Trans-Alaska pipeline
The Trans-Alaska Pipeline System carries oil from the North Slope to tidewater in Valdez. (Photo by Rashah McChesney/Alaska’s Energy Desk)

Hilcorp is on the cusp of obtaining BP’s North Slope holdings. Acquiring the trans-Alaska oil pipeline is taking longer.

The state of Alaska announced on Monday that two state departments granted approvals on the transfer of hundreds of oil and gas leases and surface permits on the North Slope.

“After ten months of in-depth analysis, stress-testing of Hilcorp’s financial capacity to hold and operate these assets, and successfully securing secondary liability guaranties from BP, I am confident that the transfer of these leases and facilities both protects and advances Alaska’s interests,” Department of Natural Resources Commissioner Corri Feige said in a prepared statement

Outside experts at National Economic Research Associates and the international law firm Morrison & Foerster were hired to help the state analyze Hilcorp’s finances along with the $5.6 billion deal in which Hilcorp, a private company based in Texas, is purchasing Alaska assets from BP.

Those assets are listed as: 26.36% interest in the Prudhoe Bay Unit; 32% interest in the Point Thomson Unit; 50% interest in the Milne Point Unit; 50% interest in the Liberty Unit, which is under federal jurisdiction; an interest in Arctic Slope Regional Corp. leases in the Arctic National Wildlife Refuge; one-third interest in the Alaska LNG Project, LLC; 50% interest in the Milne Point Pipeline, LLC; 32% interest in the Point Thomson Export Pipeline; 48.4% interest in the Trans-Alaska Pipeline System; 47.6% interest in Valdez TAPS terminal tankage; 49.1069% of Alyeska Pipeline Service Co. shares; and 25% of the Prince William Sound Spill Response Corporation.

The Department of Natural Resources will periodically reassess Hilcorp’s financial position “to determine if future amendments to the financial assurances are necessary,” according to a Monday memorandum to Gov. Mike Dunleavy from Feige, who headed up the Governor’s Oversight Committee reviewing the deal.

Dunleavy called the approvals a major milestone.

“I thank the Department of Natural Resources and Department of Environmental Conservation for their diligent efforts to protect Alaskans’ interests throughout every step of this historic transaction,” he said in a prepared statement.

The memo to Dunleavy said Hilcorp was required to provide the state of Alaska significant financial assurances, including “a formula-based financial assurance amount that will be refreshed every third year, submission of third-party estimates of the cost to fulfill the DR&R (dismantlement, removal, and restoration) liabilities, quarterly and yearly submission of financial data, opportunity to review insurance coverages, and pre-defined financial metrics to periodically reassess Hilcorp’s financial strength.”

An agreement guaranteeing secondary liability for dismantlement, removal, and restoration of existing facilities and contaminated sites was secured from BP Corporation North America, the announcement from the state said.

The Department of Environmental Conservation handled environmental permits and plan approvals and established responsibility for existing contaminated sites, according to a news release.

Hilcorp will be responsible for 50 known contaminated sites involving BP, according to the memo from Feige.

“DEC expects there will be adequate assurances in place to protect the state and has worked to ensure the contaminated sites are covered under an enforceable secondary guaranty with BP,” the memo states.

Hilcorp’s proof of financial responsibility, which the memo to Dunleavy said “ensures an operator has adequate resources for spill response and to cover compensable, statutory pollution liability losses,” is already at the maximum, $93.5 million, and will remain unchanged.

The memo said financial responsibility obligations do not increase when new facilities are added. The obligation “must be equal to the highest amount required for any one of the covered facilities,” according to the memo.

Hilcorp is taking over three active drilling waste sites and one inactive drilling waste site and will assume financial responsibility for all four, according to the Feige memo.

“Hilcorp will also acquire two facilities that were previously permitted and closed but remain in post-closure monitoring and could require corrective action in the future,” the memo states.

Hilcorp already operates oil and gas facilities in Alaska and is expanding its current oil spill plan to apply to its newly-acquired assets, according to the memo. For that plan, two public comment periods were held, ending June 19. Staff with the Division of Spill Prevention and Response “reviewed the public comments and resolved any outstanding issues or concerns,” according to Feige.

Approval from the two state departments are some of the last steps before Hilcorp assumes the role of operator of BP’s Prudhoe Bay holdings.

A spokesman for Hilcorp said the company would issue a statement on Wednesday.

After BP and Hilcorp announced the sale last August, supporters of the deal said it would bring more oil through the trans-Alaska oil pipeline. Hilcorp is known for extending the life of aging oil fields.

Critics pointed to environmental and worker-safety fines assessed against Hilcorp, which has been operating in Alaska since 2012 after purchasing assets in the Cook Inlet.

The North Slope facilities coming under Hilcorp’s ownership are known as upstream assets, or those involved in producing oil and gas before it goes to market.

The trans-Alaska oil pipeline is known as a midstream asset. State regulatory review of the transfer of BP’s share of the pipeline is expected to wrap up by Sept. 28.

The state pipeline coordinator is looking at whether Hilcorp is “fit, willing, and able” to assume an ownership interest in the pipeline.

The Regulatory Commission of Alaska is also conducting an analysis and will make a separate decision, according to the state’s announcement.

The commission granted Hilcorp confidentiality of its financial information earlier this year.

Contact staff writer Amanda Bohman at 459-7545. Follow her on Twitter: @FDNMborough.