The impasse between the Point Thomson unit owners and the State of Alaska is heading down a road clearly signposted toward litigation. And that being the case, the legal title to at least some of the Point Thomson leases is likely to stay in limbo for quite some time.
So, just how long might it be before the state can schedule a Point Thomson lease sale, assuming that the state prevails in its position that the Point Thomson unit, together with its underlying leases, passed into oblivion following Department of Natural Resources Commissioner Tom Irwin’s decision to terminate the unit?
As in all things legal, that depends on what happens.
Complete the state lawsuit
The first step will necessarily be the completion of the current Point Thompson lawsuit in Alaska Superior Court, before Judge Sharon Gleason.
On Dec. 27, Gleason ruled that DNR acted properly when it rejected Exxon’s 22nd plan of development for the Point Thomson unit. Rejection of that plan in 2005 led to the chain of events culminating in termination of the unit. However, Gleason directed DNR to give the Point Thomson owners one last chance to come up with an “appropriate remedy” as an alternative to termination by holding a DNR administrative hearing. DNR held the hearing and Commissioner Irwin re-affirmed the termination decision.
DNR will send the record on the hearing and decision back to Judge Gleason shortly, Nan Thompson, petroleum manager for DNR’s Division of Oil and Gas, told Petroleum News June 16. Gleason will review the DNR decision and then make a final decision in the case. It’s probable that, assuming Gleason finds in favor of the state, the oil companies would appeal the case to the Alaska Supreme Court.
And how long might it then take for the Supreme Court to decide on the case?
“A reasonable estimate for the Supreme Court is a couple of years after it gets to them,” Thompson said.
Spencer Hosie, a senior partner and specialist in business law with the San Francisco firm of Hosie McArthur, told Petroleum News June 17 that the state’s view of the timeframe may be a little pessimistic. Given the urgency of the situation, the court would likely expedite the case.
“It could be resolved in 16 to 18 months,” Hosie said. “With any luck it shouldn’t take a full two years.”
Federal court?
On the other hand, if the case were to end up in federal court rather than state court, the timeframe for resolution could extend considerably. But the state doesn’t think that there is any valid federal claim.
“It’s an issue we’ve looked at,” Thompson said. “This is an issue about state management of its resources.”
Hosie agrees.
There’s probably no federal case to answer, he said. But if the lease owners wanted to make a federal case they’d probably claim that a federal constitutional due process violation had occurred. They would file a new case in a federal court and that court would decide whether there was a valid federal case. Of course, the lease owners could then appeal that court decision.
But Hosie thinks that the whole Point Thomson question comes down to a requirement that the lease owners tell the state whether they view Point Thomson as being economic for development.
“What the state is entitled to here is a straight answer. Is it economic or not?” Hosie said.
The owners have not answered that question, he said.
—Alan Bailey
