News-Miner opinion: Alaskans need assurance that an oil company operating in this state is extracting the oil in a safe manner and in compliance with state laws. They need to know that an oil company has the financial ability to deal with a major oil spill. And they need to know about a company’s plans for employing Alaskans.
Gaining that assurance means having an understanding of the company’s finances and practices.
Obtaining financial information might prove problematic with Hilcorp, the private corporation that through two subsidiaries is purchasing all of BP’s Alaska assets, including BP’s ownership share in the Trans-Alaska Pipeline System and the company’s North Slope interests, including an exploration lease in the Arctic National Wildlife Refuge. Total cost: $5.6 billion.
State regulators and legislators should press the company for openness.
Hilcorp is different from the other major players in Alaska’s oil industry. BP, ConocoPhillips and ExxonMobil are publicly traded companies, meaning they have shareholders who are entitled to company financial information. Those shareholders, as well as potential investors, want to know that the company is on solid financial footing. Alaskans likewise should want to know more about Hilcorp.
Why, for example, did Moody’s Investor Service, one of the leading bond ratings agencies, put Hilcorp on a “review for downgrade” following the announced purchase of BP’s Alaska holdings? The Moody’s report in August mentioned uncertainty about the financing of the sale: “... if the acquisition were to be mostly debt funded, debt levels (including Moody’s standard adjustments) could approach $6 billion from roughly $2 billion currently,” the report reads.
Does Hilcorp have the money to pay the cost of dealing with a major spill? Is it willing to acquire sufficient insurance to cover the cost?
Hilcorp would become the dominant owner, at 48.44%, of the Trans-Alaska Pipeline System. But why is Hilcorp not taking on the BP share of responsibility for the cost of shutting down the pipeline at the end of the pipeline’s life? BP is retaining that responsibility.
Hilcorp so far isn’t wanting to share financial information with the public. It has asked the Regulatory Commission of Alaska, which is considering Hilcorp’s applications for the transfer of ownership of three pipelines, to keep confidential the company’s financial statements for the two most recent years. The company has confidentially filed “comparative balance sheets, income and cash flow statements, among other information” with the commission.
What the company doesn’t do in its written request for confidentiality is explain why it wants to shield its financial documents from the public. That is disconcerting.
Alaskans will want to know whether Hilcorp is on solid financial ground and as capable as BP, ConocoPhillips and ExxonMobil of working in the Arctic. Alaska’s legislators need to know; they represent the people, after all.
State statute requires the Regulatory Commission of Alaska to rule on the confidentiality request within 30 days after the end of the public comment period. The commission will now have even more time to consider the confidentiality request. That’s because the commission last month extended the public comment period on Hilcorp’s three pipeline transfer requests to Nov. 15.
The Alaska House of Representatives next year will be holding hearings on the proposed sale of BP’s assets to Hilcorp, according to the office of Kotzebue Democratic Rep. John Lincoln, who is co-chairman of the House Resources Committee. Surely members of that committee will want to know a lot about Hilcorp.
Hilcorp might be a fine company. It reportedly has expertise in extending the life of declining oil fields, and Alaska certainly has a few of those and needs to keep them alive. The company, despite some of the problems it has had already in the state, might be the right company for Alaska at the right time.
But Alaskans do need assurances about companies that extract oil from state land. And the best way for Hilcorp, as it moves to become one of the leading companies, to give that assurance is to share as much about itself as any publicly traded company would.
The Alaska Constitution, in Article VIII Section 10, addresses protecting the public interest regarding state lands. The Hilcorp-BP agreement would seem to be a good time to consider it:
“No disposals or leases of state lands, or interests therein, shall be made without prior public notice and other safeguards of the public interest as may be prescribed by law.”
Let’s make sure we have those safeguards in place.