A former Alaska Gasline Port Authority legal consultant with historically hard line views on producers’ obligations under state oil and gas leases is now working for the Department of Law on those issues.
Mark Cotham, a Houston-based attorney, was hired by the Department of Law in July 2015 as a contract attorney with expertise “in obligations of oil and gas lessees to develop leases,” according to his contract with the department.
His original contract, not to exceed $65,000, ran through June 30, 2016; it was amended earlier this year to run through June 30, 2017, with a $130,000 limit.
Cotham testified to the Legislative Budget and Audit Committee in 2005 that he was “struck” by the lack of discussion about the producers’ requirement to develop and sell natural gas from state leases in his research into the relationship between the State of Alaska and the North Slope producers.
At the time, the state was working to advance an ultimately unsuccessful North Slope natural gas project under Stranded Gas Development Act.
In November 2006, Cotham wrote an opinion column for the Juneau Empire entitled “My turn: Speaking in terms Big Oil can grasp: Lease cancellation threats may get companies talking.”
With the state administration in flux during the 2006 election season, he described his views on how the companies should be treated by whomever led a gasline project for the state.
“The central point that the new gas pipeline negotiator must make to the oil companies is that they do not have the legal, let alone the moral, right to hold Alaska’s gas hostage to their own profit targets,” Cotham wrote. “If getting that point across involves a lawsuit to cancel their leases, so be it. If it takes a few years to get a court determination, that is certainly shorter than the oil companies’ proposed ‘study’ under the current proposal. And after that wait, Alaska stands a very good chance of owning, ‘lock stock and barrel,’ the North Slope leases and 100 percent of the gas.”
Gov. Bill Walker is a former project manager and general counsel for the Alaska Gasline Port Authority, which Cotham was representing in his 2005 testimony to the Legislature. The authority was formed to develop a gasline from the Slope to Valdez for in-state use and export.
Attorney General Craig Richards is a former attorney in Walker’s law firm and for the authority. Walker’s chief of staff Jim Whitaker is a former mayor of Fairbanks and former chair of the authority.
Whitaker also co-authored the sponsor statement for a 2006 ballot measure to institute a reserves tax on North Slope gas as a means to spur development. Walker floated a gas reserves tax before last November’s special session but withdrew the idea soon after.
In a Jan. 14 letter, now-retired Department of Natural Resources Commissioner Mark Myers wrote a letter to BP Alaska officials informing the company that the department wanted information regarding efforts to market oil and gas from the Prudhoe Bay unit included in future unit development plans.
Division of Oil and Gas Director Corri Feige said in an interview that similar letters were sent to all unit operator companies in the state because it is a priority of the administration’s to have the information for possibly developing gas for instate use.
BP’s Prudhoe Bay Plan of Development submitted March 31 focused mainly on immediate drilling plans and included a general statement that, “Major gas sales (MGS) from Prudhoe Bay remains depended upon a number of factors, including market demand and the availability of an acceptable offtake project. In the meantime, the Prudhoe Bay unit working interest owners will continue to use gas to enhance and accelerate oil recovery and for (natural gas liquids) production for shipment through TAPS or use in enhanced oil recovery operations.”
Feige followed with an April 11 letter to BP stating the Prudhoe Bay development plan is “not sufficient to allow the division to understand how the (working interest owners) plan to achieve an MGS.” The letter also stated that the division could not consider the plan complete from a regulatory standpoint until it received additional information.
The letter subsequently requested detailed information regarding commercial agreements being negotiated for natural gas sales from the Prudhoe unit as well as “the commercial terms under which each (working interest owner) is offering to make resources available for long-term sale, including: the estimated volumes to be delivered, the pricing terms, the location at which title to the gas and the associated risks of loss will change, and the condition of the gas at the time of delivery.”
In recognition of BP’s statement that the working interest owners preferred to do their marketing individually, the Oil and Gas Division asked for responses to the April 11 letter from BP as the Prudhoe operator and ConocoPhillips and ExxonMobil to be submitted by May 1.
That deadline was extended one day to May 2. The Journal submitted a public records request to the division for the publicly available portions of the producers’ responses May 3; the request was not granted as of press time for this story. State agencies have 15 business days to respond to such requests.
• Elwood Brehmer is a reporter for the Alaska Journal of Commerce. He can be reached at elwood.brehmer@alaskajournal.com.
