The state is conducting a “robust” review of Hilcorp’s $5.6 billion purchase of BP Alaska’s assets, which include a share of the trans-Alaska oil pipeline, the state’s natural resources commissioner said in a Nov. 12 letter to North Pole Republican Sen. John Coghill and three other legislators.
Also, the state regulatory commission extended its comment period for another four weeks, giving Alaskans more time to weigh in on the purchase.
A joint informational hearing of the House and Senate Resources Committees is tentatively planned for Dec. 16 at the Anchorage legislative information office to discuss the state’s role in the sale, said Coghill, who is chairman of Senate Resources. He doesn’t expect officials from BP or Hilcorp to attend the hearing. The focus will be on state issues, and Coghill said he hopes to hear from multiple state departments as well as the Regulatory Commission of Alaska.
Questions on the senator’s mind include, “What are the things we’ve got to watch out for? How do we as a state deal with it?”
About 100 people have commented to the Regulatory Commission of Alaska as of Saturday. Some say Hilcorp will increase oil production and that the sale is good for Alaska. Others question Hilcorp’s ability to properly manage the aging trans-Alaska oil pipeline, which runs through the Fairbanks North Star Borough.
Hilcorp is owned by Texas businessman Jeffery Hildebrand, who is known for buying aging oil fields from larger competitors and boosting output. The company has operated in Alaska since 2012 and has been fined for worker safety and other violations.
“Rest assured, DNR (the Department of Natural Resources) takes its responsibilities for regulatory oversight and protection of the state’s interests very seriously,” Commissioner Corri Feige wrote to Coghill, Senate President Cathy Giessel, R-Anchorage, Rep. Geran Tarr, D-Anchorage, and Rep. John Lincoln, D-Kotzebue.
“DNR is focused squarely on conducting a full suite of analyses to ensure that the state’s interests are protected,” Feige said. “While it is early in this process, significant resources within this agency and the Department of Law are currently deployed to ensure this robust oversight.”
Feige added that the state is “contracting with an independent and highly respected economic consulting firm to rigorously examine Hilcorp’s ability to fulfill its obligations to the state under a set of stressful scenarios.”
Coghill said he contacted the department to invite officials to the legislative hearing to answer questions earlier this month and learned that the letter by Feige was pending.
Multiple other state and federal agencies are also reviewing the business deal. The Federal Trade Commission found no antitrust or anti-competitive issues, Feige told legislators. The Department of Law is conducting a similar review, she said.
Other state agencies involved include the Alaska Oil and Gas Conservation Commission, the Department of Environmental Conservation, the Department of Revenue and the Department of Fish and Game.
The longer comment period was announced by Regulatory Commission of Alaska spokeswoman Grace Salazar on Thursday. The new comment deadline is 5 p.m. Dec. 13. This is the second comment period extension.
The regulatory commission is the only avenue under which Alaskans can comment on a business deal described as the biggest in a generation.
The regulatory commission will decide on Hilcorp’s ability to operate the trans-Alaska oil pipeline along with two pipelines on the North Slope.
Entities that do business with Hilcorp have praised the company in comments to the RCA.
The president of Farbanks-based Brice Inc. was among them.
“Our construction companies have successfully worked for Hilcorp in Alaska since 2012. From these experiences, we have come to recognize them as a fair and reputable firm that cares about the safety of our Alaskan workforce,” Sam Brice wrote.
Genevieve Bell of Fairbanks-based Flowline Alaska Inc. also submitted a comment.
“Hilcorp is poised to invest millions of dollars into Alaska, helping grow our economy and pull longer life out of existing fields,” she wrote. “We appreciate their enthusiasm in helping Alaska prosper and greatly look forward to watching them flourish.”
Christine Resler, president of Arctic Slope Regional Corp. Energy Services wrote about Hilcorp’s ability to increase oil production.
“I believe a thriving oil and gas industry is imperative to the economy of Alaska and have seen first-hand Hilcorp’s long proven track record of increasing production in mature basins — something the state needs more than ever as we try to find ways of safely pulling more crude from our legacy fields,” she wrote.
Aaron M. Schutt, president of Fairbanks-based Doyon, Limited also praised the deal.
“Doyon views Hilcorp’s purchase of Prudhoe Bay assets from BP as a step forward for the Alaska oil and gas industry,” he wrote. “Hilcorp specializes in reinvigorating mature oil fields through using a lean management approach. While Hilcorp has not been incident free, they have a record of focusing on safe and responsible operations.”
Other commenters asked for assurances that the company is up to the challenge of operating an 800-mile pipeline that runs down the eastern half of the state. Hilcorp will own 49% of the pipeline system and of the Alyeska Pipeline Service Co. once the deal is final, which is expected sometime next year.
“This system is nearing 50 years old and is also vulnerable to accelerated effects of climate change,” wrote Francis Mauer of Fairbanks. “Now more than ever, increased attention must be directed to safe operation, through careful monitoring, maintenance and repairs. Does Hilcorp have the resources and resolve to assume this responsibility?”
Palmer residents Kaarle Strailey and Kirsten Woodard submitted a joint letter critical of the company.
“Hilcorp cuts corners or ignores them entirely, and that is a dangerous approach for a company to take that wants to assume responsibility for infrastructure as important to our state as BP’s operations and TAPS. Too little is known about Hilcorp’s finances, and there is not a mechanism for determining the assets they have or their capacity to deal with potentially very expensive liabilities.”
Kent Alger of Eagle River asked the RCA to determine what will happen once the pipeline ages out.
“I would like to know what the status would be for the removal and reclamation requirements for the North Slope facilities and trans-Alaska pipeline once production is complete. Please ensure that clear liabilities are reviewed and responsibilities are confirmed.”
BP is retaining pipeline decommissioning responsibilities under the terms of the agreement with Hilcorp.
It’s uncommon for pipeline transfers of this kind to be rejected by the RCA, according to Salazar. It’s also uncommon for the agency to extend comment periods.
Hilcorp has requested to keep its financial records confidential. The RCA’s response is pending.
Contact staff writer Amanda Bohman at 459-7545. Follow her on Twitter: @FDNMborough.