Conoco Says Court Case Could Break Alaska Deal

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Category: News

Created on Friday, 01 September 2023 15:36

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By JAMES BROOKS

Alaska Beacon

In documents filed Tuesday in Anchorage, international oil company ConocoPhillips said an ongoing federal court case is likely to make or break Alaska’s largest planned oil development in decades.

If Alaska District Court Judge Sharon Gleason cancels required federal approvals, “the Willow project is highly unlikely to proceed at all,” said Connor Dunn, vice president of Willow for ConocoPhillips.

Dunn’s statement came as ConocoPhillips filed a legal reply to several environmental groups who sued the federal government earlier this year and asked Gleason to overturn existing federal approvals as inadequate.

The plaintiffs include the Alaska Wilderness League, Sierra Club and Sovereign Iñupiat for a Living Arctic. A similar lawsuit, filed in 2020, overturned a previous federal approval and forced regulators to restart their process, and new approval was granted this spring.

The federal government is opposing the environmental groups’ lawsuit and is backed by ConocoPhillips, the state of Alaska, the North Slope Borough, and a variety of companies and industry groups who hope to see the project developed.

ConocoPhillips said in this week’s filings that through July it has already spent $925 million on Willow, and if allowed to proceed, it expects to spend another $903 million by the end of the winter 2023-2024 construction season.

As many as 1,200 people would be involved in direct construction, the company said, with another 600 offering support. 

Willow is expected to hold as much as 600 million barrels of recoverable oil and would generate billions for the state of Alaska in the long term but would cost the state money during its initial years.

The environmental groups are scheduled to reply to ConocoPhillips and other defendants by mid-September, allowing Gleason to decide the case before the start of the winter construction season.

If the case isn’t resolved by then and ConocoPhillips can’t work this winter, there is a risk that the company could fail to meet the requirements of its land lease with the federal government.

Willow would be the first large project constructed in the National Petroleum Reserve-Alaska, and ConocoPhillips’ 30-year lease was signed in 1999.

Under the terms of the agreement, the first oil must flow by September 2029. Writing to Gleason, Dunn said that “timely first oil requires a highly integrated series of construction milestones from 2023 through 2029, and there are no opportunities to further compress the construction schedule that would not create major execution risk.”

It’s possible that the federal government allows a lease extension, he said, but that’s not guaranteed.

If Gleason overturns the existing approval altogether through what’s known as a “vacatur” order, it would likely cost ConocoPhillips at least two winter construction seasons, Dunn said, because of the time needed for federal regulators to redo the approval process.

“It could take years, depending on market conditions, to reassemble the right team to execute the project safely and efficiently,” Dunn said. “This is a real, practical consequence of a vacatur order, and it would weigh heavily against ConocoPhillips moving forward with a project that faces a risk of lease expiration.”

--https://alaskabeacoon.com/james-brooks

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