Hilcorp Only Bidder in Alaskan Lease Sale

Cook Inlet
Cook Inlet

Published Jun 21, 2017 7:24 PM by The Maritime Executive

Hilcorp Alaska LLC was the only bidder in the U.S. government's Cook Inlet oil and gas lease sale this week.

The company, the primary producer of oil and gas in the Inlet, spent $3.95 million on 20 blocks, $922,000 on state leases and $3.03 million on federal leases, including 14 in the middle of the Inlet in front of Kachemak Bay.

The state’s 2016 Inlet lease sale drew no bids, and according to the Bureau of Ocean Energy Management (BOEM), the Inlet sale was the first federal offshore lease sale in Alaska since 2008.

“Today was the first time in nearly a decade that parcels off Alaska have been leased. This is the latest sign of continued industry optimism in the Trump Administration,” said Vincent DeVito, Counselor to the Secretary for Energy Policy. “This Administration understands that our lands offer vast energy development opportunities and that responsible energy development strengthens all aspects of our energy economy. Today's successful sale is another step in an America First energy strategy that puts us on our way toward energy dominance."

The BOEM is undertaking a new National OCS Oil and Gas Leasing Program as part of President Donald Trump’s America First Offshore Energy Strategy outlined in the President’s Executive Order 13795 on April 28, 2017, and amplified by Secretary Zinke’s Secretary’s Order 3350 on May 1, 2017.

The Center for Biological Diversity is critical of Hilcorp Alaska's expansion in what it calls “that treacherous waterway,” saying that $3.03 million investment on 14 different tracts substantially expands the heavily fined company’s commitment to drill in waters it deemed too forbidding to allow repair of its underwater pipeline leak for nearly four months.

“After Hilcorp’s struggle with oil and gas leaks into Cook Inlet this year, it’s disturbing to see the company given more chances to drill and spill in this fragile place,” said Center for Biological Diversity attorney Kristen Monsell. “Allowing this company to expand could have devastating effects on Cook Inlet beluga whales and their prey.”

Hilcorp is also seeking to build the controversial Liberty project in the Arctic. The project would involve construction of a nine-acre artificial island, drilling wells to tap underwater oil reserves and building an underwater pipeline more than five miles long to send the oil to onshore facilities. Hilcorp’s Liberty development and production plan is now being considered by BOEM. 

In recent years, says the Center, federal regulators have warned the company to improve maintenance of its gas pipelines, and state regulators have repeatedly fined the company and said “disregard for regulatory compliance is endemic to Hilcorp’s approach to its Alaska operations.” The Alaska Oil and Gas Conservation Commission has repeatedly cited Hilcorp for violating safety regulations for its oil and gas operations in the state. In March 2017 the commission fined Hilcorp $200,000 for failing to maintain a safe work environment in accordance with good oilfield engineering practices, among other issues.

“Hilcorp’s disdain for regulations and history of spills could spell disaster for Cook Inlet and the Arctic,” Monsell said. “The Trump administration is setting the table for more accidents in these treacherous waters. We’ll be fighting to make sure Cook Inlet beluga whales and other Alaskan wildlife are protected from dangerous offshore drilling.”