Three years after Hilcorp Energy Co. took over as operator of the Prudhoe Bay oil field and the near-half owner of the trans-Alaska pipeline, the Alaska Supreme Court is considering whether the public should have access to that privately held company’s financial information.
The Supreme Court on Tuesday heard arguments in a case pressed by the city of Valdez, which claims that state regulators violated citizens’ fundamental rights when they allowed Hilcorp to keep its financial information secret after acquiring all of BP Plc.’s Alaska assets.
The $5.6 billion sale by BP to Hilcorp was completed in 2020, with the blessing granted by the Regulatory Commission of Alaska. Along with that decision approving transfer of BP’s portion of the trans-Alaska pipline was the commission’s approval of Hilcorp’s request to keep its financial information confidential – a contrast to the situation with BP and other major oil companies operating in Alaska, which are publicly traded.
Robin Brena, the attorney representing Valdez, said the public has a right to know the evidence behind the RCA’s decision that Hilcorp is willing, able and qualified to manage the Trans-Alaska Pipeline System, including the Valdez marine terminal that is located in that Prince William Sound city.
“There is not on the record one shred of evidence that that’s true,” Brena told the justices in the hearing.
Valdez is not seeking to undo the transaction, Brena emphasized. But it wants public access to financial information so that city residents and other Alaskans can know whether Hilcorp, as it continues to operate the pipeline and other facilities, has the wherewithal to operate safely, to address any disasters such as oil spills, and to clean up facilities when they are no longer used, with the cost of the latter project estimated at over $5 billion.
“As it stands today, we Alaskans, nor the city of Valdez, nor this court has any way to determine whether or not the largest owner of the most important publicly regulated facilities in Alaska has $1,000 in the bank, much less the financial capacity to safely operate these publicly regulated facilities in the public interest,” Brena said.
Valdez made a similar argument but lost when a state Superior Court judge dismissed the case in 2021. The city is now asking the Supreme Court to reverse that decision and send the case back to Superior Court so that its full merits can be considered.
Attorneys representing the RCA, Hilcorp and BP spoke in succession at the hearing, and reiterated their clients’ arguments that Valdez lacked legal standing to challenge the commission’s decision and that the question of disclosing Hilcorp’s financial information is now moot.
Valdez could have filed an official complaint seeking to block the RCA action but did not do so, they said.
“This appeal is not about the merits,” nor is it about the commission’s actions, said David Wilkinson, the assistant Alaska attorney general representing the RCA. “It’s about what Valdez failed to do to bring the issues to the point of being capable of resolution and to preserve those issues for judicial review.”
Michael McLaughlin asserted a similar argument. He was the attorney representing BP, which fully exited Alaska after half a century of operations in the state when it sold its last assets to Hilcorp.
“Valdez sat on its rights here and allowed its appeal to become moot,” McLaughlin said.
Justices appeared skeptical of some of those technical arguments, especially the claim that Valdez lacked standing in the dispute.
Justice Joel Bolger said such technicalities were hard to accept “when I think about the Valdez marine terminal, the location of Port Valdez – all these things that the commission and many other people just know.” He cited the city’s official comments, which concluded that any disruption of the Trans-Alaska Pipeline System would be of huge consequence to Valdez residents.
“How could you say that these interests are not sufficient to confer standing for Valdez to make this appeal on behalf of its citizens?” Bolger, who is retired but was on the panel hearing the case, asked Anne Marie Tavella, the attorney representing Hilcorp Harvest Midstream, its pipeline subsidiary. “I understand your procedural objections, but when you get right down to the substance, I can’t think of anybody that’s more concerned about this transaction.”
Tavella responded that Valdez, though it has substantial interest in the matter, was not harmed by the RCA’s approval of the BP-Hilcorp transaction. To have standing, she said, a party must be harmed or potentially harmed by an action.
A substantial crowd sat in the court’s chambers for the proceedings, which lasted for more than two hours. Among the onlookers was Vic Fischer, 99, the last surviving author of the Alaska constitution, and some former state lawmakers.
That was noticed by the justices. “We as a court appreciate the public interest in this case,” Chief Justice Peter Maassen said at the close of the hearing.
Maassen said the court will issue a written ruling sometime in the future, though he did not give an estimate of how long that will take.
There are mixed feelings in Alaska about Hilcorp’s emergence as one of the main oil industry operators.
Supporters of the company point to its successes at stemming production declines at aging Prudhoe Bay and its enhancements at other North Slope fields acquired from BP. Hilcorp has a history of rejuvenating aged oil and gas fields previously operated by major companies. It began its Alaska operations in 2012 in Cook Inlet, where it acquired assets from Chevron and Marathon Oil.
Hilcorp’s detractors say the company cuts corners and has a history of safety and environmental violations. They point to dozens of enforcement actions, the most recent one taken by the Alaska Oil and Gas Conservation Commission for drilling violations at the Milne Point field and the most serious possibly being a 2015 event at that oil field that nearly killed three workers.
Critics of the company, including members of the Alaska Public Interest Research Group and the Fairbanks Climate Action Coalition, rallied in front of the courthouse just before Tuesday’s Supreme Court hearing. They chanted slogans like “No more secrets, no more spills,” and “We are watching,” with the latter directed at the court’s justices.
Among the Hilcorp skeptics at the rally was state Sen. Bill Wielechowski, D-Anchorage. He said he fears that BP unloaded its assets to Hilcorp to avoid the huge cleanup costs involved in future dismantling of facilities, and that Hilcorp lacks the ability to cover those costs.
“Why did BP sell for such a low price?” he asked after speaking at the courthouse rally.
Wielechowski is sponsoring a bill that would force the privately held company to pay corporate income taxes to the state, just as BP did during the decades it operated in Alaska. The measure, Senate Bill 114, would apply to privately held companies in the oil and gas business that make over $4 million in profits. That change, Wielechowski said, would yield an extra $120 million a year to the state.
The oil industry and its supporters have fiercely opposed Wielechowski’s bill. In a memo that urged members to testify at a May 4 legislative hearing, the Resource Development Council for Alaska said the bill “threatens the future of oil and gas development in Alaska and would be a disaster for the economy, jobs, and Alaskans’ quality of life.”
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