The March 13 DNA headline, “Alaska’s Next Big North Slope Oil Project Is Embroiled In A Feud With ConocoPhillips, Reportedly Up For Sale.” highlights a situation that would not exist in this owner state if Alaska acted like an owner and managed its oil fields the same way other owner states around the world manage theirs.
Oil Search, an oil exploration company from Papua New Guinea, came to Alaska and, in good faith, partnered with Spanish oil company Repsol, as a minority partner, to produce oil from the North Slope from Alaska.
Together, in 2017, they bought out Bill Armstrong’s Pikka discovery for $850 million and proceeded to drill more wells and build roads and gravel pads.
Last December, in need of more capital, Oil Search sold a majority stake to Australian Santos Ltd.
While the ink is barely dry on the contract, Australia’s Santos Ltd. tackled the harsh reality of doing business on the Alaskan North Slope and has already put its stake up for sale.
The problem of Santos Ltd. has nothing to do with taxes or government regulations; their problem has to do with the lack of government regulation – a lack of government regulation that the overwhelming majority of oil-producing proprietary states provide.
ConocoPhillips is demanding hundreds of millions of dollars in exchange for the right to cross the roads it owns that connect the Pikka prospect to the North Slope oil hub in Prudhoe Bay.
The message here: you can leave the oil in the ground or you can give ConocoPhillips all of your profits for the next 30 years, or you can sell your interests to ConocoPhillips today for a fraction of the $850 million paid to Armstrong and the hundreds of millions of dollars already spent on roads and platforms.
Armstrong was familiar with the tactics of the big three oil producers and most likely anticipated extortion from Conoco as part of his incentive to sell.
When residential developers build subdivisions and sell lots to builders, they cannot sell a single lot until sewer lines, water lines, streets, streetlights, sidewalks, and fire hydrants were not completed to city or state engineering specifications and transferred to the city or state. From this day forward, the road is owned and maintained by the government, and free for all users.
The North Rim is a web of roads, collector lines and packinghouses, all leading to the Trans-Alaska Pipeline. Without reasonable economic access to North Slope packing facilities and transportation systems, newcomers cannot do business.
Do you remember Anadarko Petroleum? Anadarko has spent hundreds of millions of dollars fighting the Big Three for fair access to Alaska’s pipeline infrastructure. After years of frustration, Anadarko packed up and left.
Most of the world’s oil is produced in countries that provide access to all the infrastructure necessary for production. Pipelines are transportation corridors, just like bike lanes, sidewalks, highways and railroads.
Section 8 of the Alaska constitution states that Alaska’s lease to Conoco is “subject to reasonable concurrent uses”. I suspect the state Supreme Court would agree that charging more than a fair share of maintenance costs violates Section 8.
Section 18 of the Alaska constitution guarantees the state’s authority to use the Conoco Highway for public access and egress and their pipelines to ensure companies like Anadarko or Santos Ltd. the ability to market and deliver the oil they find.
If we Alaskans want to see the North Slope prosper, if we want to see the pipeline fill to capacity again, we have to overcome this bottom 48 mentality that public ownership of our resources and infrastructure for to deliver to the market is equivalent to communism. . We need to take charge of our oilfields and develop a network of public rights of way that any newcomer can tap into.
Ray Metcalfe spent four years working hard and drilling in the Alaskan oil fields in the 1960s and 1970s, and in the 1970s and early 1980s he was in the Alaska Legislature, where in 1982 he was the co-author of the original investment strategy for the Permanent Fund. In 2005 and 2006, he was a whistleblower on VECO owner Bill Allen for paying bribes to six lawmakers in exchange for their votes to donate Alaska Oil.
The opinions expressed here are those of the author and are not necessarily endorsed by the Anchorage Daily News, which welcomes a wide range of viewpoints. To submit a piece for review, email comment(at)dna.com. Send submissions of less than 200 words to [email protected] Where click here to submit via any web browser. Read our full guidelines for letters and comments here.