"I determined that the proposed 23rd Plan of Development (a gas recyling and condensate production project) does not serve the State's best interests or meet the legal standards in DNR's regulations," Tom Irwin said in a statement.
"In light of the history of this unit, I did not trust the appellant's commitment to follow through with their 23rd Plan of Development," Irwin said. The commissioner declined to offer further comments because the issue is in litigation. Irwin said the leaseholders have 20 days to request a reconsideration of the decision.
The state had moved to terminate the Point Thomson unit and take leases back from the companies in late 2006, but was ordered by Alaska Judge Sharon Gleason in December to discuss alternative remedies to termination of the leases.
In February, ExxonMobil, the operator of Point Thomson, submitted a proposal for a $1.2 billion gas recycling and condensate production project as a proposed solution to the dispute.
Rejection of the ExxonMobil proposal sets the stage for further litigation. Judge Gleason has scheduled another hearing on the dispute June 15 to give the state an opportunity to explain its reasons for rejecting the recycling proposal.
Gleason could reject the department's decision but state attorneys have said that no matter what Gleason decides, the decision will be appealed to the state Supreme Court by either the department or the leaseowners.
Richard Todd, a state attorney leading the state litigation team, told Alaska legislators in February it will probably take the Supreme Court until 2010 or 2011 to make a final decision.
The state's decision has important ramifications for an Alaska natural gas pipeline. Point Thomson's 9 trillion cubic feet of proven gas reserves are an important part of the 35 tcf of total proven gas on the North Slope. If the ownership of Point Thomson is uncertain, companies planning a gas pipeline may have difficulty holding an open season for gas capacity nominations in 2009 or 2010.
BP and ConocoPhillips announced April 9 they will prepare for a 2010 open season for a pipeline they hope to develop jointly. TransCanada Corp. has separately proposed a pipeline it would develop with an open season in 2009.