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Oil company wants changes to $30 million state loan after Walker's tax-credit veto

  • Author: Alex DeMarban
  • Updated: November 27, 2016
  • Published November 27, 2016

An oil company that received a $30 million loan from the state to help pay for a long-distance drilling rig near Cook Inlet is seeking eased loan terms because it is short on money after Gov. Bill Walker's decision this summer to defer tax-credit payments owed to oil companies.

Next year, Bluecrest Energy hopes to begin tapping oil from the offshore Cosmopolitan field using extended-reach hydraulic fracturing from the new land-based rig installed 6 miles north of Anchor Point.

The company is asking the Alaska Industrial Development and Export Authority to modify the terms of a loan entered into last year because the state did not pay the tax credits the company had expected to receive, according to a resolution before the AIDEA board.

Like other independent explorers, Bluecrest has said it is owed tens of millions of dollars from the state. The lack of payment affected the company's ability to fund an account meant to protect the state, according to the resolution.

"The state's postponement of tax credit payments the borrower had expected to receive has affected the funding for the reserve account the borrower is required to establish under the terms of the loan agreement," the resolution states.

The state corporation provides financing to support economic diversification in Alaska. The board is expected to consider the modification request at its meeting on Dec. 1.

The resolution also notes that delays in completing construction of the rig has contributed to delays in oil production.

AIDEA staff negotiated with Bluecrest on the proposed modification. The resolution says the changes would protect the state's interest while providing Bluecrest with "reasonable flexibility" to advance a project that supports jobs and economic development.

Benjamin Johnson, chief executive of the Fort Worth-based company and a former Alaskan, said Friday he could not provide comment while the issue is awaiting board review.

Walker in late June deferred payment of $430 million in tax credits owed to oil and gas companies, one of several vetoes meant to reduce the state's giant fiscal gap.

AIDEA entered into the loan agreement with Bluecrest in July 2015. The agency has noted that development at Cosmopolitan could be worth more than $150 million in taxes and royalties to the state.

The new rig will be able to drill wells more than 4 miles, reaching reservoirs more than a mile beneath the seafloor to conduct the modern hydraulic fracturing that has already boosted oil production in the Lower 48.

The fracking is scheduled to begin next spring, according to plans. Though regulators say fracking has been conducted in Alaska safely for more than half a century, Bluecrest's drilling site near urban areas on the Kenai Peninsula has heightened concerns. One conservation group is calling for a public hearing before a well-fracking operation can be approved by the Alaska Oil and Gas Conservation Commission. The AOGCC will hold a hearing on the topic on Dec. 15.

The original loan to Bluecrest called for what was described as a $15 million reserve account to protect the state, which would be adjusted over time.

The proposed new loan terms would still provide the state with protection, but the company could have an option of keeping a minimum of $5 million in the account. To do so, the company may need to pay a fee to provide the state the additional protection, depending on the appraised value of the rig that serves as collateral for the loan, according to paperwork with the resolution. The fee would not be credited against the loan.

Officials with AIDEA did not return calls seeking comment for this story Friday.

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