Sign Banking Word Alaska Myself

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Alaska insight is supported in part by the Corporation for Public Broadcasting and by viewers just like you thank you VP one of the biggest and longest operating oil companies in Alaska is now leaving the state the company has sold its assets to Hill Corp a much smaller operator that is known for buying older oil and gas fields and streamlining operations what does it mean for Alaska's resource extraction future now that one of the industry leaders is out we'll take a look at bp's exit plan tonight on alaska insight [Music] [Music] as one of the first oil companies to invest in Alaska BP has been a part of the state's economy for 60 years but after decades as a leader in Prudhoe Bay the company struck a 5.6 billion dollar deal to sell their Alaska assets to hill Corp Alaska Alaska Public Media's akima Cummings has this story about the major role BP played in making Alaska an oil-rich state BP is leaving Alaska after more than 60 years as one of the largest oil companies in the state BP announced in August it will sell its Alaska assets to texas-based company hill Corp the company began explorations in Alaska in 1959 but for years BP had little success with exploration coming up short with dry wells in Prudhoe Bay then in 1967 Arco and humble oil struck oil BP confirmed the discovery the following year by drilling a successful well of their own Tim Brandner is the editor of the Alaska economic report and worked for BP from 1970 to 1985 he says that as the first major oil company to explore the North Slope BP laid the foundation for the eventual discovery of oil even though Arco and humble Jo the discovery well pp was quickly drilled a second well which helped kind of confirm the significance of the discovery so I think to me for one thing you can credit BP with having laid the groundwork for the oil wells in Alaska has enjoyed bps activities soon increased in 1975 the company helped build the trans-alaska pipeline an 8 billion dollar undertaking that was the largest privately funded construction project in the world two years later they started oil production in Prudhoe Bay the company was interested next in offshore exploration Roger Herrera was a geologist and lobbyist for BP at that time clearly is that Alaska has hardly been touched for its true potential for oil and gas it's true potential is further illustrated by the vast area of outer continental shelf all of most of which has all gas potential which lies offshore Alaska BP was all in eventually acquiring Arco in 2000 Prudhoe Bay is now managed through a partnership with ConocoPhillips and Exxon but over the last five years BP has been selling off its alaska assets Brander says the news of bp's five point six billion dollar deal with hill corp isn't a surprise to those who keep a close eye on the industry as oil fields mature the the large companies atone or maybe developed at the in the beginning you know they at some point they transfer the asset to a smaller company that might be more aggressive or might have different ideas out of how to work it it's the end of an era for Prudhoe Bay in the beginning of another as Hill cork takes over bp's assets on the North Slope in Anchorage I'm Zakia Cummings good evening BP ConocoPhillips Exxon the names are synonymous with Alaska's oil industry but one of the big three is leaving the state now here to discuss what this means for the future is Larry persley Larry is a former federal pipeline coordinator for Alaska LNG and also a former Deputy Commissioner of the Department of Revenue hi Larry hi thanks for being here hope I have some answers I'm sure you will also with us this evening is Bill pop bill is the CEO and executive director of the Alaska Economic Development Corporation hi Bill good evening thanks for being here and in the interest of full disclosure bill is a member of Alaska Public Media's Board of Directors so we want to let the public know about that let's start with what we know about the deal so far five point six billion dollars sale to texas-based company hill corp so Larry what does that mean what did Hill Corp actually purchase well they bought VP's interests and leases they bought VP's share in the physical assets of the trans-alaska pipeline Prudhoe Bay Point Towson but what hill Corp really bought what really determined that five point six billion is how much oil is not just in the ground but how much oil hill Corp they can get out of the ground and at what price and at what profit the five point six is for oil not old pieces of steel mm-hmm bill as someone who watches economic trends what does this sale say is it BP's bargain bin Sela or is it a smart robust investment for the future for Hill Court I think it's more of the latter and but it serves both companies purposes BP is changing its focus to other parts of the world this is not an unexpected change this happens in older legacy fields around the world where a major will come in and find a major discovery of oil develop it harvest and then ultimately sell it off to a smaller company that's more nimble that has other ideas about the field that then makes significant new investments that the legacy company probably wasn't really interested in in its broader portfolio so I think this is a win-win for both companies this allows Hill Corp to move up substantially in the size of its assets and its developable oil and I think this allows BP significant a significant chunk of cash that they've already made very clear they want to invest in other parts of the world you mentioned Hill Corp being a more nimble company they're smaller so what do we know about how different these two operators are BP is a publicly traded corporation Hill Corp is privately held what does this mean how does this make the two companies different well Hill Corp has a business model that is less less top-heavy with labour in terms of direct employment they tend to use contractors more we have clear examples of their business model right here in Alaska in Cook Inlet where they took over the legacy Chevron assets that Chevron had inherited from unical when they bought out unical globally and it really didn't fit their portfolio and they almost immediately put it up for sale and Hill Corp picked up Cook Inlet and over the course of several years made some significant new investments doubled production in Cook Inlet of crude oil and brought on significant new supplies of natural gas especially when they took over the marathon assets and Cook Inlet and saw significant new levels of economic activity on the Kenai Peninsula from the new contractors that they helped to bring online as well as existing contractors and overall saw a bit of a renaissance in the Cook Inlet region nowhere near what it used to be in hundreds of thousands of barrels of oil but definitely taking it up into the high teens and low 20s in terms of daily production you know for BP this is not you know these are the types of production levels that really aren't a good fit for a multinational major BP Exxon Mobil other Eni other will excuse me Nadi and I but other companies that are significant players on the global scene their strategies are starting to shift in ways that are starting to try and take more advantage of the fracking revolution in the lower 48 in particular and they're starting to shift away from these more expensive fields in terms of for their their point of view more expensive in in terms of the return and potential on the money that they are investing Larry pick up that thread BP much larger publicly traded but also you look at the BP has 1600 employees in Alaska and it takes a not just so 1,600 there's a lot of management attention in Houston and London there's spent on Alaskan we now know it was worth 5.6 billion so I think BP says I can take that five billion in the management time at the higher levels I was spending on Alaska for 74 thousand barrels a day and declining I can invest that somewhere else better returns a growing number revenue decline number so just from a business perspective it it just makes sense how long is it going to take to actually get this deal done sometime next year they're saying there'll be some regulatory approvals state federal required my guess is there may still be some details they need to resolve certainly Hill Corpse going to have to look at bp's 1600 employees they're contractors the organization chart how they get something done day to day and figure out how do they want to structure it who do they want to keep what positions do they want so I believe they've been saying sometime early next years what they would hope BP has managed the Prudhoe Bay operation on behalf of all the partners up there for about 20 years now do we have any clarity yet as to what this will mean going forward have have you heard that that will continue that he'll Corp will be the new operator of the field on behalf of everyone or has that not been determined yet anybody have any insight about that and the expectation is he'll Corp will be but I haven't seen an official announcement that says he'll Corpse gonna be the upper I guess the question is if not he'll Corp who I would doubt Exxon wants to and Conoco is pretty busy with cap Arak and Alpine and NPR a so I think the expectation is kill Corp but that's something where Hill Corp and Exxon and Conoco the major partners they have to talk among themselves bill a lot of North Slope workers live in Anchorage BP has been selling off assets for a few years now have you seen that rippling out at all in the Anchorage economy you know it's been kind of hard to tell in the sense that some of those asset sales have taken place before the recession kicked in before the bottom fell out of the price of a barrel of oil and some of them taking place after that you know overall I think that we've seen you know some very significant employment numbers before the recession all-time record peaks in employment in North Slope jobs but since then we've seen a fairly significant retrenchment we've got about 2,700 jobs in Anchorage right now that are attributed to oil and gas employment that's based here in Anchorage the headquarters jobs if you will that's down fairly substantially almost a thousand jobs that we've seen in terms of losses from the previous peak and overall statewide were just now approaching the 10,000 mark when we were up in the 14,000 range in terms of total oil and gas employment so it's kind of hard to ferret that out you know as to you know this particular asset sale meant this many less or more jobs given what been going on with the overall state of the oil market in Alaska Larry as someone who's worked for both the federal and state government how much involvement will will there be with either federal or state in in this actual deal are they just at a regulatory distance will they be involved at all and kind of having oversight over I mean they'll be involved the Federal Energy Regulatory Commission's involved on the tariffs for the trans-alaska pipeline where each company has its its own its own tariff filings its own ownership stake there will be land leases that have to be transferred they'll be I suppose air quality permits and the rest but I don't think it's going to achieve the level twenty years ago when BP took over Arco and antitrust issues got involved and the the state really leveraged some concessions as part of that merger I don't see any antitrust issues here so I think yes state and federal will be involved but a much lower level than we saw 20 years ago with the merger up on the slope but that's also something that's going to take some time which is another reason why they talk next year how has Alaska's relationship vp's relationship with Alaska sort of evolved over the course of its 60-year history it's a question for both of you well I think BP has been a strong player in the state of Alaska for six decades they've had a lot to do with the success of the oil patch in the state of Alaska they've made massive investments in our state and they've generated massive returns for our state treasury and for our economy and they've been a big part of our community I mean I know a lot of folks at BP who are friends and neighbors and who I'm gonna really miss if they leave the state with BP and that's gonna be a little bittersweet this is a fairly significant change but it's not an unexpected change I want to reinforce that we see this happen in in other oil fields all around the world where large companies handoff to smaller companies an asset that they've developed for a while I think we've been lucky in the fact that BP has been with us for six decades I mean that is a little unusual in in that particular model and so I think we're going to have to you know unfortunately say goodbye to some of our friends but in the same hand we're gonna be welcoming new friends that are gonna be coming on board with Hill Corp coming in in a stronger presence in our state and then we're gonna see a lot of transition of BP employees to Hill Corp and to other companies well I think three majors we have now BP Conoco Exxon Arco before that you know if you go back decades unocal the majors have been good corporate citizens in terms of support in the university it has gotten a lot of money from BP BP runs a teacher the air program Conoco and they all a lot of their employees volunteer in the community serve on boards so it's not that Hill herps gonna shut that off they're gonna do it different however they decide I think it's unsettling the change is unsettling to Alaskans are they going to write the same checks that BP did with their employees volunteer on my boards and I think given the political and budget budget turmoil in Alaska we're sort of overloaded on uncertainty at the moment and this just adds to us I think it's making people anxious I think we're seeing the handoff of BP's stewardship role in our state's economy being handed off to hill Corp and we just have to see how they're going to embrace that role as a steward of the state's economy well I think it's interesting both of you were on talk of Alaska with me earlier this week and and Bill you mentioned that BP actually has a chair on the board of directors for the Alaska economic or Anchorage Economic Development Corporation how unusual is that it's not unusual we see BP ConocoPhillips ExxonMobil other companies in all different sectors of the economy taking stewardship roles and direct involvement roles in holding seats on any number of nonprofit boards in our community and across the state and it's part of their involvement in the community that serves their their company and their employees and their reciprocal role in being part of the process that keeps Alaska a great place to live and work and play and I it's it's not unusual at all do you anticipate that he'll core might take that seat now well that's a discussion that I don't really have any good answers on yet because that's the discussion for my board of directors hill Corp started in Alaska and Cook Inlet in about 2012 they've had some problems pipeline leak in December of 2016 that continued for nearly five months and also a cleaning incident on the North Slope that was nearly fatal for three workers after that incident the Alaska Oil and Gas Conservation Commission wrote that hill Corp has a significant history of non-compliance with a-okeh regulations do you think what what of what's changed in that time have they tightened up their operations here to address these concerns Larry what do you know about this well I'd say they better have and I would expect their partners on the slope with Conoco and Exxon we'll be discussing that with them insuring the same concerns regulators have you know did Hill Corp take some things for granted where they lacks here I don't know I haven't read the files I would expect the Legislature will probably hold some hearings not that they have jurisdiction to stop it or bless it but they'll want to know what is the company's commitment what are they they learned Alaska is a different environment to work in and I'd like to think hill Corp has learned that and will do a good job going forward but I know this is not a prediction accidents happen certainly BP with the Gulf Exxon with the Exxon Valdez the question is ow often do they happen and what's your response when they do happen are you prepared to deal with it a lot of questions that I've had from the public relate to the bonding that's required for taking care of if there's an accident if there's a spill or well blowout or at the end of particular areas production the restoration that has to happen to take all that infrastructure out have you seen any details about how that might transfer to Hill Corp and is Hill Corp large enough to take on this liability pence how bad the accident is you know all the leases require when you're done with Prudhoe you gotta clean it up when you're done with point Thompson you got to clean it up when you're done and Cook Inlet you got to clean it up I would expect as BP through the taps to trans Lascaux oil pipeline teres has been in essence pre collecting some money for the dismantling and restoration of the pipeline route that that is an issue that was discussed with the two companies and would be in the contract which of course I haven't seen buddy I think that is alaskans concern is if there's an accident how deep are your pockets how much insurance do you have I think bill has some history and cook inlet in the issue of the platform's you know when I worked for the Keene evidence libera one of the issues was removal and remediation of the platforms that are in Cook Inlet and ultimately if a company that has is the current operator and owner of a platform were to say go bankrupt there was a view at that time that the it would then the state would then turn to the previous owner and look at that owner for the cost of removal and remediation so you know the issues that are related to infrastructure removal and remediation and to those kinds of responses are something that you know the state is going to be probably looking at in terms of how the deal is structured in the deal approval process and are probably going to be looking at that to see that the lines of responsibility are clearly defined and I think regulators will look at it after the Department of Natural Resources which deals with state land leases I expect the legislature will look at it again not to block it but just saying hey we're the elected officials can you come testify and explain how you're gonna deal with this what's your structure what's your plan so it's possible that BP may still be involved at some point in the future as far as for mediation and again depending on how the deal is structured and obviously we don't know yet because the documents in detail through the regulatory process have not gone into the public arena yet and you know those that are disclosed there will be portions of the deal that are proprietary in nature and then there'll be portions of the deal that are subject to regulate rig regulation and oversight by the federal government and by the state government this is a private company it's not publicly traded there's not the same level of disclosure in reporting what should Alaskans expect going forward this hill Corp is also a company that's known for not wanting to comment very often so it's hard to get interviews with them what should Alaskans expect in this new era now with a private company being a much bigger player in the North Slope I guess I would say Alaskans who Alaskans who want more information and feel the industry's hiding something will get more frustrated because it's a private company and they don't have to share financials BP just end of July held the quarterly briefing on their results and at that quarterly briefing at the end of July they said hey we plan to divest sell off another ten billion dollars in assets before the end of 2020 you're not going to get those kind of announcements signals from hill Corp so I think Alaskans will get frustrated but I think the bigger question will be are they good corporate citizen do they have any accidents what's their hiring practice how do they treat contractors and employees if you do a good job on all that people will be more understanding of the fact that you're private you don't have to tell me what's in your checkbook if they have problems they're the lack of information I think we'll just get more frustrating bill Hill Corp may they're known for being a leaner operation that's how they make their money they will likely use more contractors than direct employees what do you think that means for the job market and wages for those contractors well I think that you know one of them and this is a nationwide trend of using contractors and even the majors are starting to do that more aggressively it's going to be some downward pressure on the top end range of the wages that are being paid in in the oil industry it's still going to be really good paying jobs in the contractor side of things and in all likelihood I think we're gonna see a period of transition between BP ownership and Hill Corp ownership there's going to be some decisions made there are going to be BP employees current BP employees who are going to leave with BP to other parts of the world that's a talent loss for the state in a very competitive marketplace we're going to have a portion of the BP workforce that is going to land with Hill Corp that hill Corp is going to want to make offers to and Preserve within their company there are going to be other oil and gas companies pursuing this labor pool also there it's going to be a competition for this workforce depending on you know the level of that competition is going to depend on the skills that you have to offer but nationwide there is a bit of a talent shortage in the oil and gas industry because there was a lot of folks who retired out during the recession the national recession a lot of folks who said this isn't the industry for me and they move to a new industry sector so right now this labor pool that's suddenly potentially in play in terms of BP's workforce is going to be of interest to the oil and gas industry and all the players involved there but will also be of interest to other industry sectors because there are accountants there are lawyers there are communication specialists there a logistics team specialists all of whom are of interest to any number of companies in the state in just about 30 seconds or so BP was known as being a very philanthropic corporate citizen in Alaska spending three to four million dollars per year or donating I should say three to four million dollars a year to local organizations and nonprofits what do you think we can expect or should we have any expectations about how he'll court may step into that role in Alaska I think we're gonna have to see how that plays out I mean Hill Corp is a different company with a different company philosophy and a different company structure and they are going to be making their own decisions on those kinds of charitable contributions and and contributions to other nonprofit type organizations the thing of it is is that I think that they have just taken on a role of significant stewardship within our state's economy and our communities I think that that baton is being handed off to them by BP I think that they recognize that and I think that to the degree that it fits within what they want to accomplish in the state they are also going to be good community partners all right we'll have to leave it there thanks so much to my guests Larry personally and Bill pop for joining me this evening thank you good to be here as you've heard this evening b.p leaving Alaska will be a big change for the oil industry itself but most Alaskans may not see much difference in the state's relationship with the operators of Prudhoe Bay environmentalists are concerned that hill Corp will cut corners to make a profit citing worker safety incidents and past spills Hill Corp acknowledges errors but officials say they are committed to working with regulators to maintain safe operations as the company takes the reins from BP Alaskans will be watching to see what kind of corporate citizen hill Corp will become you can watch past episodes of Alaska insight on our website Alaska public org slash Alaska insight we'll be back next Friday right after Washington week thanks for joining us this evening I'm Laurie Townsend good night [Music]