IT ALL STARTED WHEN GOV. WALKER MADE BROOKS RANGE A DEAL
The State-owned Alaska Industrial Development Authority to the list of creditors for Caracol/Brooks Range Petroleum, which owes AIDEA tens of millions of dollars on a loan for the Mustang Project.
Although the exact amount owed to Alaska’s publicly owned development agency is hard to calculate from the outside, what is known is that since October, the company hasn’t paid the $3.1 payment due on the note. It’s in default. Brooks Range is supposed to pay $3.1 million per quarter.
Brooks Range has produced a small amount oil from the project — about $500,000 worth. But there are creditors to the tune of $15 million that it took to produce that bit of oil. The company is now in “warm storage,” and if the creditors don’t get some money, they won’t likely keep the small crew on staff that monitors the generators. Creditors, if not paid by end of 2019, could very well put the company into bankruptcy.
HOW AIDEA GOT THERE
A series of missteps by former Gov. Bill Walker relate to Brooks Range Petroleum’s financial peril:
Misstep one: Walker ordered a conversion of AIDEA’s equity position in the project to a loan in 2018. The company never made a payment.
Misstep two: Walker vetoed the tax credits and ordered the Department of Revenue to essentially lend money to Brooks Range, while all other players suffered (i.e. Furie going bankrupt), as they were counting on those tax credits.
Misstep three: The loan from the Department of Revenue was paid off by AIDEA, during the restructuring of the equity deal.
Under Gov. Bill Walker, AIDEA sold off its interests in the holding companies and road and pad infrastructure associated with the Mustang field. The state-owned agency instead financed the purchase by Caracol for $52.5 million for the Mustang processing facilities and $8.5 million for the road and pad operating company, and other associated costs.
Under the restructuring, there were no payments due until Oct. 1, and there was a 30-day grace period for Caracol, which has also passed. In the loan agreement, that means AIDEA could call in the entire note as due.
Decisions made during the Walker Administration were done behind closed doors with consultants to Walker, such as Mark Gardiner, the Portland consultant paid $400,000 a year, who met with Walker in Juneau behind closed doors without anyone from AIDEA present.
Unfortunately, the chickens are coming home to roost under AIDEA now that Walker is no longer in charge and the board must decide what to do with a Walker loan agreement that appears to have gone bad.