Oil patch insider: Judge says ConocoPhillips to win
road access suit in Superior Court
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Kay Cashman Petroleum News
State loses in North Slope road access lawsuit. That was the headline in Tim Bradner's Nov. 25 Alaska Economic Report.
A state Superior Court judge said Nov. 22 that he will "rule against the state Department of Law and for ConocoPhillips, a North Slope oil producer, in a complex and important law case involving access to North Slope oilfield roads. The state has indicated that it will appeal the decision to the Alaska Supreme Court," Bradner reported.
In a nutshell, "Oil Search (now Santos Ltd.) needed to use oilfield roads built by ConocoPhillips through the Kuparuk River oil fields to reach state leases where Oil Search planned the new Pikka oil field. Typically oil companies allow other firms to use their roads during exploration and pre-development when traffic is light," Bradner wrote.
"During construction, when traffic is heavier, arrangements are made to share maintenance and repair costs. What's unusual in this case is that ConocoPhillips and Oil Search were unable to come to agreement for use of the Kuparuk roads during the Pikka construction phase that began a couple years ago and is ongoing," Bradner reported.
Proposals for cost-sharing were exchanged but the parties could not agree on terms, he wrote.
"No matter how the state high court rules precedent will be set that will affect not only the petroleum industry but mining and other industries where private roads cross public lands for access to properties," Bradner wrote, Things came to a head, he reported, "when Oil Search was in negotiations with lenders to fund Pikka's multi-billion dollar startup cost for phase one (this was prior to the Oil Search acquisition by Santos). There was still no longer-term agreement for using the roads, and at that point a letter from ConocoPhillips warned it might terminate access to its roads. That spooked Oil Search, which ... went to the Department of Natural Resources to ask for access to the roads through a state land use permit. This would be an unprecedented use of this procedure, normally used for small-scale surface land access on state lands. It would essentially become an easement along, or on top, of a private road to allow use by a third party, Oil Search. There was still no agreement on cost-sharing and ConocoPhillips complained that Oil Search (by now Santos) was using the roads for free, with ConocoPhillips picking up $10 million to $12 million in annual maintenance costs."
"Oil Search, however, complained that ConocoPhillips had also asked for a road 'access fee' in addition to cost-reimbursement. An access fee is unprecedented on the slope, it said," Bradner reported.
DNR was in a "difficult position because state oil and gas leases guarantee the companies' access to leases across adjacent state lands for exploration and development. It's unclear whether ConocoPhillips would have carried through on its threat to cut road access, but from the state's point of view a private road owner denying access to a road for access to nearby state leases was untenable," Bradner reported.
"Oil Search/Santos could have built its own road but having two roads side-by-side seems illogical, if for no other reason than the added environmental impact," Bradner said.
Oil Search pressed DNR to issue the road-use permit.
ConocoPhillips sued, arguing this amounted to a form of taking of private property rights. State Superior Court Judge Andrew Guidi said on Nov. 22 that he will agree with ConocoPhillips in his final decision, Bradner reported.
In Bradner's view the "case is lose-lose for Alaska no matter how the Supreme Court rules."
No matter how the Superior court rules on this it, he wrote, it "would set an unfortunate precedent. The same is true for a Supreme Court decision. If the superior court decision against the state and for ConocoPhillips is upheld in the Supreme Court, it could set a precedent for private landowners to block access to state resources. Absent some solution there might also be a liability for the state if it is unable to guarantee access, as provided for in the state oil and gas lease. If the court sides with the state and against ConocoPhillips it would also signal to new oil investors that their infrastructure, in this case roads, will be open to 'free-riders' or those using them free of charge," Bradner wrote.
"Either message to investors is bad news. The state could always pursue a condemnation procedure but that gets messy and winds up with the state owning the infrastructure," Bradner wrote.
"This case should be settled among the parties before a Supreme Court decision comes. Once the state high court renders a decision it is set, absent some intervention by the state Legislature," Bradner concluded.
Editor's note: Tim Bradner can be reached by email at [email protected] or by phone at 907-440-6068
PN reporting on road use March 27, 2022 issue: "Despite a 10-fold difference between what Oil Search (Alaska) is willing to pay ($60 million) and what ConocoPhillips Alaska Inc. wants ($600 million), ConocoPhillips thinks the two companies will be able to reach an agreement allowing Oil Search access to roads in the Kuparuk River unit, which will enable Oil Search to develop the multi-billion-barrel North Slope Pikka unit."
That's the beginning of one of the articles written by Petroleum News on the road use issue.
Check it out in PN archive at:
https://www.petroleumnews.com/pnads/41776607.shtml
ConocoPhillips donates $2M On Nov. 21 the University of Alaska Anchorage announced a $2 million donation from ConocoPhillips Alaska to the Ted Stevens Foundation to create the Alaska Leaders Archive at the UAA/APU Consortium Library.
"We are excited to partner with the Ted Stevens Foundation as a lead donor to preserve and share our state's history through the Alaska Leaders Archive," said Erec Isaacson, president, ConocoPhillips Alaska. "This is an opportunity to equip future generations of Alaskans with the historical foundation to understand the challenges, triumphs, and lessons of those who came before them. ConocoPhillips Alaska is proud to be part of this significant project, which will empower future leaders and ensure that Alaska's rich history is preserved for years to come."
The Alaska Leaders Archive project was launched in 2023 with the gift of the records of Senator Ted Stevens to UAA by the Ted Stevens Foundation. The Stevens collection is one of the largest congressional archives in history. The records document the transition of Alaska from a territory to a state and the important legislative accomplishments of Senator Ted Stevens during his 40 years of public service. His work shaped policy in ways that continue to impact our state today, UAA said in its press release.
The collection showcases the Senator's profound commitment to key issues in Alaska and our nation, including energy, education, healthcare, communications, Indigenous rights for Alaska Natives, amateur sports, infrastructure, military, the Arctic, and much more. The Stevens collection will serve as the cornerstone of the Alaska Leaders Archive, which includes historical collections totaling more than 7,000 boxes from more than 130 Alaska leaders, elected officials, and community figures.
"The Alaska Leaders Archive will provide a window into the leadership and decision making that shaped Alaska's history," said UAA Chancellor Sean Parnell. "Their legacy has a great deal to teach our students and future generations of Arctic leaders."
In collaboration with the Ted Stevens Foundation, UAA plans to renovate and expand the UAA/APU Consortium Library to house the Alaska Leaders Archive.
"Senator Stevens was a strong believer that challenges could only be solved by bringing different voices and perspectives together. The Alaska Leaders Archive brings together the rich history of that collaboration and we hope it encourages leadership in the same spirit," said Lily Becker, daughter of Senator Stevens and President of the Ted Stevens Foundation.
The creation of the Alaska Leaders Archive will involve multi-phase construction and renovation at the UAA/APU Consortium Library. The completed project will include the addition of state-of-the-art archival facilities, a teaching area, and space to display items from these important collections.
--Oil Patch Insider is compiled by Kay Cashman
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