Alaska senator urges state to investigate possible Hilcorp violations around Cook Inlet leases

Energy costs could spike 30% if top Cook Inlet natural gas developer does not honor contracts, says Sen. Bill Wielechowski
Alaska senator urges state to investigate possible Hilcorp violations around Cook Inlet leases
Published: Jun. 27, 2023 at 7:38 AM AKDT
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JUNEAU, Alaska (KTUU) - An Alaska lawmaker from Anchorage is asking for an investigation of one of the state’s largest energy companies.

Sen. Bill Wielechowski says he’s worried that Hilcorp Alaska, LLC, the dominant natural gas producer in Cook Inlet, will eventually fail to meet the natural gas needs for hundreds of thousands of Alaskans living along the Railbelt Corridor, stretching from the Kenai Peninsula north to Fairbanks.

Wielechowski urged the state in a letter to investigate whether Hilcorp is violating its Cook Inlet leases and if so, asks for action from the state.

“Hilcorp has refused to extend the leases for any of the utilities up and down the Railbelt,” Wielechowski said. “They’ve refused to extend the leases for ENSTAR, and so those leases will start to expire next year, and every single year, there will be less and less gas that’s available.”

Currently, Cook Inlet represents the vast share of all gas used by Alaskan communities and Hilcorp is the primary leaseholder there.

In spring 2022, Hilcorp warned utility companies the reserves there are depleting.

In a letter to Gov. Mike Dunleavy, Railbelt Utilities pleaded to enforce the lease obligations by Hilcorp to ensure a continued flow of natural gas and energy costs.

“There is no doubt, however, that the least expensive way to ease our impending energy shortfall would be to continue to ensure the production of gas from wells ‘capable of producing ... gas’ under existing leases that Hilcorp has with the State of Alaska,” the letter said.

In the letter dated April 3, 2023, top officials with the Homer Electric Association, Golden Valley Electric Association, Matanuska Electric Association, and ENSTAR Natural Gas Company said Hilcorp supplies over 80% of the Railbelt’s energy supply and brought in roughly $450 million in revenue in 2022 from its Cook Inlet production.

Wielechowski’s letter is another effort to get the state to look into the matter, as he claims Hilcorp has violated a consent decree with the state. Wielechowski said he is worried that if Hilcorp does not follow the decree, it could put Alaskans in an energy and economic crisis with energy costs expected to skyrocket upwards of 30%.

“The situation is growing pretty dire and there’s no other solution, really, that will not result in Alaskans paying extraordinarily higher natural gas prices to heat their homes, to pay for their electricity costs, for the business community,” Wielechowski said. “Every good and service in the state of Alaska will increase dramatically unless this situation is resolved.”

Ideally, Wielechowski wants Hilcorp to follow the terms of the leases and consent decree, which would be to explore and produce the gas and sell it to utilities.

Luke Miller, a spokesperson for Hilcorp, said in an email that the company plans to invest more than $1 billion on capital project over the next five years, similar to what he said Hilcorp has put into Cook Inlet since taking over the majority of assets in 2012.

“Hilcorp is working closely with the Railbelt Utilities to find solutions to our natural gas supply challenges,” Hilcorp spokesperson Luke Miller said in an email. “These solutions include significant new capital investments, new commercial arrangements, new Cook Inlet platforms, advancing North Slope natural gas options, and exploring opportunities to repurpose existing infrastructure for renewable energy.”

Kara Moriarty, the president and CEO of the Alaska Oil and Gas Association, pointed out that Hilcorp poured investment dollars into Alaska’s natural gas production in Cook Inlet at a time last decade when major companies were no longer investing in the area.

Moriarty said that Hilcorp turned it around, but now it faces new challenges.

“I know the utilities and the companies are working together to try to continue to meet the demands of energy consumers,” Moriarty said. “Natural gas is — and will be and will continue to be — the safest, most economical, source for power in Southcentral Alaska.”

A spokesperson for the Alaska Department of Natural Resources said that it had received Wielechowski’s letter and is currently reviewing his concerns, but offered no additional comment.