In the first public meeting involving the $5.6 billion sale of BP’s Alaska assets, state officials sought to reassure Alaska lawmakers they are closely reviewing the deal and taking steps to ensure that buyer Hilcorp has the financial muscle to meet unexpected obligations and future clean-up costs.
Hilcorp, a privately owned company from Houston, Texas, has asked a state agency to keep its financial records out of the public eye, citing competitiveness concerns. That has generated pushback from some Alaskans who question the company’s financial ability to play such a big role in the state’s oil fields.
Corri Feige, who leads the Alaska Department of Natural Resources, said at Monday’s public meeting the companies say they hope to close the deal by June 2020.
But she said the state has no deadline to approve it.
“It will take the time that it takes for the state to undertake its due diligence and get to the point that we can either say this transaction is in the state’s and the public’s best interest, or it is not,” Feige said.
The two oil companies announced the deal in August. It is the biggest oil field transaction in Alaska in a generation. The proposal set in motion a regulatory process that has so far primarily played out before the Regulatory Commission of Alaska, a state agency that is overseeing the part of the deal that includes the sale of BP’s 48% stake in the 800-mile trans-Alaska pipeline.
The hearing Monday, before the House and Senate Resources committees, was a chance for state officials to inform the Legislature about the review process so far and future steps that must be taken before the transaction can be completed.
The state regulatory commission, a quasi-judicial board, did not have a role in Monday’s hearing. The case before the RCA is a pending adjudicatory matter, and the agency’s officials aren’t commenting on the case, said Grace Salazar, a spokeswoman with the RCA.
Feige said the state natural resources department is about one-third of the way through its process, and that Hilcorp and BP have been forthcoming and transparent with the state’s requests for information.
Matt Snodgrass, a commercial analyst with the department’s oil and gas division, said the state has contracted with National Economic Research Associates, a New York consulting firm with expertise in the energy sector, to help analyze Hilcorp’s financial health.
“What we’re trying to ensure is that the public interest will be protected,” not only today but well into the future, he said.
John Ptacin, who oversees the oil and gas section under the Alaska Department of Law, said the state recently learned that BP will be “secondarily liable" for the large costs associated with the removal and restoration of the North Slope oil field infrastructure once the fields run dry at some future, unknown date. That will back up commitments from Hilcorp, he said.
Lawyers for the state will be working on securing that commitment from BP in contracts, Ptacin told lawmakers.
In comments to the state regulatory commission, a number of Alaskans have raised questions about who will pay the giant sum of money needed to one day dismantle and remove the trans-Alaska pipeline and clean up the land after oil stops flowing.
Ptacin, responding to concerns expressed by Rep. Ivy Spohnholz, D-Anchorage, said the cost of that job was last estimated at $2.6 billion in 2005.
The pipeline’s major owners — BP, ConocoPhillips and ExxonMobil — have said they have collected more than $5 billion in shipping fees and earnings to pay for that future cost, Ptacin said. But the state never required the creation of a distinct account. BP has told the RCA it will retain its future obligation to remove and restore the pipeline.
“What we have in place are essentially corporate guarantees from three very large companies to perform the (dismantling, removal and restoration of the) pipeline,” Ptacin said. “Understandably, it’s not the greatest (of) assurances. This is something we are going to look into as part of this deal as well, to essentially refresh where we are with (dismantling and restoration of the) pipeline. This is a good opportunity to do so.”
Sen. Lora Reinbold, R-Eagle River, wanted to know when lawmakers would have a chance to hear from the oil companies, in part to understand how many of BP’s 1,600 employees Hilcorp plans to hire.
“This will not be the last hearing on this issue, I can assure you,” replied Sen. John Coghill, R-North Pole, who ran the meeting and is vice chair of the Senate Resources Committee. “We are just discovering what this deal looks like. We’re going to be talking about taxes, we’re going to be talking about all kinds of things.”
“I committed to the House we would keep this at as a high level as we could because at this point, whether it’s Alaska hire issues, financial assurance issues, or dismantlement and removal of the pipeline ... (it) is a big deal,” Coghill said.