Senate Bill 114, which would expand oil and gas tax to S Corporations like Hilcorp, was the topic of a Senate Finance Committee hearing on Friday, during which Hilcorp Alaska Senior Vice President Luke Saugier gently explained to the committee that the company has made billions of dollars in investments both in Cook Inlet and in Prudhoe Bay since entering the state in 2012.
Saugier said that the company now has 1,300 Alaska employees and that Alaska makes up nearly 60% of the business.
Hilcorp came to Alaska in 2012, just as larger companies were exiting Cook Inlet’s natural gas fields and the Railbelt was preparing for natural gas shortages and brownouts.
Since then, the company has invested over $1 billion in Cook Inlet natural gas, and has increased the supply, drilling 90 new wells and completing 400 well repair projects.
“Hilcorp is proud of the role we’ve played in keeping the heat and lights on for Alaskans and we look forward to continuing to play an important role in fueling Alaskans’ homes and businesses,” he said.
In 2014, Hilcorp entered the North Slope, and took over at the operator in 2015. The company has invested over $1 billion and drilled more than 100 new wells, with another 20 wells planned for this year. It’s grown from 18,400 barrels per day in 2014 to over 41,000 barrels per day today, and Saugier expects it to grow to 60,000 barrels per day in the next four or five years.
But Sen. Lyman Hoffman was not impressed. He wanted to know why there isn’t one million barrels per day going through the Trans Alaska Pipeline System. He said that Hilcorp was making a veiled threat of shutting down gas production in Cook Inlet if SB 114 passes.
Hoffman said that SB 114 is “baby steps” in rewriting Alaska’s oil and tax tax laws, which were last changed in 2012 with SB 21. “And I find it hard to believe the industry doesn’t come to that same conclusion.”
Hoffman appears ready to not only go after Hilcorp as an S corporation that doesn’t pay the same rate as publicly traded corporations, but to come back later with legislation to ratchet up the government’s take on other companies by moving the dials on existing tax laws.
“We need to reevaluate where we are and are we getting our fair share,” Hoffman said.
It was a remarkably hostile approach to a company and an industry that has poured billions of dollars in investment into Alaska’s aging oil and gas fields in recent years.
Sen. Donny Olson also raised the point that when Hilcorp took over the assets from BP, it was not subject to the same tax structure as BP, something that clearly also bothers him.
Saugier took the hostility in stride, reiterating that the company has made not only significant investment, but has helped the energy sector stem the pipeline and natural gas decline from the trajectory it was on before Hilcorp arrived.
Photo: Luke Saugier, Vice President of Hilcorp, testifies in Senate Finance.