Dunleavy enriches Hilcorp at Alaska’s expense

The Dunleavy administration recently rubber-stamped the sale of BP’s Prudhoe Bay leases to Hilcorp, LLC. Despite claiming to conduct a “diligent, thorough analysis” of the proposed deal, the administration refused to ask hard questions and protect Alaska’s public interest. The issue is not state approval of the deal, but rather how the state conducted its review and why Gov. Mike Dunleavy did not seek real accountability and assurances from Hilcorp.

This was a flawed approval for three reasons: The administration silenced Alaskans, rushed the review amid a global health pandemic and rewarded Dunleavy’s political donors.

First, the Dunleavy administration refused to listen to Alaskans. Hundreds of Alaskans warned of Hilcorp’s troubling history of safety and environmental violations and urged regulators to demand accountability. Former Gov. Tony Knowles argued the Dunleavy administration needed public commitments from Hilcorp and suggested an agreement like his BP-ARCO charter. So many Alaskans expressed concerns that this became one the most contentious cases in the history of the Regulatory Commission of Alaska.

How did the administration respond to this torrent of concern?

The Dunleavy administration refused to hold public hearings on the deal — the most important Alaska business transaction in a generation. A Department of Natural Resources (DNR) spokesperson wrote that the governor’s Oversight Committee — convened by Dunleavy to “fully understand ... any potential impacts on Alaskans”— was “under no obligation to respond to questions from the public.” How could the Dunleavy administration possibly protect Alaska’s public interest by refusing to listen to Alaskans?

Worse than just ignoring Alaskans, Dunleavy’s appointees argued Alaskans had no right to be involved in the transfer of our natural resources. Despite the fact that 63% of Alaskans urged transparency, Dunleavy backed Hilcorp’s campaign to hide its liabilities from public scrutiny. DNR wrote that no one was entitled to answers to questions they “may have about the detailed elements of a private business transaction.” The fact that the Dunleavy administration is pretending this transfer of our public natural resources is “private” is not only alarming, it’s unconstitutional. Disposing of public resources as “private” is an affront to our constitutional framers, who made Alaska’s mineral resources public after decades of plunder by outside corporations. Who does Dunleavy work for — Alaskans or Hilcorp shareholders?

Second, this was a rushed review that sacrificed good governance. BP and Hilcorp wanted regulatory approval no later than June. Despite a global pandemic, massive turmoil in oil markets that exposed Hilcorp’s poor finances, and BP needing to loan Hilcorp billions of dollars, the Dunleavy administration acquiesced. When private banks refused to finance the deal because of Hilcorp’s poor credit and over-leveraged assets, DNR didn’t raise any red flags or even brief the Legislature. Despite its obligation to review Hilcorp’s financial wherewithal, it’s unclear if DNR even sought updated financial statements after the oil crash. When the Alaska Oil and Gas Conservation Commission fined Hilcorp again in May, citing its “lack of good faith… (and) history of regulatory noncompliance,” DNR didn’t demand more accountability. When the RCA asked fair questions about Hilcorp’s ability to be the dominant owner of the Trans-Alaska Pipeline System, DNR blindly accepted the BP-Hilcorp scheme to split the transaction and fast-track selling Prudhoe Bay.

Dunleavy is taking advantage of a pandemic-distracted public to rush a poorly vetted transfer of Alaska’s most important oil field.

Third, the Dunleavy administration is not a neutral arbiter acting on the public’s behalf. After Dunleavy fired AOGCC Commissioner Hollis French (who wanted to take action over a leaking Hilcorp pipeline), Hilcorp founder Jeffrey Hildebrand donated $25,000 to Dunleavy’s shadow campaign. Dunleavy’s administration again protected Hilcorp in November when it joined a lawsuit defending Hilcorp’s seismic blasting of Cook Inlet’s endangered beluga whales and other marine mammals. Dunleavy has put his thumb on the scales of justice to benefit Hilcorp in the past, and he did so again with this deal.

Is this the kind of independent oversight we should expect from our elected leaders?

With Hilcorp’s troubling history of safety and environmental violations, combined with Dunleavy’s refusal to protect Alaskans, we face billions in liabilities and losses. Does anyone think that Hilcorp can clean up a major spill and make Alaskans whole? Does anyone think that Hilcorp will actually clean up legacy wells in the 2030s and 2040s? Does anyone think Hilcorp can manage the melting permafrost that is causing major arctic oil spills?

This was the moment we could have made Hilcorp accountable and responsive to Alaska’s long-term interests. Instead, Dunleavy has grossly mismanaged our public resources and saddled Alaskans with billions in future liabilities to enrich his political donors. This corrupted review is nothing less than the great Prudhoe Bay Giveaway and it will make Alaska poorer for decades to come.

Philip Wight, Ph.D., lives in Fairbanks and is a policy analyst for the Alaska Public Interest Research Group. He recently completed his dissertation in history, entitled “Arctic Artery: The Trans-Alaska Pipeline System and the World it Made.”

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