Hilcorp needs to regain trust in Cook Inlet

Moving oil is a risky business, especially across Cook Inlet's notoriously rough waters.  But who assumes the risk? And if it's Alaskans who depend on healthy fisheries who bear the risk, how much risk are we willing to accept?

Hilcorp has released plans to move away from tankering oil across Cook Inlet, and to convert an old gas pipeline to carry oil beneath Cook Inlet.

We want to see this project work. But it must be done right.

Right now, Hilcorp pumps most oil from Cook Inlet to the west side, where it's stored at the Drift River Oil Terminal, just below the West Foreland. This situation presents at least two sets of risks.

[Hilcorp plans $75 million project to remove oil storage facilities near Redoubt volcano]

First, the terminal sits in the floodplain of Mount Redoubt, an active volcano. When Mount Redoubt erupted in 2009, with massive mudslides cresting the facility's protective berms, Chevron left over 6 million gallons of oil perched above Cook Inlet fisheries. So, the lesson? Don't store oil at the base of an active volcano.

Regarding the second risk, tankering oil across Cook Inlet's rough and icy waters is tricky. While double-bottomed and double-hull tankers have made tankering oil safer, and while technology and seamanship improve every year, the fact remains it's risky to load, unload, dock and transit tankers carrying oil.

Hilcorp's plan is complicated because it would convert a 21-mile long 10-inch subsea natural gas line into an oil line.  Gas lines are built to carry gas. Oil lines are built to carry oil. So, the conversion from one to another is rather involved, to say the least. Furthermore, Industry installed this line in 1972, so it's spent over 45 years on the bottom of Cook Inlet's unforgiving boulder fields and swirling glacial silts. And the proposed line would hold roughly one-half million gallons of oil beneath Cook Inlet when full.

There are a host of technical, engineering and oceanographic considerations in play, and it's vital our state and federal agencies ensure Hilcorp employs the very best available technology.

But there's another factor at play here, and it has to do with corporate culture. Jeff Hildebrand is Hilcorp's CEO. His primary business model has been to buy-up old fields and wring out the last remaining profits. He's done very well (he's worth over $3.5 billion, according to Forbes), and because Hilcorp lawyers set up as an "S-Corporation" under IRS rules, Hilcorp pays no corporate income tax to Alaska. Hildebrand's not converting an old gas line across Cook Inlet because it's the right thing to do. No, he's doing it to increase profits, because in the long haul, shipping oil by pipeline is cheaper than by tanker. And when profit is the primary driver, there's a tendency to cut corners.

Hilcorp's attention to profits, and its broader corporate ethic, during its short time in Alaska raise concerns. The Alaska Oil & Gas Conservation Commission has cited Hilcorp for over two dozen violations since 2012, including a 2015 violation that nearly killed 3 workers.  AOGCC has gone so far as to say "The disregard for regulatory compliance is endemic to Hilcorp's approach to its Alaska operations. …"

The most relevant violation to consider, however, is Hilcorp's gas line leak near Platform A in Cook Inlet earlier this year. Hilcorp should have known it had a leaking line in December 2016, yet it did not tell regulators about the leak until February 7, 2017.  Hilcorp then refused to shut down the line, and allowed the gas leak to continue for months, until late May 2017, so it could continue production. If Hilcorp allowed that line to leak for months, what will it do if its oil pipeline leaks? What if shutting down a leaking oil pipeline across Cook Inlet means shutting-in lucrative, producing oil wells upstream?

One of Hilcorp's primary arguments against taking appropriate action during the Platform A incident was that Cook Inlet's winter ice conditions made it impossible to repair the pipe. This is important: If Hilcorp does not employ state-of-the-art leak detection and spill response controls into this project, including a series of well-positioned isolation valves across Cook Inlet, it will be unable to address an oil spill during a substantial part of the year.

[Hilcorp makes industry's first move in decades into federal waters of Cook Inlet]

Hilcorp has worked hard to improve its operations, and we applaud those efforts.

But it's clear Hilcorp must reduce the risks associated with converting a 45-year old gas line to an oil line beneath Cook Inlet's vital fisheries.  Risk is, after all, just another form of corporate subsidy. Because if Hilcorp can save money by installing a substandard pipeline, it pushes the risk of an oil spill onto the general public — we Alaskans, who own the fish and waters of Cook Inlet under the Alaska Constitution — and we all bear the cost of that risk.

And those risks are high. Cook Inlet fisheries support countless families by generating around $1 billion in value every year, and tens of thousands of Alaskans rely on Cook Inlet salmon and halibut to feed them through the winter.

In the end, Hilcorp must regain our trust. And the biggest question Hilcorp needs to answer for Alaskans who live, work and play in Cook Inlet is this: Can you show us — with your design plans and operational commitment — that your proposed pipeline across Cook Inlet will protect the fisheries that feed Alaskans?

Bob Shavelson works for Cook Inletkeeper, a group of Alaskans who came together in 1995 to fight for clean water and healthy fish habitat throughout the Cook Inlet watershed.

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