State charter agreement in BP-Hilcorp deal is unnecessary

After reading Philip Wight’s Nov. 12 opinion piece regarding Hilcorp’s purchase of BP’s assets on the North Slope, in which Mr. Wight demanded Alaska shackle this important business deal with a big government “solution” by requiring a complex charter agreement, I felt compelled to respond. Mr. Wight falsely claimed that such a solution would benefit Alaskans, when in fact the opposite is true. I was the Department of Natural Resources commissioner who was serving at the time of the BP-ARCO merger, when such a charter was justified.

Over the years I have seen firsthand how Alaska’s public agencies have capably overseen a continually evolving oil and gas industry. Our agencies have the experience, the expertise and information needed to carefully and thoughtfully evaluate the intricacies of this transaction with the benefit of all Alaskans foremost in mind. It’s their job, and they do it very well.

There are multiple agencies scrutinizing this transaction. We have regulations that require financial assurances and contingency plans to protect the state’s interests. We have regulations that govern exploration, production, labor and all other aspects of oil and gas operations. It is the duty of our agencies to ensure companies are capable and are complying with all of these requirements. If you think any of this is a rubber-stamp exercise, I suggest you talk to someone who has had to go through it.

I also witnessed firsthand the monthslong agony the Legislature forced on the BP-ARCO merger. Such a cumbersome approach is unnecessary and counterproductive in this instance. BP and ARCO’s merger would have combined the ownership of about 70% of North Slope production, a situation that required serious intervention by the state led by then-Gov. Tony Knowles. Here, we simply have Hilcorp stepping into the same position as BP. To force a charter agreement in this situation would clearly say to any other businesses watching from the sidelines, “Don’t invest in Alaska unless you want to be subjected to a difficult process that will be used by some to make your investment uneconomic.” And let’s remember, the corporate signatories to the charter referenced by Mr. Wight are already, or soon will be, gone. On the other hand, Hilcorp has been expanding its investment in our state since they arrived here in 2012.

The greatest “benefit to Alaskans” is the one that Hilcorp is uniquely capable of providing: more responsible energy production. For those of us who have been paying attention to the numbers, Hilcorp has a proven track record of increasing production in Alaska’s mature basins. Look at what they recently achieved at Milne Point on the North Slope or over the last several years in Cook Inlet. Hilcorp’s investments have reversed declines, and Alaskans are benefiting. Remember, when Hilcorp showed up in Alaska and took a position in Cook Inlet, our gas reserves were so low that there was talk of having to ship in liquefied natural gas from outside the state or forcing Alaskans in Southcentral to go back to the 1960s, when heating oil and wood were the main means of heating one’s home.

While production is key, jobs are equally important. Hilcorp has achieved what it has by relying on the Alaskans who know our state’s oil and gas fields best. Hilcorp’s local hire rate is near 90%. Just like BP, Conoco, Exxon and others, they, too, rely on thousands of local contract workers to keep things running.

This is not a merger, it’s a stock sale — a point Mr. Wight conveniently ignores. The balance of ownership in Prudhoe Bay will remain exactly the same. Hilcorp is merely stepping into BP’s shoes. The governance structure of the Trans-Alaska Pipeline System will remain the same. The only new thing here is we have a company with a proven track record (in many different states, not just here) that is committed to increasing production and looking to invest billions of dollars in the coming decades.

Considering the economic challenges we face in Alaska, this opportunity could not be coming at a better time. As an Alaskan, I’d prefer we remain focused on balancing the budget and creating policies that encourage investment here, rather than inventing needless and expensive requirements that will only hurt future investment in our state.

John Shively was the commissioner of the Department of Natural Resources for Gov. Tony Knowles and is currently the chairman of the board for the Pebble project.

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