potential deal, he said.
In 2006, the state terminated the unit, leading to legal action and a 2009 commitment from Exxon under former Gov. Sarah Palin to complete two wells and launch the gas-cycling project, in exchange for keeping two leases, he said. The state settled the case over the remaining leases in 2012, but work related to the 2009 commitment has led to the progress seen at Point Thomson today, he said.
"It was a repackaging of the deal" reached in 2009, Walker said of the settlement.
Responding to a request for a follow-up interview with Parnell, Parnell campaign spokesman Luke Miller sent an email saying Parnell stands by his original statement and Walker is actively working to stop the project. "Any action undertaken by Bill Walker's law firm will cost Alaskans thousands of jobs," the statement said.
Walker's legal partner and his lawyer in the case, Craig Richards, said a victory for Walker's case would not delay development at Point Thomson. It would simply ensure that the Department of Natural Resources has control of future development steps at Point Thomson, allowing for public input, an authority the settlement removed. He said the settlement allows disputes to be resolved by arbitration rather than through the legally required means of administrative decisions or the courts.
"This has never been about throwing out the project or going back to court cases and reopening those. It's solely been about DNR retaining its legally mandated authorized role in terms of overseeing project development now and in the future," he said.
Joe Balash, the current DNR commissioner, said changing a key part of the settlement could undermine it. "Like most deals, if you take out a key part, then what's left? Do you still have a deal?"
The plan lays out a path to development that allows Exxon to earn back the entire field, he said.
If the company and its partners -- including BP and ConocoPhillips -- complete the initial production system, they can keep the "heart of the reservoir" but not all the acreage associated with the unit, he said. For Exxon to secure all the acreage, by 2019 it would have to commit to increasing the gas-cycling effort to up to 30,000 barrels daily, or sanction a major gas sale, or send gas 60 miles west to Prudhoe Bay to produce more oil there while also making significant amounts of gas available from Prudhoe Bay for instate use. That last alternative would require the installation of a gas line from Point Thomson to Prudhoe Bay and a gas sale. If none of those three options is achieved, the remaining acreage returns to the state.
Balash said that when Walker and Richards say they just want to return the decision-making to DNR, "it seems to me they're trying to use some weaselly words to suggest they're not trying to undo the deal," he said. They're trying to say, no, "you can't make a commitment to (Exxon and its partners) that if they do all this work, they can keep the land. They're saying no, no, that deal's off, DNR has to be free to change its mind."
Balash said public comment related to future steps will be available because the Alaska Oil and Gas Conservation Commission must approve whatever 2019 development options the field's working interest owners choose. He said extensive comment in hearings and litigation since 2005 has also been taken into consideration in creating the settlement. That settlement is essentially a plan of development, and such plans even in non-settlement circumstances cannot be commented upon unless disputes arise, he said.
Richards said once Exxon completes the initial production system, the settlement contains loopholes that permit Exxon to merely complete "paperwork and fake studies" to keep the field until the 2030s, without suffering meaningful consequences from the state, he said.
"We might get a hit by a satellite, too," said Balash. "I don't know where he's coming up with that quite honestly. We have pretty tight language about the commitment in 2019 to one of those three options."
Balash said the settlement provides the means to more fully develop the field beyond the initial production system. It prevents Exxon from stalling on the project and using the initial production system as a lever against the state.
Without a settlement, they could say, "You know, we're not sure there's a good enough fiscal deal with the state, so we'll not move forward on an LNG project at this time, so we'll just continue to produce from Point Thomson under the IPS. What would the state do? We could certainly try to take action on Point Thomson but they would argue well, these other parts of the fields are contributing to production ... and because they're in production we'd be in a legal quagmire that would take years to either prevail in court, or try to make another settlement."