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Alaska’s Deal With Oil Execs Ushers in Pipeline

ANCHORAGE, Alaska (CN) - Three oil giants reached a settlement with Alaska Gov. Sean Parnell on Friday on the future development of North Slope energy resources.

Exxon Mobil, BP and ConocoPhillips have agreed to work on the Alaska Pipeline Project(APP) with TransCanada Corp.

The Alaska Supreme Court indicated a day earlier that a settlement might be in the works by dismissing its review of disputed leases on the Point Thompson gas fields.

Point Thompson is North America's largest known oil and gas field. The North Slope property is thought to have 8 trillion cubic feet of natural gas and hundreds of millions of barrels of petroleum liquids, one-fourth of the known gas resources in the area.

Alaska had been trying to win back control of Point Thompson land for the last decade, pulling leases that it said had been held too long without being developed. ExxonMobil, the largest leaseholder in Point Thompson, with more than half of the shares, recently released its Point Thompson Environmental Impact Statement and plans to go active by 2016.

It and other oil companies had attributed the development issues to technical challenges and the absence of new pipeline.

Before the Alaska Supreme Court dismissed the case, it had heard oral arguments on Feb. 8.

Parnell, who discussed proposed oil and gas legislation at a large rally Wednesday, applauded the settlement.

"I am pleased to announce that the parties have resolved Point Thomson litigation and the three CEOs have stated their companies are now formally aligned with the APP parties," Parnell said in a statement. "They have undertaken work together on the commercialization of North Slope gas with a specific focus on a large-scale LNG [liquefied natural gas] project from Southcentral Alaska."

The CEOs of ExxonMobil, Conoco and BP issued a letter Friday saying they are moving forward as "co-venturers" with the goal of bringing the Point Thompson resources to market.

"North Slope gas commercialization will bring new job opportunities, increased state revenues, reliable in-state energy supplies and new exploration opportunities, which will further the development of North Slope oil and gas," the letter states. "This will be key toward reaching your goal of one million barrels of oil per day through the Trans-Alaska Pipeline System.

"We are now working together on the gas commercialization project concept selection, which would include an associated timeline and an assessment of major project components including in-state pipeline routes and capacities, global LNG trends, and LNG tidewater site locations, among others."

State senators have been criticizing the governor's plan to give certain tax incentives to the companies, claiming that it would take money out of the state and hinder new exploration and competition with new gas players.

The Alaska Department of Natural Resources noted in a 20-page report that "the settlement also has severe consequences if the producers fail to develop or expand development."

"If Producers abandon the IPS (Initial Production System)/fail to keep the provisional work schedule, there will be a significant contraction of PT acreage by 2015," the report states.

"If there is no IPS production and a MGS (major gas sale) is not sanctioned by 2019, then the unit terminates and all acreage automatically returns to the state without appeal," it continued, adding that "this includes leases with capable wells."

"If the producers do not commit to expand production beyond the IPS, or do not sanction a MGS, then significant acreage contracts from the unit and automatically returns to the state without appeal.

"If the producers commit to expanded development, or sanction a MGS by 2019, but do not follow through, the unit will contract to the area in production.

"If there is no commitment to Brookian oil formation production, then Brookian acreage automatically contracts in 2018 and returns to the state without appeal.

"'Without appeal' is used throughout the agreement - it means that the producers waive their right to appeal automatic termination of their leases to any tribunal in Alaska or the United States."

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