Can Hilcorp Regain Our Trust With Cook Inlet Pipeline?

Moving oil is a risky business, especially across Cook Inlet’s notoriously rough waters. But who assumes the risk? And if it’s Alaskans who depend on healthy fisheries who bear the risk, how much risk are we willing to accept?

Hilcorp has released plans to move away from tankering oil across Cook Inlet, and to convert an old gas pipeline to carry oil beneath Cook Inlet.

We want to see this project work, because pipelines can be safer than tankers for moving oil. But it must be done right.

Right now, Hilcorp pumps most oil from Cook Inlet to the west side, where it’s stored at the Drift River Oil Terminal (DROT), just below the West Foreland. This situation presents at least two sets of risks.

First, the DROT sits in the floodplain of Mt. Redoubt, an active volcano. Arco, Unocal and others sited the facility there in 1966 even after an ongoing eruption had pushed boulders and blocks of ice the size of D9 Cats through the proposed facility site. In the 1989 Mt. Redoubt eruption, industry evacuated the facility and left 20 million gallons of oil perched above Cook Inlet fisheries. It would have been a nationwide story if the Exxon Valdez hadn’t hit Bligh Reef. Then, when Mt. Redoubt erupted again in 2009, with massive mudslides cresting the facility’s protective berms, Chevron left more than 6 million gallons of oil at the facility, with zero capacity to mount a spill response. So, the lesson of the story: don’t store oil at the base of an active volcano.

Regarding the second risk, tankering oil across Cook Inlet’s rough and icy waters is tricky. While double bottomed and double hull tankers have certainly made shipping oil by tank vessel safer, and while technology and seamanship improve every year, the fact remains its risky to load, unload, dock, hold and transit tankers carrying oil.

Hilcorp’s plan is complicated because it would convert a 21-mile long 10-inch subsea natural gas line into an oil line. Gas lines are built to carry gas. Oil lines are built to carry oil. So, the conversion from one to another is rather involved, to say the least. Furthermore, industry installed this line in 1972, so it’s spent over 45 years on the bottom of Cook Inlet’s unforgiving boulder fields and swirling glacial silts. And the proposed line would hold roughly a half-million gallons of oil beneath Cook Inlet when full.

There are a host of technical, engineering and oceanographic considerations in play, and it’s vital our state and federal agencies — including the Alaska Department of Natural Resources, Alaska Department of Environmental Conservation and the federal Pipeline Hazardous Materials Safety Administration — ensure Hilcorp employs the very best available technology.

But there’s another factor at play here — perhaps equally important — and it has to do with corporate culture. Jeff Hildebrand is Hilcorp’s CEO. His primary business model has been to buy-up old fields and wring out the last remaining profits. He’s done very well (over $3.5 billion in net assets, according to Forbes), and because Hilcorp lawyers set up as an “S-Corporation” under IRS rules, Hilcorp pays no corporate income tax to Alaska. So, Hildebrand’s not converting an old gas line across Cook Inlet because it’s the right thing to do. No, he’s doing it for the simple reason it will make him more money. Because in the long haul, shipping oil by pipeline is cheaper than by tanker. And when profit is the primary driver, there’s a tendency to cut corners.

And Hilcorp’s attention to profits, and its broader corporate ethic, in the relatively short time it has conducted business in Alaska have been quite disappointing. The Alaska Oil &Gas Conservation Commission has cited Hilcorp for more than two dozen violations since 2012, including a 2015 violation that very nearly killed three workers. AOGCC has gone so far as to say “[t]he disregard for regulatory compliance is endemic to Hilcorp’s approach to its Alaska operations….”

Perhaps the most relevant violation to consider, however, is Hilcorp’s gas line leak near Platform A in Cook Inlet earlier this year. Hilcorp knew or should have known it had a leaking line in December 2016, yet it did not tell regulators about the leak until Feb. 7, 2017. Hilcorp then refused to shut down the line, and allowed the gas leak to continue for months, until late May 2017, so it could continue production. If Hilcorp allowed that line to leak for months, what will it do if its oil pipeline across Cook Inlet leaks? What if shutting down a leaking oil pipeline across Cook Inlet means shutting-in lucrative, producing oil wells upstream?

One of Hilcorp’s primary arguments against taking appropriate action during the Platform A incident was that the ice conditions in Cook Inlet in the winter made it impossible to repair the pipe. This is an important consideration for the current project: if Hilcorp does not employ state-of-the-art leak detection and spill response controls into this project, including a series of well-positioned isolation valves across Cook Inlet, it will be unable to address an oil spill during a substantial part of the year.

Hilcorp has worked hard to improve its operations, and we applaud those efforts.

But it’s absolutely vital to reduce the risks associated with converting a 45-year old gas line to an oil line beneath Cook Inlet’s important fisheries. Risk is, after all, just another form of corporate subsidy. Because if Hilcorp can save money by installing a substandard pipeline, it pushes the risk of an oil spill onto the general public — we Alaskans, who own the fish and waters of Cook Inlet under the Alaska Constitution — and we all bear the cost of that risk.

And those risks are high. Cook Inlet supports countless families and communities. Our fisheries generate around $1 billion in value every year, and tens of thousands of Alaskans rely on Cook Inlet salmon and halibut to feed them through the winter. That’s why it’s critical Hilcorp employ state-of-the-art technologies to help discover and respond to pipeline spills.

In the end, Hilcorp must regain our trust. And the biggest question Hilcorp needs to answer for Alaskans who live, work and play in Cook Inlet is this: can you show us — with your design plans and operational commitment — that your proposed pipeline across Cook Inlet will protect the fisheries that feed Alaskans?

Bob Shavelson works for Cook Inletkeeper, a group of Alaskans who came together in 1995 to fight for clean water and healthy fish habitat throughout the Cook Inlet watershed.