BLOWING UP PRUDHOE
Prudhoe Bay is the largest oil and gas field in the nation. A delicious find for the energy sector back in the 1960s, at 213,543 acres, it’s among the 20 largest and most productive fields in the world. It was a boon for our young state. Prudhoe Bay, it can be argued, built Alaska.
And it might just be on the verge of going south because of the obsession of a governor.
Prudhoe, the field, is divided into leases; leases are combined into units; and units have operating agreements.
This makes the work efficient for both the producers and for the state, which a
ctually owns the mineral rights.
Without agreements and a Plan of Development, we’d have a chaotic arrangement of rigs drilling everywhere like a swarm of mosquitoes on a caribou. Or like Texas in the early days of oil.
In Prudhoe Bay, the Plan of Development for the coming year, which starts in July, was submitted on time by the operator.
WALKER MAKES DEMANDS
But Governor Walker’s Administration has asked for a series of information — some technical, and some marketing — from the producers, as it relates to their gas.
The story was well explained by the Alaska Journal of Commerce in April. Oil and Gas Division Director Corri Feige signed a letter to senior BP Alaska asking a lot of questions relating to a major gas sales project. O&G asked for drilling plans, management of carbon dioxide pulled from Prudhoe, gas balancing agreements, and marketing details for the gas.
BP, the field operator said, in no uncertain terms, that can’t give over the marketing plans because, in fact, that would be an anti-trust violation if the companies even had each other’s plans. BP is not supposed to know what Exxon is doing to market gas, because this is supposed to be a competitive market, not a collusion.
Fiege would not have acted without the direction of the governor. Why, then, has Walker demanded this information?
Why has the Acting Commissioner of DNR decided to leave on the last day of the current lease?
Why did Craig Richards quit his prestigious job as attorney general after only 18 months? Richards is not a quitter. And it has nothing to do with his personal life, which was hinted at in the governor’s press release.
Insiders are saying it’s because Walker intends to default the Prudhoe Bay Unit when it comes due on July 1 and Richards is moving into position on the outside of the administration to eventually assist in litigation.
Marty Rutherford, who has been leading DNR on an acting basis, is reported to want nothing to do with that. Insiders say that she told the governor she was ready to lead DNR, but not ready to default the Prudhoe Bay Units.
Craig Richards, on the other hand, may want everything to do with that, including inheriting the litigation of a lifetime.
NO TECHNICAL BASIS FOR DEFAULT, SO…
Experts say there is no technical basis for defaulting the unit. The technical information has been given over and the field is in production.
The operator BP has done nothing that would harm the unit. If Walker, through his new DNR commissioner Andy Mack, decides to default a working unit, this would be a first. And it has the ability to throw Alaska’s entire economy into the drink.
Further, if Walker decides to default the Prudhoe Bay Unit, it woud be because he intends to nationalize it. At that point, the operator technically has no permission from the owner (Bill Walker) to engage in any activity. What would BP do?
The courts would decide because this would invite a gusher of litigation. And this is where Craig Richards’ latest move is most interesting.
Richards and Walker have made a career of suing oil companies. It was their efforts that stalled the completion of the Point Thomson agreement that former Gov. Sean Parnell helped resolve, which is now in production, giving 10,000 barrels of liquids into the Trans Alaska Pipeline System each day.
What is motivating the governor? It’s the gasline. Amanda Coyne, in her much-missed column by the same name, analyzed Gov. Walker back in 2014, and his desire for the state to own the gasline outright. She wrote: “Walker can be persuasive when he talks about taking back the state and about controlling our destiny. But we should all be aware of the risks: And the risks in this case are that what we have now will all be undone.”
Walker’s testimony in 2015, when he was forced to drop his lawsuit against the state (he was now governor and would have been suing himself) hints at his current strategy to put the Prudhoe Bay Unit into default.
WALKER AND RICHARDS AT IT AGAIN?
Any speculation that former Attorney General Craig Richards has fallen out of favor with Gov. Walker is unfounded. As one insider put it, “there’s no daylight between those two.”
Richards will likely go off to a law firm, where he can bring in the bigger dollars, and wait for his required 12 months before working on a lawsuit that has anything to do with his former work as an attorney general. He can practice what’s known as “gardening,” which is tending to the plants who actually do the work directly with the state or on topics he would be forbidden from tackling directly. Twelve months is a drop in the bucket for litigation of this magnitude.
MARCIA DAVIS UP NEXT
Word has it the governor will likely appoint Deputy Chief of Staff Marcia Davis as the new attorney general. With her, and with Andy Mack heading up DNR, he’d have his compliant team in place.
Davis worked tirelessly to elect Walker and cut deal with the Alaska Public Offices Commission staff after she was popped for organizing campaign groups that essentially laundered money from a fake nonprofit Davis set up in 2014 with two other Walker supporters. They raised and spent $50,000 to defeat Governor Parnell and install the Walker-Mallott Indie-Democrats into office, they did so at the 11th hour of the campaign. They didn’t disclose their sneak attack, but APOC learned of it and went after them.
The penalty was reduced by over 90 percent because APOC determined that Davis was an “inexperienced filer.” This inexperienced filer may be our next attorney general, because she is close with both Walker and his Chief of Staff, Jim Whittaker.
“This whole play is to squeeze the oil companies to do what he wants them to do in relation to AK-LNG,” one insider said.
18 MONTHS, SIX DEPARTMENTS, 14 COMMISSIONERS
Walker is now at the 18th month mark of his term. He is already on his third DNR commissioner, third Corrections commissioner, second Public Safety commissioner, second Education commissioner, second Attorney General, and second AGDC president. Must Read Alaska has learned that at least one other commissioner is halfway out the door.