Pursuing Point McIntyre.

• Author: Tyson, Ray
• Position: Oilfield

Just five years after it was discovered, the Point McIntyre oilfield near Prudhoe Bay was poised to come on line in early July, within budget and nearly two months ahead of schedule. Then things began to unravel into a fight that pitted the field's owners against the State of Alaska.

For three and a half months, until mid-October when the dispute was settled and Point McIntyre was brought on line, the Alaska Department of Natural Resources (DNR) and owners Arco Alaska, BP Exploration and Exxon fought over a spider's web of issues that kept oil from one of the nation's largest reserves locked in the ground.

Never before had an Alaska oil field been held hostage to a state/owner disagreement. And never before had the state's industry policeman, the Alaska Oil & Gas Conservation Commission (AOGCC), been called in to resolve such an unprecedented event.

The debate centered on whether to allow the Point McIntyre field to become part of the larger Prudhoe Bay Unit (PBU), a cost-saving move that would permit the owners to use existing PBU facilities and infrastructure while diminishing construction impacts on the environment.

While DNR favored this approach, it wouldn't accept owner claims amounting to millions of dollars in field-cost deductions for handling the state's portion of Point McIntyre oil during the productive life of the reservoir.

Moreover, DNR accused the owners of allocating oil reserves to specific Point McIntyre leases in a way that would shortchange state royalty payments. State leases that make up the reservoir carry three separate royalty rates and DNR felt that producers assigned an inordinate amount of crude to leases with the lowest rates.

STOIC STANDOFF

At first, the owners stood firm on the issue, contending that inclusion of Point McIntyre in the PBU had always been part of their master plan, and emphasizing that portions of the field actually lie within the unit. Moreover, the owners said an earlier agreement with the state entitled them to deduct field costs for processing state royalty oil on leases within the PBU.

In a failed effort to break the deadlock, DNR and the Point McIntyre owners proposed and then rejected each other's interim plan calling for immediate startup of the field.

The owners asked DNR to approve their application to include Point McIntyre in the PBU, pending a final decision on expanding the unit and approving the formula for allocating oil to specific leases. The owners said any "adjustments"...