Upstream portion of BP-Hilcorp sale on track for state approval
BP and Hilcorp are hoping to close the upstream portion of their $5.6 billion Alaska deal by the end of the month while state regulators continue to evaluate Hilcorp’s financial wherewithal to take a large stake in the Trans-Alaska Pipeline System.
State Natural Resources and Environmental Conservation department officials said they are also on track with their reviews of the sale to hit the companies’ preferred closing date during a June 19 meeting of the Governor’s Oversight Committee on the transaction.
DNR Commissioner Corri Feige said staff in her department should finish their fit, willing and able test of Hilcorp’s ability to operate the large Prudhoe Bay oil field that is the heart of the deal by June 26.
“We still do in DNR’s shop have the secondary liability of upstream guarantee for both DEC and their contaminated sites and DNR’s (removal and restoration) obligations pending so that one is still very much active,” Feige said.
Companies that develop infrastructure on state oil and gas leases are required to maintain a financial assurance with the state that they will be able to restore the parcel back to a condition deemed acceptable by DNR officials, commonly known as dismantlement, removal and restoration, or DR&R.
Under its deal with Hilcorp, BP will retain its secondary liability for the upstream North Slope facilities it is selling to the Houston-based independent as well as for BP’s portion of TAPS, which the company holds a 48 percent stake in.
The total cost to restore the Prudhoe Bay leases or the TAPS corridor is unclear given the exact requirements could vary depending on the individuals in leadership at the time, but a 2002 U.S. General Accounting Office report put the cost to restore areas of the North Slope developed for industry “in the billions of dollars” at the time. Reports evaluating the cost to close down and clean up TAPS have come to similar conclusions.
A third-party estimate of the DR&R obligation is submitted to DNR every three years but kept confidential, according to DNR officials.
BP spokeswoman Meg Baldino wrote via email that the companies do not expect to hold any sort of event at Prudhoe when the deal is final and are instead focused on a smooth transition.
A Hilcorp spokesman declined to comment.
DEC Commissioner Jason Brune said during the meeting that his department is also evaluating BP’s guarantee to back up Hilcorp in addressing existing contaminated sites.
Hilcorp has asked to incorporate the Prudhoe Bay facilities it will take over into its current oil spill response contingency, or C-plan, and submitted a list of the facilities that would be added to the plan to DEC on June 15, according to Brune. The department is also targeting a June 30 decision on Hilcorp’s proposed C-plan amendments.
DEC received no comments on the changes to the spill response plan during a 10-day comment period that closed June 19, according to spokeswoman Laura Achee.
The companies had originally hoped to close the entire transaction at about this time, but the Regulatory Commission of Alaska has spent considerable time evaluating Hilcorp’s finances in relation to it taking BP’s 48 percent share of TAPS.
John Ptacin, a state attorney for the RCA, said the pipeline and utility oversight agency received a substantial amount of data from the companies specific to the TAPS transaction May 4 and a request for confidentiality of that information is currently being reviewed.
The City of Valdez in April appealed the RCA’s March decision to keep Hilcorp’s financial records private in state Superior Court.
Feige said the next transaction oversight meeting is likely to be held in late August to update work on the upstream close if it does not happen June 30 or evaluate where the TAPS portion of the deal stands; it is currently on pace to close in fall, according to state officials at the meeting.
Elwood Brehmer can be reached at [email protected].