Oil company Santos scored a victory last week over competitor ConocoPhillips in a long-running dispute over roads needed to access Alaska’s next big petroleum development.
For the past year, the companies have feuded over the rights of Australia-based Santos to cross roads that connect its new Pikka project to the North Slope oil hub of Prudhoe Bay.
The roads were built by Conoco at that company’s Kuparuk River field, which sits on leased, state-owned land between Pikka and Prudhoe Bay.
Earlier this year, the Alaska Department of Natural Resources issued a permit to Santos, formerly known as Oil Search. Conoco appealed soon after.
Last week, Acting Natural Resources Commissioner Akis Gialopsos denied the appeal, writing in a sharply worded decision that Conoco does not have “the ability to prevent or impede the people of the state of Alaska from realizing the benefits of development on adjacent state lands.”
Conoco can now file another appeal to civil court, though it has not said if it will do so.
“We are disappointed in the commissioner’s Dec. 1 decision,” spokeswoman Rebecca Boys wrote in an email Monday. “We are evaluating our next steps.”
Santos officials didn’t respond to a request for comment. Officials from the Department of Natural Resources declined to comment.
The Pikka project, once it’s built, could ultimately add 120,000 barrels to the 500,000 barrels that already flow down the trans-Alaska pipeline each day.
Australia-based Santos and partner Repsol, a Spanish oil company, in August announced their final decision to invest $2.6 billion in the project’s construction. Alaska political and industry leaders hailed the news, saying the development could create 500 permanent jobs.
But Pikka sits far to the west of the North Slope’s Prudhoe Bay oil hub, and to access it and move infrastructure there, Santos needs to cross the Kuparuk River field.
Santos, in correspondence with state officials, said Conoco was asking for “exorbitant” payments in exchange for access to the Kuparuk River roads. Conoco said it asked Santos for a one-time, $95 million payment, compared to Santos’ offer of $60 million to support maintenance and capital expenses.
With negotiations stalled, Santos asked Gov. Mike Dunleavy’s administration to grant the company a “miscellaneous land use permit” that would allow it to cross the Kuparuk River Unit over Conoco’s objections — without paying.
The Department of Natural Resources granted the request in March, and Conoco’s appeal has played out over the rest of the year.
Conoco, according to Gialopsos’ decision, argued that the department lacked the authority to issue the permit, failed to follow the necessary decision process and granted Santos a permit that amounted to a “taking” under the U.S. and Alaska constitutions.
Gialopsos rejected each of those arguments in his 35-page decision. He wrote that the state, in its lease and agreements with Conoco, granted exclusive rights for the company to develop oil and gas at the Kuparuk River Unit, but only “non-exclusive” rights to develop roads and access the surface.
The Department of Natural Resources is still pushing Santos and Conoco to reach their own road use agreement that would render the permit unnecessary.
“In the interim, the permit ensures that the public interest is protected, and development of the state’s natural resources is not impeded,” Gialopsos wrote.
Nathaniel Herz is an Anchorage-based journalist and the author of Northern Journal. To support Northern Journal, subscribe here.
