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Energy

Walker's oil and gas adviser says he’ll look at tax credits and production opportunities

  • Author: Alex DeMarban
  • Updated: August 2, 2016
  • Published August 2, 2016

John Hendrix explains his new role as the chief oil and gas adviser to Gov. Bill Walker on Monday, Aug. 1, 2016. (Bill Roth / Alaska Dispatch News)

Gov. Bill Walker's new oil and gas adviser said on Monday he'll play a role in helping resolve the standoff between the administration and Alaska's major oil producers over marketing plans for North Slope natural gas.

But John Hendrix, a Homer-bred Alaskan who has held key jobs for BP and Apache Corp., also plans to have a broader role that includes speaking frankly with company officials about their development plans and fiscal health. Those discussions should help the state have a better understanding of future development prospects and hear how it can facilitate production.

Noting that he's not a regulator, Hendrix said the state needs to have "gritty" conversations with the oil industry about what companies are doing — or not — when it comes to exploration and production.

Walker announced Hendrix's appointment and his newly created Cabinet-level position in mid-July, saying Hendrix can help "steer the conservation" between the state and industry so both can find beneficial common ground. The post pays $185,000 a year.

The announcement of Hendrix's appointment came two weeks after the state refused to approve an annual activity plan at Prudhoe Bay because the major producers — BP, ConocoPhillips and ExxonMobil — haven't provided details about their plans to produce and sell the unit's vast quantities of natural gas. That gas has long been reinjected back into the ground to pressurize the reservoir and juice up more oil.

The state, which hopes to one day sell that gas to overseas markets in Asia, extended the 2015 activity plan that would have ended June 30, and gave the companies an extension until Sept. 1 to provide the information.

Critics who accused Walker of bullying the industry said Walker will declare the Prudhoe unit in default if the information isn't provided, though Walker said in June he doesn't see that happening.

Hendrix said he also hopes to better understand the role state tax credits play within each company. In late June, Walker deferred payment to industry of $430 million in state tax credits to help slow spending at a time when low oil production and prices have blasted a multibillion-dollar hole in the state budget.

"Tax credits are good if the people out there are drilling for oil," Hendrix said. But it's not good when companies "use tax credits to drill for more tax credits. We don't want that."

With a background in petroleum engineering — a career highlight with BP was dramatically boosting production at Alaska's Milne Point field in the mid-1990s — Hendrix said he could seek complex gas-marketing details from the producers. But he said the administration isn't interested in that.

"We just want to understand basically do you have a need to keep the gas locked up. If not, share it with us."

Hendrix, 59, was the general manager for Apache in Alaska until the Houston, Texas-based company announced in March it was abandoning its ambitious Cook Inlet exploration plans after six years.

Hendrix blamed low oil prices and a legal challenge that led to permitting delays for the company's decision to shutter its Alaska operation. But Hendrix also blamed himself, saying he wished he could have done more to prevent Apache from shifting its focus to other projects outside Alaska.

Hendrix, who said Alaska needs to diversity its economy so the burden doesn't rest mainly on the oil and gas industry, has also served as vice president of the Alaska Oil and Gas Association, the industry's lobbying group.

The chief executive and president of AOGA, Kara Moriarty, said Hendrix can help the administration understand some of the challenges the industry faces.

"We'd hope that type of background would be used and listened to in setting sound policy," she said.

Larry Persily, oil and gas advisor for Kenai Peninsula Borough Mayor Mike Navarre, said Hendrix appears to be well-liked in Alaska. Hiring Hendrix is a smart move politically, given Walker and the industry are not "perceived as best of friends," Persily said.

"By appointing John Hendrix, the governor is telling industry, 'I want to learn more,' and that's good," Persily said.

Hendrix said he was paid significantly more working for Apache than he is now.

Hendrix graduated from Homer High School in 1975 and six years later started the Popeye Wrestling Club for Homer youth that continues today. He said he's working for the state because he's tired of blaming others for Alaska's inability to shift its economy away from the heavy dependence on the oil industry.

He hopes he can help companies further increase oil and gas production — on top of the 3 percent increase achieved this summer — and give the state some breathing room as it tries to diversify its economy.

"It's about trying to build a sustainable future," he said.

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