Pondering the Patch & Pipe
I went to Anchorage last week for a Joint House and Senate Resources Committee meeting. We got together to ask questions on the record about what the future would look like if Hilcorp buys all of BP’s Alaska assets.
The focal points were competition on the North Slope, Alaska jobs, and the pipeline.
There have been questions for a long time about how much chance new companies really have to compete on the North Slope. Sure, smaller operators can get leases from the state, but they often have a tough time breaking in with the major producers to get space in their processing & treatment facilities before oil goes into the pipeline (which the producers also own.) That means a few large companies have a lot of leverage in our state‘s oil patch. Hillcorp taking over all of BP's operations doesn't help that balance. They'll have around 26% of Prudhoe Bay's operation, 32% of Pt. Thomson, and half each of Milne Point, Liberty, and ANWR.
There's also the issue of jobs. BP has agreements with Alaska workers and labor organizations that put Alaskans to work first. Hilcorp‘s history doesn’t really include union workers or strong commitments to local hire. That’s a problem for an industry built on extracting Alaska’s resources.
Finally, if Hilcorp buys out BP, that will include around half the Trans Alaska Pipeline System. There were some questions about that, too, but it shone a spotlight on something else. Oil will flow through the pipeline for a long time to come, but some day it’ll need to be demolished and cleaned up. Its been years since the state estimated the price tag for that. But TAPS owners have been collecting money toward the eventual cost since day one. The kicker is: they’ve collected several times the last estimate, and regulators haven’t required them to keep the cash in an account.
Alaska just expects these companies will stay solvent indefinitely and uphold their obligations. That’s a risky approach when the owners are publicly traded companies. It’s riskier still as the companies get smaller and don’t have to report their finances to the public through the Securities and Exchange Commission.
This was the first hearing on the proposed purchase. We need to have a few more to make the right decisions to protect Alaska’s future.
