It’s time for the governor and Legislature, with citizen involvement, to get public commitments from Hilcorp, the new proposed owner of BP Alaska’s assets, on issues vital to Alaska’s interests.
This is certainly not a new approach, as Alaskans and their political leaders historically have been tenacious negotiators for Alaskan interests and values in the development and successes of North Slope oil resources and the Trans-Alaska Pipeline System, or TAPS. Despite differing views, Alaskans, at the end of the day, always came together in unity and strength. Gov. Bill Egan and the Legislature did it in passing legislation approving the pipeline and establishing the initial oil tax revenue structure. This was followed by passage of the Alaska Native Land Claims Settlement Act, which was a requirement for federal approval of the pipeline right of way. In 1989, Gov. Steve Cowper and the Legislature led a united Alaska in demanding Exxon pay for the massive recovery and rehabilitation from the Exxon Valdez oil spill disaster and ensuring future protection of our world-class environment.
And then there was the surprise announcement of the BP-Arco merger in 1999. BP expected no interference other than a perfunctory review by the Federal Trade Commission. Alaskans saw it differently. Recently, Dermot Cole, a longtime Alaska reporter, columnist and author, wrote that the BP-Arco “… deal did not go the way that BP envisioned, for which Alaskans should be forever grateful to the Federal Trade Commission, a new Alaska political group called ‘Backbone: Standing up for Alaska’s Future’ and the Knowles administration. The combination of the three, sometimes working in opposition, led to some long-lasting benefits for Alaska.”
One result was a document my administration and I negotiated with BP called a “Charter for Development of the Alaska North Slope.” It required the merged BP-Arco divest itself of some state leases, significant oil production on current producing fields and shares of ownership in the oil pipeline. In addition, there were detailed agreements on comprehensive environmental and community commitments, Alaska hire and use of Alaska contractors.
Some have argued that the latest proposed transaction of Hilcorp is not comparable with BP-Arco merger, as it is just a transfer of existing private assets. While the transactions take different forms, where this line of reasoning misses the point is Alaska has a compelling right and responsibility to be at the table regarding any transaction involving assets of leases on state lands and development of Alaskan-owned resources. State leaders have an obligation to protect the public interest on oil revenues, pipeline tariffs and corporate taxes, as well as to safeguard substantial land and marine environments, including the final dismantling of TAPS and restorations, estimated to cost in the billions of dollars.
Yet there are some key differences between the Hilcorp proposal and the BP-Arco merger. In the 1999 BP-Arco merger, both companies were large, publicly traded companies that had been involved in North Slope development for 30 years. Hilcorp is a much smaller, privately held company that came to Alaska in 2012 in a much smaller role than either BP or Arco. Hilcorp’s small size and private nature raises several questions about its ability and willingness to pay for unexpected emergencies, how these situations will be prevented and if it is prepared to operate and maintain TAPS, as a 48% owner, without any experience relating to the scale and marine involvement of that responsibility.
The BP-Arco charter agreed to environmental and community commitments. Will Hilcorp do the same? Will Hilcorp agree to hiring Alaskans and using Alaska contractors as did BP? BP paid a corporate income tax of $30 million per year. Hilcorp, as a private LLC, will not pay any corporate income tax. Will Hilcorp support making Alaska whole on these revenues? What is the status of Hilcorp on the required funds for the future dismantling, removal and restoration required for TAPS, and does it have the resources to fulfill this obligation?
What is needed is for the governor and Legislature to convene a series of public meetings for Hilcorp to present its answers to the many questions Alaskans have regarding the operations and corporate values of BP’s successor. Of paramount interest is whether Hilcorp would be prepared to sign a “charter” memorializing its commitments on key issues involving the environment, community involvement, hiring of labor and businesses, corporate transparency, and financial obligations to the state? Hilcorp should be eager to introduce itself to Alaskans in its role as a new major operator on the North Slope and the major owner of TAPS. The company should welcome the opportunity to show us who it is and what its plans are for the future so as to earn our trust.
Alaskans are pleased that a corporation such as Hilcorp is prepared to invest in Alaska. Our motto should be the often-used Ronald Reagan standard of “Trust, but verify.” This has been our approach in the past and it has served Alaskans well. It is now time for our political leaders to continue this time-tested tradition.
Tony Knowles served as governor of Alaska from 1994-2002. He lives in Anchorage.
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