March 15, 2022

Press Release: Gara & Former State Commissioner Say ConocoPhillips Cannot Block Access To Potential Billion Barrel North Slope Oil Project

“One of the biggest impediments to increased investment in oil development on the North Slope by new investors has been actions by major oil companies. Blocking development by new, often smaller competitors kills jobs and harms our Alaska’s ability to fund everything from schools to rural and urban police to a stronger long-term PFD,” said Former Rep. Les Gara, a co-sponsor of previous legislation aimed at preventing North Slope major producers from blocking access to facilities by smaller competitors.

“The quiet battle between some of Alaska’s established North Slope major oil producers, and competing companies trying to develop their leases came to light last week in ConocoPhillips’ effort to stop the billion-barrel Pikka prospect. ConocoPhillips is attempting to block a competitor from crossing state-owned lands. The state should immediately grant an access permit asked for by the competitor because surface lands on an oil lease remain public property,” said Gara. This interpretation is consistent with the Alaska Constitution’s requirement that “development” of state lands shall be “for the maximum benefit of its people.” Alaska Const. Article 8, Section 2.

“At the same time, we should clean up our laws and make clear that Alaska is open for business. New investors we want to attract to increase Alaska oil development need to know major oil companies in this state cannot use their financial and lease powers to block competition and new oil development,” said Gara.

Former Commissioner of the Department of Natural Resources, and a former Alaska Director of the Division of Oil and Gas, Mark Myers, agrees.

“ConocoPhillips only has a lease for subsurface rights at Kuparuk. Access to the land surface is non-exclusive. ConocoPhillips’ actions on access, seem aimed at using a non-exclusive access right to commercially leverage unreasonable concessions that could prevent a competitor’s development on valid state leases. This action will at a minimum delay and possibly prevent development of a massive new oil field that is critical to the state’s economic future. It also means that even if an alternative access is developed it will dramatically increase the environmental consequences of the development. We’ve seen similar issues before on the North Slope when major oil companies have demanded excessive costs for using the processing facilities a competitor needs in order to make a field economic,” said Myers.

Myers laid out the state’s powers and legal remedy here. The State should immediately issue access across the North Slope’s road infrastructure with reasonable conditions that protect ConocoPhillips use. “If the Pikka leaseholders cause damage to a road, they’d have to reimburse Conoco. The Pikka leaseholders would also have to comply with reasonable safety precautions crossing the surface of the ConocoPhillips leases,” according to Myers, who says a “miscellaneous” land use permit should be ordered.

Past disputes have centered on whether competitors can use expensive processing facilities owned by large oil companies at a reasonable cost, when processing space is available. Often it’s uneconomic for a small field operator to build a separate processing facility, and we know we need to make existing facilities available when possible, at a reasonable cost. “That’s the problem many of us tried to solve in House Bill 220, filed in 2011 by former Rep. Berta Gardner, and that I co-sponsored,” said Gara.

“Access is a fundamental right, but we should also pass legislation to let future competitors know they have a right to cross another state lease, and to use facilities with spare capacity at a ‘fair and reasonable cost.’ That was the point of HB 220 in 2011, though at that time the strategy by major oil companies to block a competitor was to charge exorbitant prices to use a processing facility.”

“This new chapter – denying access to state land – is creative, and appears to rest on shakier ground than denying access to facilities,” said Gara.