ConocoPhillips Co. is challenging a land use permit issued by the state of Alaska that may block the development of Santos’ $3 billion Pikka project, the biggest new oil project on Alaskan land in decades.

The appeal marks the latest move in a dispute between ConocoPhillips and Pikka developer Oil Search, which Santos acquired last year, over fees that Oil Search would pay ConocoPhillips to use roads in the U.S. independent's Kuparuk River Unit (KRU), next to Pikka.

Oil Search rejected ConocoPhillips’ proposal to pay $95 million in fees and applied to the state for a permit to access the roads, which the Alaska Department of Natural Resources granted on March 29, until the two companies reach a road use agreement.

ConocoPhillips is challenging that permit on the grounds the department “improperly granted” Oil Search “access to KRU roads that are the private property of the KRU lessees,” according to a letter dated April 5, and reviewed by Reuters, from the company to department Commissioner Corri Feige.

Feige has granted ConocoPhillips until May 18 to file additional information and given Oil Search until June 7 to respond, according to an April 8 letter reviewed by Reuters from Feige to the two companies.

Feige denied a request from ConocoPhillips to put a hold on the land use permit while the appeal is being considered.

The roads dispute casts a cloud on Santos’ effort to attract buyers for its 51% stake in Pikka. ConocoPhillips, the largest oil producer in Alaska, had earlier held talks with Oil Search to buy a stake in Pikka and is still seen as a likely bidder.

In a quarterly report on April 21, Santos reaffirmed its guidance on Pikka, saying the project’s Phase 1 has received all major environmental and regulatory approvals and is on track to be ready for a final investment decision by midyear.

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