Legislature(2019 - 2020)SENATE FINANCE 532

02/26/2020 05:00 PM Senate RESOURCES

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Audio Topic
05:03:31 PM Start
05:04:23 PM Overview(s): Bp/hilcorp Transaction
06:53:40 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time & Location --
- Joint Meeting with House Resources Committee -
BP/Hilcorp Transaction
-- Testimony <Invitation Only> --
**Streamed live on AKL.tv**
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                       February 26, 2020                                                                                        
                           5:03 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
HOUSE RESOURCES STANDING COMMITTEE                                                                                              
 Representative Geran Tarr, Co-Chair                                                                                            
 Representative Grier Hopkins, Vice Chair                                                                                       
 Representative Sara Hannan                                                                                                     
 Representative Chris Tuck                                                                                                      
 Representative Ivy Spohnholz                                                                                                   
 Representative Dave Talerico                                                                                                   
 Representative George Rauscher                                                                                                 
 Representative Sara Rasmussen                                                                                                  
SENATE RESOURCES STANDING COMMITTEE                                                                                             
 Senator Peter Micciche, Chair                                                                                                  
 Senator John Coghill, Vice Chair                                                                                               
 Senator Click Bishop                                                                                                           
 Senator Cathy Giessel                                                                                                          
 Senator Joshua Revak                                                                                                           
 Senator Jesse Kiehl                                                                                                            
MEMBERS ABSENT                                                                                                                
HOUSE RESOURCES STANDING COMMITTEE                                                                                              
 Representative John Lincoln, Co-Chair                                                                                          
SENATE RESOURCES STANDING COMMITTEE                                                                                             
 Senator Scott Kawasaki                                                                                                         
COMMITTEE CALENDAR                                                                                                            
OVERVIEW(S):  BP/HILCORP TRANSACTION                                                                                            
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
CORRI FEIGE, Commissioner                                                                                                       
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided a  PowerPoint overview,  entitled                                                             
"BP and Hilcorp Transaction" and answered questions.                                                                            
DAMIEN BILBAO, Vice President, Commercial Ventures                                                                              
BP Alaska                                                                                                                       
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  comments  during the  BP/Hilcorp                                                             
Transaction overview.                                                                                                           
DAVID WILKINS, Senior Vice President                                                                                            
Hilcorp Alaska                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  comments  during the  BP/Hilcorp                                                             
Transaction overview.                                                                                                           
DENALI KEMPPEL, General Counsel                                                                                                 
Hilcorp Alaska                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:   Provided  comments  during the  BP/Hilcorp                                                             
Transaction overview.                                                                                                           
ACTION NARRATIVE                                                                                                              
5:03:31 PM                                                                                                                    
CHAIR PETER  MICCICHE called the  joint meeting of the  House and                                                             
Senate  Resources  Standing  Committees  to order  at  5:03  p.m.                                                               
Representatives  Rauscher,  Tuck,   Spohnholz,  Hannan,  Hopkins,                                                               
Talerico, and Tarr and Senators  Coghill, Bishop, Giessel, Revak,                                                               
Kiehl,  and  Micciche   were  present  at  the   call  to  order.                                                               
Representative Rasmussen arrived as the meeting was in progress.                                                                
^OVERVIEW(S):  BP/HILCORP TRANSACTION                                                                                           
              OVERVIEW(S):  BP/HILCORP TRANSACTION                                                                          
5:04:23 PM                                                                                                                    
CHAIR MICCICHE announced  the only order of business  would be an                                                               
overview of the BP/Hilcorp Transaction.                                                                                         
5:05:31 PM                                                                                                                    
CORRI  FEIGE,  Commissioner,   Department  of  Natural  Resources                                                               
(DNR), informed the committee she  would provide a brief overview                                                               
of  the  details  surrounding   the  BP/Hilcorp  transaction  and                                                               
present  an update  of activities  subsequent to  the committees'                                                               
last review on 12/16/19.   She directed attention to a PowerPoint                                                               
presentation,  entitled  "BP   and  Hilcorp  Transaction,"  dated                                                               
2/26/20, and  reviewed the  agenda for the  overview on  slide 2,                                                               
which was  structured in five  primary categories:   The proposed                                                               
sale; assets  and liabilities  that are  changing hands;  how the                                                               
state reviews and approves this  deal; an update on due diligence                                                               
since  December; and  the governor's  oversight  committee.   She                                                               
provided  an overview  of  the sale  on slide  3,  which read  as                                                               
follows [original punctuation provided]:                                                                                        
     ? August 27, 2019 - Sale Publicly announced.                                                                               
     ? $5.6 Billion of upstream and midstream interests.                                                                        
     ? Purported stock sale of the upstream companies.                                                                          
        ? Combined stock and asset sale of the midstream                                                                        
     companies and TAPS assets.                                                                                                 
       ? October 11, 2019  Division of Oil & Gas provided                                                                       
        with confidential purchase and sale agreement to                                                                        
     assist with its due diligence.                                                                                             
COMMISSIONER  FEIGE directed  attention to  slide 4  and reviewed                                                               
the transfer of upstream assets.   She noted that upstream assets                                                               
represent  wells,  gathering  lines, and  processing  facilities,                                                               
while   midstream   assets    are   common   carrier   pipelines,                                                               
transportation,  infrastructure, storage  tankers, and  so forth.                                                               
Per  upstream assets,  she explained  that BP  Exploration Alaska                                                               
Inc. (BPXA) holds  working interests in a variety of  oil and gas                                                               
leases  and  operating  units  on  the  North  Slope,  including:                                                               
Prudhoe  Bay  Unit,  26.36  percent;   Point  Thompson  Unit,  32                                                               
percent; Milne Point Unit, 50  percent; Liberty Unit, 50 percent;                                                               
and Arctic National Wildlife Refuge,  50 percent.  She noted that                                                               
upon closure  of this sale,  Hilcorp will assume  operatorship of                                                               
the  Prudhoe Bay  Unit  and  will become  100  percent owner  and                                                               
operator of  both Liberty Unit  and Milne Point Unit,  as Hilcorp                                                               
already   owns  50   percent  of   both  units.     Additionally,                                                               
transferring  50  percent  of  Arctic  National  Wildlife  Refuge                                                               
(ANWR) leases  requires Arctic Slope Regional  Corporation (ASRC)                                                               
approval, as they are not owned by the state of Alaska.                                                                         
5:10:20 PM                                                                                                                    
COMMISSIONER FEIGE reviewed slides 5  and 6, which summarized the                                                               
transfer  of midstream  assets as  follows [original  punctuation                                                               
      BPTA holds 50% of the outstanding limited liability                                                                       
      company interests of Milne Point Pipeline, LLC. (of                                                                       
     which Harvest currently holds the other 50%)                                                                               
     ? 32% of the outstanding membership interests of Point                                                                     
     Thomson Export Pipeline                                                                                                    
     ? Acquiring from BP Pipelines (Alaska) Inc. ("BPPA"):                                                                      
          o BPPA's approximately 48.4% interest in the                                                                          
     Trans Alaskan Pipeline System ("TAPS") and approximate                                                                     
     47.6% interest in TAPS terminal tankage in Valdez.                                                                         
          o   Approximately    49.1069%   of    issued   and                                                                    
         outstanding shares of Alyeska Pipeline Service                                                                         
          o Approximately 25% share in Prince William Sound                                                                     
     Spill Response Corporation.                                                                                                
COMMISSIONER  FEIGE  noted  that  midstream assets  for  both  BP                                                               
Transportation  (BPTA)  and  BP   Pipelines  Alaska  (BPPA)  will                                                               
transfer  to Harvest  Alaska, Hilcorp's  midstream  entity.   She                                                               
continued to  slide 7  and explained that  the remainder  of BP's                                                               
asset transfers includes one-third  of the membership interest in                                                               
the  Alaska Liquified  Natural  Gas (LNG)  Project,  owned by  BP                                                               
Alaska  LNG LLC  (BPALL),  which will  transfer  to Hilcorp  upon                                                               
closure of  the sale.   She turned  to slide 8,  which summarized                                                               
DNR's  role in  the  BP/Hilcorp transaction.    She reminded  the                                                               
committee  that  according to  Alaska  law,  no transfer  of  the                                                               
interest  in oil  and gas  lease shall  be binding  on the  state                                                               
until it  is approved  by the DNR  commissioner.   That authority                                                               
places  DNR  in   a  primary  oversight  role   through  which  a                                                               
comprehensive  due diligence  and  review of  the transaction  is                                                               
undertaken by  the department,  specifically within  the Division                                                               
of  Oil  and Gas  (DOG).    Slide  8  read as  follows  [original                                                               
punctuation provided]:                                                                                                          
     • State Pipeline Coordinator Office:                                                                                       
          o Fit, willing and able test.                                                                                         
          o AS 38.35.100(a).                                                                                                    
     • Leasing:                                                                                                                 
          o Administer and approve change in control of                                                                         
          o 11 AAC 82.605.                                                                                                      
     • Units:                                                                                                                   
          o Administer change in control of operator of                                                                         
     Prudhoe Bay Unit.                                                                                                          
          o 11 AAC 83.331.                                                                                                      
     • Commercial:                                                                                                              
          o Examine existing financial assurances and                                                                           
     determine what amendments will be required.                                                                                
          o Analyze financials of Hilcorp and Harvest.                                                                          
     • Permitting:                                                                                                              
          o Administer change in control of permits.                                                                            
          o 11 AAC 83.158(e).                                                                                                   
          o 11 AAC 83.346(e).                                                                                                   
          o 11 AAC 96.040(c).                                                                                                   
     • 11 AAC 82.605 (b):                                                                                                       
          o Paraphrase: No transfer of an interest in a                                                                         
     lease is binding upon the state unless approved by the                                                                     
COMMISSIONER FEIGE  explained that the commercial  section within                                                               
DOG is  involved in examining existing  financial assurances with                                                               
Hilcorp  and BP  and  determining what  amendments are  required.                                                               
Additionally, DOG  is working  with the  Department of  Law (DOL)                                                               
and a  third party expert, Northern  Economic Research Associates                                                               
(NERA),  to  perform  financial stress  testing  on  Hilcorp  and                                                               
Harvest, which ensures that both  entities could keep oil flowing                                                               
and restore throughput and TAPS should there be a major upset.                                                                  
5:14:51 PM                                                                                                                    
COMMISSIONER FEIGE  reviewed other  agency oversight on  slide 9,                                                               
which read as follows [original punctuation provided]:                                                                          
     ? Designation of Operator & Ownership filings                                                                              
        ? Bonding  Both BP & HC compliant with increased                                                                        
     level of bonding implemented by AOGCC in May 2019.                                                                         
     ATTORNEY GENERAL'S OFFICE                                                                                                
     ? Oil and Gas Section's role                                                                                               
          o Represent decision makers through various                                                                           
     regulatory processes.                                                                                                      
          o Represent the State of Alaska before the                                                                            
     Regulatory Commission of Alaska.                                                                                           
     ? Oil Discharge Prevention & Contingency Plan approval                                                                     
          ? BPX Greater Prudhoe Bay is current                                                                                  
       ? Financial Responsibility for Spills or Possible                                                                        
          ? HC must apply for DEC approval to include newly                                                                     
     acquired facilities prior of sale closing.                                                                                 
     ? Contaminated sites liability & clean-up                                                                                  
          ? BP remains responsible for all contamination                                                                        
     existing before sale                                                                                                       
COMMISSIONER FEIGE  directed attention to slide  10 and addressed                                                               
the  Regulatory   Commission  of  Alaska  (RCA)   process.    She                                                               
explained  that the  RCA process  is  unique from  DNR and  other                                                               
agencies.     The  RCA  resides  underneath   the  Department  of                                                               
Commerce, Community & Economic  Development (DCCED); however, the                                                               
RCA is  a quasi-judicial body  and, therefore, independent.   The                                                               
RCA  has  five  commissioners charged  with  answering  questions                                                               
regarding   the   BP/Hilcorp   midstream  asset   transfers,   in                                                               
particular Trans-Alaska  Pipeline System (TAPS)  asset transfers.                                                               
One such  question presented to  the RCA is whether  the proposed                                                               
acquisition of midstream assets is in the public interest.                                                                      
COMMISSIONER   FEIGE  reviewed   slide   11,  which   highlighted                                                               
significant activities subsequent to  the committees' last review                                                               
on  12/16/19.   Slide 11  read as  follows [original  punctuation                                                               
       ? January 9th  Governor's Oversight Committee held                                                                     
     its first meeting.                                                                                                         
       ? January 17th  Hilcorp/Harvest pipeline transfers                                                                     
      completed in preparation for working the BP/Harvest                                                                       
     transfer applications.                                                                                                     
       ? January 21st  "Change in control" form for oil &                                                                     
     gas leases provided to Hilcorp.                                                                                            
          ? Still finalizing what entities will hold                                                                            
     secondary liability.                                                                                                       
          ? BP represents to the State that it will remain                                                                    
      secondarily liable for the upstream DR&R obligations                                                                    
     of BPXA as they exist at the time of the transfer.                                                                       
        ? February 4th  RCA held Public hearing on TAPS                                                                       
     transfer application.                                                                                                      
          ? Still awaiting decision on petition for                                                                             
      confidentiality of financial documents. Decision due                                                                      
     March 12th.                                                                                                              
      ? February 25th - DNR & 3rd Party experts in Houston                                                                    
        at Hilcorp's office to advance financial stress                                                                         
          ? Companies have remained very forthcoming in                                                                         
     this & other due diligence.                                                                                                
      ? DNR has established the "FAQ" webpage for keeping                                                                     
     the public informed.                                                                                                     
          ? DNR Home Page banner -- Can register to get                                                                         
     email alerts as new information is posted.                                                                                 
5:22:05 PM                                                                                                                    
COMMISSIONER FEIGE  addressed the Governor's  Oversight Committee                                                               
(GOC) on slide 12.  She explained  that the GOC was formed at the                                                               
end of  December 2019  by Governor Mike  Dunleavy to  oversee the                                                               
transaction  due  diligence  and  ensure that  the  interests  of                                                               
Alaskans are  thoroughly discussed  and protected.   The  body is                                                               
comprised   of  commissioners   from  DNR,   the  Department   of                                                               
Environmental Conservation  (DEC), the Alaska Department  of Fish                                                               
& Game (ADF&G),  the Department of Labor  & Workforce Development                                                               
(DLWD),   DCCED,   and   the   Department   of   Revenue   (DOR),                                                               
representatives  from  the Office  of  the  Attorney General  and                                                               
DOL's  Oil &  Gas Section,  and a  senior staff  member from  the                                                               
Office of  the Governor.  She  said the GOC was  intended for the                                                               
exchange of  information.   She added that  the GOC  ensures that                                                               
all agencies  are receiving  requested information  and discusses                                                               
all  aspects  of  the  deal  as  it  pertains  to  each  agency's                                                               
oversight and areas  of interest.  She noted that  the GOC has no                                                               
bearing on the  function of DNR's oversight role.   She announced                                                               
that the  GOC will have  a public meeting  in the second  half of                                                               
March  to update  the public  on the  transaction review  and due                                                               
diligence and  share any new information  that becomes available.                                                               
In closing,  Commissioner Feige said  since the  committees' last                                                               
review  in December,  progress has  been made  on the  review and                                                               
vetting of the  transaction.  She applauded the  progress made by                                                               
DNR at this point.                                                                                                              
5:25:17 PM                                                                                                                    
SENATOR BISHOP questioned  whether Commissioner Feige anticipates                                                               
any "extra innings."                                                                                                            
COMMISSIONER FEIGE answered no.                                                                                                 
CO-CHAIR  TARR   asked  about  the  terminal   assets  factor  of                                                               
dismantlement,  removal,  and  restoration (DR&R),  in  terms  of                                                               
COMMISSIONER FEIGE  asked whether Co-chair Tarr  was referring to                                                               
the Valdez Marine Terminal.                                                                                                     
CO-CHAIR TARR said yes.                                                                                                         
COMMISSIONER  FEIGE  explained that  the  portion  of the  Valdez                                                               
Marine Terminal  included in the  deal includes only  the storage                                                               
tanks  that BPTA  currently  holds  and will  be  covered by  the                                                               
midstream  liability.   She added  that  DR&R responsibility  for                                                               
ownership  in Alyeska  Pipeline Service  Company will  follow the                                                               
transfer of assets to Harvest Alaska.                                                                                           
REPRESENTATIVE RASMUSSEN returned attention  to slide 9 and asked                                                               
whether   the  other   agencies'  determinations   regarding  the                                                               
transaction would be reconciled in the final approval.                                                                          
COMMISSIONER FEIGE answered  no.  She explained  that each agency                                                               
undertakes  its  jurisdictional reviews  independently;  however,                                                               
Hilcorp will  need approval from each  agency individually, prior                                                               
to or at an appropriate time after closing.                                                                                     
5:28:24 PM                                                                                                                    
CHAIR MICCICHE questioned whether  there is adequate capacity and                                                               
talent within the commercial team.   He also asked whether DNR is                                                               
transparently  receiving the  required  financial information  to                                                               
complete the  financial stress testing and  allow the transaction                                                               
to proceed.                                                                                                                     
COMMISSIONER FEIGE offered her belief  that the expert capability                                                               
needed  to  successfully complete  the  due  diligence review  is                                                               
inhouse.    She relayed  that  the  internal commercial  team  is                                                               
headed by  Dr. Matt Snodgrass  and supported by  DOG's commercial                                                               
team, many  of whom have  decades of experience working  with the                                                               
division.   Additionally, there  are several  PhD-level petroleum                                                               
economists  working on  the project.   Externally,  she explained                                                               
that  NERA, which  specializes in  financial analysis  and stress                                                               
testing, has been brought in  as a third-party expert in addition                                                               
to  support  from John  Ptacin,  the  head  of  DOL's Oil  &  Gas                                                               
Section,  who  has  extensive experience  with  the  TAPS  tariff                                                               
litigation.    She later  added  that  the commercial  team  will                                                               
continue to ask questions and  negotiate to settle any discomfort                                                               
that  may arise.   She  commended Hilcorp  for being  forthcoming                                                               
about sensitive information.                                                                                                    
5:31:18 PM                                                                                                                    
REPRESENTATIVE SPOHNHOLZ  remarked that  one of the  big concerns                                                               
is  regarding  DR&R of  liabilities  on  the  North Slope.    She                                                               
reflected that Commissioner Feige had  described that BP is going                                                               
to maintain a secondary liability.   She asked Commissioner Feige                                                               
to describe  what the  structures are  for guaranteeing  that and                                                               
for  a  guaranteeing that  a  company  like Hilcorp  assumes  its                                                               
responsibility.     She  further  asked  Commissioner   Feige  to                                                               
describe the transition and existing options.                                                                                   
COMMISSIONER FEIGE responded that  both entities [BP and Hilcorp]                                                               
have existing  financial assurance  agreements in place  with the                                                               
state.  She  explained that where this  particular transaction is                                                               
concerned, the secondary liability  will be a binding contractual                                                               
arrangement with a BP entity,  such that if Hilcorp should falter                                                               
on  the satisfaction  of DR&R  for  Prudhoe Bay,  that BP  entity                                                               
would be responsible to step in  and cover DR&R on all the assets                                                               
as they  existed at  the time  of the transfer.   She  added that                                                               
each DR&R  contract and financial assurance  agreement varies and                                                               
is specific to the nature of  the transaction and to the facility                                                               
and assets  being covered.   She  said she is  not at  liberty to                                                               
discuss the  commercial details because they  are currently being                                                               
negotiated; however,  a broader framework would  be provided once                                                               
they are in place.                                                                                                              
REPRESENTATIVE  SPOHNHOLZ asked  when  that  information will  be                                                               
COMMISSIONER FEIGE answered there is  no set timeline.  She said,                                                               
"We will get  there when the state is satisfied  that we have the                                                               
financial assurances that we need  to protect the interest of the                                                               
state and the interest of Alaskans."                                                                                            
5:34:26 PM                                                                                                                    
DAMIEN BILBAO,  Vice President,  Commercial Ventures,  BP Alaska,                                                               
noted that  BP opened its first  office in Anchorage in  1959 and                                                               
has been  a member  of the  Alaska community  for over  60 years.                                                               
Consequently,   he  related   the   personal  difficulties   that                                                               
accompany  BP's   departure  from   Alaska.     Additionally,  he                                                               
addressed the reason  for the company's departure.   He explained                                                               
that this is a time of  limited capital investment in the oil and                                                               
gas industry;  therefore, BP  made a  $10 billion  acquisition of                                                               
oil producing  assets from  a company named  BHP that  will allow                                                               
BP's  Lower  48  business  to  be  more  competitive  for  growth                                                               
investment.   He  said BP  decided  to pay  for that  acquisition                                                               
through  the sale  of its  assets in  Alaska because  the state's                                                               
high cost of production, distance  from market, and tax risk have                                                               
made investing for growth a  challenge.  Furthermore, he conveyed                                                               
that  the  uncertainty surrounding  the  ongoing  oil tax  debate                                                               
influenced  the  evaluation of  BP  Alaska  within the  company's                                                               
portfolio.   He  stated that  there  is no  shortage of  resource                                                               
opportunity in  Alaska; however, he  questioned how the  cost and                                                               
uncertainty of development compares to  other global options.  He                                                               
further  explained   that  Alaska   became  a   solid  divestment                                                               
candidate  once  Hilcorp  expressed interest  in  acquiring  BP's                                                               
business  in the  state.   He praised  Hilcorp's performance  and                                                               
production at Milne  Point and said BP looks  forward to "passing                                                               
the  torch" and  watching Hilcorp  produce for  the next  50-plus                                                               
5:39:21 PM                                                                                                                    
MR.  BILBAO turned  attention  to the  transition  process.   The                                                               
process of transferring BP's business  to Hilcorp began September                                                               
2019 and  is expected to  continue until the late  second quarter                                                               
of  2020.   He listed  four  primary aspects  of the  transition:                                                               
operate Prudhoe Bay safely and  responsibly; treat employees with                                                               
respect;  support federal  and  state  regulatory processes;  and                                                               
prepare to position  Hilcorp for success on day one.   He said as                                                               
the  transition  process  advances,  BP has  informed  the  other                                                               
owners of Prudhoe  Bay and TAPS, Exxon  Mobile and ConocoPhillips                                                               
Alaska, as well  as the Alyeska Pipeline Service  Company, of key                                                               
decisions  that   affect  them.    He   said  the  aforementioned                                                               
companies  have   offered  their   experience  and   support,  as                                                               
necessary.    Mr. Bilbao  continued  by  addressing how  BP  will                                                               
remain  responsible for  future DR&R  of upstream  facilities and                                                               
TAPS.     He   explained  that   Hilcorp  will   provide  primary                                                               
accountability for  future DR&R  in the  upstream, while  BP will                                                               
hold  secondary liability.   Additionally,  BP  will retain  DR&R                                                               
accountability for TAPS.   He noted that the cost  of future DR&R                                                               
is difficult to  estimate given the requirements are  still to be                                                               
defined by regulators.   Further, DR&R activity  is planned years                                                               
in  advance,  which allows  for  the  financial, regulatory,  and                                                               
operational  preparation by  various parties.   Last,  he pointed                                                               
out that BP  is not the only  owner of Prudhoe Bay and  TAPS.  In                                                               
closing, he  extended BP's appreciation  to the people  of Alaska                                                               
for  supporting  the company's  efforts.    He also  thanked  the                                                               
Native people of Alaska for  welcoming and partnering with BP and                                                               
thanked the  Alaska State Legislature for  remaining committed to                                                               
doing what's right for the state.                                                                                               
5:44:29 PM                                                                                                                    
REPRESENTATIVE  RAUSCHER asked  how long  BP would  be doing  its                                                               
"handholding" with Hilcorp.                                                                                                     
MR.  BILBAO said  he would  characterize it  as a  cooperation in                                                               
preparation  for day  one.   He clarified  that Hilcorp  does not                                                               
need  any handholding,  as they  have  done a  phenomenal job  of                                                               
showing they can  operate on the North Slope.   He explained that                                                               
regarding day one  readiness, the workstreams are  focused on the                                                               
frontline operations and  ensuring that Hilcorp is  prepared.  He                                                               
said  Hilcorp  would  be  taking   a  large  percentage  of  BP's                                                               
workforce and  with that, the  knowhow, experience,  history, and                                                               
institutional knowledge  that it  possesses.  Furthermore,  BP is                                                               
instituting  training  plans  for  any new  staff  that  will  be                                                               
joining Hilcorp,  as well  as shadowing  plans for  Hilcorp staff                                                               
that  will  have  roles  post  day  one,  so  that  Hilcorp  will                                                               
experience  participating in  activity conversations  and have  a                                                               
better understanding of  key decisions and risks that  need to be                                                               
mitigated.  He  noted that the preparation for  day one readiness                                                               
extends  to other  things, such  as IT  decisions and  accounting                                                               
5:46:39 PM                                                                                                                    
MR.  BILBAO, in  response  to a  question  from Senator  Coghill,                                                               
stated that BP's greatest asset  is its people, later adding that                                                               
the knowledge,  experience, and technical expertise  that it will                                                               
bring  to Hilcorp  is invaluable.   He  explained that  BPXA owns                                                               
over  40 years  of data    surface,  subsurface and  commercial                                                                 
which   Hilcorp  will   acquire  with   its  purchase   of  BPXA.                                                               
Additionally,  Hilcorp will  obtain the  keys to  warehouses that                                                               
contain thousands  of rocks and cores.   He said Prudhoe  Bay has                                                               
been a   pearl  in BP's portfolio  and an area where  the company                                                               
has developed  technology and  exported it  elsewhere.   He added                                                               
that data  is critical to  operations in  Prudhoe Bay.   He noted                                                               
that Hilcorp immediately  placed top experts at  the frontline of                                                               
Prudhoe Bay to learn about BP's  operations and to ensure that it                                                               
has the necessary  data to be ready  on day one.   He offered his                                                               
understanding  that  BP is  on  track  to provided  Hilcorp  with                                                               
everything it needs to operate Prudhoe Bay.                                                                                     
5:48:48 PM                                                                                                                    
REPRESENTATIVE  RASMUSSEN inquired  as  to the  plan  for the  BP                                                               
building in Anchorage.                                                                                                          
MR. BILBAO directed the question to David Wilkins.                                                                              
5:49:11 PM                                                                                                                    
REPRESENTATIVE SPOHNHOLZ  pointed out  that Alaskans have  a long                                                               
track record with BP and have  confidence in BP as a corporation.                                                               
She  offered  her  understanding  that  BP  doesn't  take  action                                                               
without  engaging  in  homework,  research, and  planning.    She                                                               
further opined that BP would  not undertake the responsibility of                                                               
assuming  the second  liability  for DR&R  without the  knowledge                                                               
that Hilcorp could fulfill its  obligation.  She asked Mr. Bilbao                                                               
to  discuss  the  due  diligence  that  took  place  between  the                                                               
corporate partners to give Alaskans  more confidence in Hilcorp's                                                               
ability to assume the responsibilities its undertaking.                                                                         
MR. BILBAO  replied that  BP was  pleased when  Hilcorp expressed                                                               
interest in Prudhoe Bay.   He recounted Hilcorp's positive impact                                                               
in Cook  Inlet and Milne  Point, where  it produced more  oil and                                                               
built new pads with a different  approach.  He further noted that                                                               
over  90 percent  of Hilcorp's  employees live  in Alaska,  which                                                               
spurs Hilcorp's desire to succeed in  the state.  He conveyed the                                                               
importance of selecting the right  company to ensure that Hilcorp                                                               
won't  need  to continue  to  provide  oversight in  the  future.                                                               
Further,  the owners  of  Prudhoe  Bay, including  ConocoPhillips                                                               
Alaska  and ExxonMobil  Corporation, will  continue to  help each                                                               
other  better  their  operations.   Additionally,  the  operating                                                               
agreement  at Prudhoe  Bay will  continue  to provide  safeguards                                                               
around    payments,   obligations,    and   honoring    financial                                                               
responsibilities.   He  said all  of  that will  be available  to                                                               
Hilcorp in the transfer from BPXA.                                                                                              
5:52:36 PM                                                                                                                    
REPRESENTATIVE  HANNAN pointed  out that  BP has  had a  long and                                                               
positive history with organized  labor.  She sought clarification                                                               
on the extension of contracts in the organized labor units.                                                                     
MR.  BILBAO  said  Hilcorp  will   inherit  all  obligations  and                                                               
contracts in  which BPXA is engaged,  including labor agreements.                                                               
He noted  that last  year, BP extended  its labor  agreements for                                                               
three  years.   Furthermore,  Hilcorp  has  access to  the  labor                                                               
agreements  and  participated  in conversations  with  leadership                                                               
from  the  labor  groups.   He  deferred  any  further  questions                                                               
regarding future actions on this matter to Hilcorp.                                                                             
5:53:51 PM                                                                                                                    
SENATOR  KIEHL  asked  what  entity   of  BP  will  maintain  the                                                               
secondary liability for the upstream DR&R.                                                                                      
MR.  BILBAO offered  his belief  that BP  has not  formally filed                                                               
which specific  entity will take on  that liability.  He  said it                                                               
will be  an entity with  sufficient financial backing  to fulfill                                                               
its responsibilities.   He offered to return with  an update when                                                               
it's finalized.                                                                                                                 
5:55:27 PM                                                                                                                    
CO-CHAIR  TARR indicated  that ConocoPhillips  Alaska is  also in                                                               
the process  of selling some of  its assets.  She  asked how that                                                               
will affect the current owner/operator  relationship on the North                                                               
MR.  BILBAO declined  to  speak for  ConocoPhillips  Alaska.   He                                                               
stated  that growing  uncertainty  informs  the way  corporations                                                               
make  decisions about  their portfolios.    Further, the  ongoing                                                               
uncertainty  in Alaska  around  the direction  that  the oil  tax                                                               
debate will  take is factoring  into how corporations  are making                                                               
investment and long-term decisions in the state.                                                                                
5:57:19 PM                                                                                                                    
REPRESENTATIVE TUCK sought clarification  on how DR&R liabilities                                                               
are accounted.                                                                                                                  
MR. BILBAO  responded that  DR&R is  accounted as  an obligation.                                                               
He  explained that  years  of litigation  between  the owners  of                                                               
TAPS, the state,  and the federal government has  resulted in the                                                               
current  DR&R  structure  regarding  approach  and  inclusion  in                                                               
tariffs.  He said BP has  assured that it will remain financially                                                               
accountable for  DR&R; furthermore,  it is  in the  other owners'                                                               
best  interest to  ensure that  those  costs are  covered at  the                                                               
right time and financial obligations are honored.                                                                               
REPRESENTATIVE  TUCK expressed  interest in  following up  on the                                                               
financial assurances regarding DR&R.                                                                                            
6:01:15 PM                                                                                                                    
CHAIR MICCICHE offered his  understanding that the responsibility                                                               
might fall to  BP Corporation North America Inc.   He requested a                                                               
follow-up  response  with  the   requested  information  on  DR&R                                                               
MR. BILBAO clarified that BP  will be retaining primary liability                                                               
of TAPS and the secondary liability at Prudhoe Bay.                                                                             
6:03:33 PM                                                                                                                    
DAVID WILKINS, Senior Vice President,  Hilcorp Alaska, said he is                                                               
testifying  on behalf  of Hilcorp's  581 employees,  of which  90                                                               
percent are  Alaskans.   He informed  the committee  that Hilcorp                                                               
Energy Company was  founded in 1989 and is  currently the largest                                                               
privately held oil and gas  production and exploration company in                                                               
the  U.S.   Hilcorp  Energy is  entirely based  in  the U.S.  and                                                               
operates  in eight  states: Texas,  Colorado,  New Mexico,  Ohio,                                                               
Pennsylvania,  Alabama,  Wyoming,  and Alaska.    Hilcorp  Energy                                                               
operates  450 thousand  barrels  of oil  equivalent  per day,  of                                                               
which 20 percent  comes from Alaska.  Since  2012, Hilcorp Energy                                                               
has  been  creating  efficiencies,   extending  field  life,  and                                                               
increasing  production  safely  and responsibly.    He  addressed                                                               
Hilcorp's commitment to  safety, later sharing that  in 2019, the                                                               
Hilcorp   employee   OSHA   [Occupational   Safety   and   Health                                                               
Administration] total  recordable incident  rate (TRIR)  was .35,                                                               
which is lower than the Alaska industry average of .9.                                                                          
6:07:23 PM                                                                                                                    
MR.  WILKINS  stated  creating   efficiencies  does  not  require                                                               
cutting  corners.   Efficiencies, he  said, produce  longer field                                                               
life,  more reserves,  more production,  and more  money for  the                                                               
state.  He  addressed Hilcorp's record in  revitalizing fields in                                                               
the Lower  48 and Alaska and  noted that since 2012,  Hilcorp has                                                               
invested $2.5 billion  in the state, which  includes $1.7 billion                                                               
in  the Cook  Inlet Basin,  investments in  production-increasing                                                               
products,  and investments  in maintaining  aging infrastructure.                                                               
Hilcorp  has  drilled  86  wells  in the  Cook  Inlet  Basin  and                                                               
extended  the life  of the  offshore  basin by  20 years  through                                                               
projects like  the cross-inlet pipeline,  which allows  for daily                                                               
shipments  of  oil to  the  refinery  in  Nikiski.   Mr.  Wilkins                                                               
related   that   in   2019,  Hilcorp   safely   and   responsibly                                                               
decommissioned  the   Drift  River  Terminal  and   is  currently                                                               
advancing  the DR&R  for the  Christy  Lee Platform  in the  Cook                                                               
Inlet.   He  further touted  Hilcorp's ability  to stabilize  the                                                               
brownouts occurring in  Southcentral Alaska due to a  lack of gas                                                               
in 2012.   In 2014,  Hilcorp brought its energy,  investment, and                                                               
innovation to  the North  Slope.   He reported  that 5  years and                                                               
$700  million dollars  later, Hilcorp  has drilled  60 wells  and                                                               
taken production  from 18,400 barrels  per day to  34,000 barrels                                                               
per day  at Milne Point.   By the end of  2020, forecasts suggest                                                               
that  Hilcorp will  produce over  40,000 barrels  per day  at the                                                               
same location.                                                                                                                  
6:12:14 PM                                                                                                                    
MR.  WILKINS continued  to  highlight  Hilcorp's achievements  at                                                               
Milne Point,  including Moose Pad, polymer  flood operations, and                                                               
a conventional  Ugnu well, which  unlocked the potential  for one                                                               
billion barrels of  recovery on the North Slope.   He stated that                                                               
Hilcorp aspires to continue its  success at Prudhoe Bay and hopes                                                               
to  triple its  Alaska  workforce  by late  2020  through the  BP                                                               
acquisition.   He reported that  Hilcorp extended a job  offer to                                                               
800 of  the 1,000 BP employees  that applied for a  position.  He                                                               
said  Hilcorp will  honor all  union agreements  and has  been in                                                               
communication  with  the joint  crafts  council  and other  labor                                                               
organizations on  the North Slope,  adding that  their experience                                                               
and  expertise is  critical to  continuing  safe and  responsible                                                               
operations  at  Prudhoe  Bay.   Hilcorp  is  also  expanding  its                                                               
service  technical  teams,  integrity  team,  safety  group,  and                                                               
environmental group, which  assist in maintaining accountability.                                                               
He stated  that Hilcorp will be  a great operator at  Prudhoe Bay                                                               
and  will continue  to be  a  community partner  with the  Giving                                                               
Program.   He  reported that  with the  company's match,  Hilcorp                                                               
employees have given  more than $2.8 million to  over 375 Alaska-                                                               
based  charities.   Furthermore,  Hilcorp's newfound  partnership                                                               
with the  Alaska Community Foundation  will infuse  an additional                                                               
$5,000 into  the program.   In closing, Mr. Wilkins  pledged that                                                               
Hilcorp  will safely  lead the  charge  towards more  investment,                                                               
jobs, and production.                                                                                                           
6:17:39 PM                                                                                                                    
DENALI  KEMPPEL,  General  Counsel, Hilcorp  Alaska,  provided  a                                                               
short  description of  her educational  background  and her  work                                                               
experience at Hilcorp beginning in  early 2019, later noting that                                                               
she  is  a  member  of  Hilcorp's "BP  transaction  team."    She                                                               
recalled that in August 2019,  Hilcorp announced it would buy all                                                               
of  BP's  upstream  and  midstream  assets  in  Alaska  for  $5.5                                                               
billion,  which   includes  approximately  20  percent   of  BP's                                                               
interest in  and operatorship  of the Prudhoe  Bay Unit,  BP's 48                                                               
percent ownership  share in  TAPS, BP's 49  percent share  of the                                                               
Alyeska Pipeline  Service Company, and  25 percent of  the Prince                                                               
William Sound  Response Corporation.   Hilcorp will also  take 33                                                               
percent  interest  in  the  Alaska   LNG  Project  and  buy  BP's                                                               
remaining  interest  in  the Milne  Point,  Point  Thompson,  and                                                               
Liberty Fields.   She  noted that  Hilcorp is  not buying  all of                                                               
Prudhoe  Bay  Unit,  as   ConocoPhillips  and  ExxonMobil  remain                                                               
partners  for  their  respective  ownership  interest,  which  is                                                               
approximately  37  percent  of each.    Since  the  announcement,                                                               
Hilcorp  has worked  diligently  with the  state  to procure  the                                                               
required approvals  to close the transaction,  including upstream                                                               
components  with  DNR  and midstream  components  with  the  RCA.                                                               
Pending all  regulatory approvals,  Hilcorp expects to  close the                                                               
transaction in the second quarter of 2020.                                                                                      
MS. WILKINS turned  attention to DR&R and  explained that Hilcorp                                                               
worked  with  DNR  to  find   the  right  solution  that  ensures                                                               
sufficient  coverage  for the  state.    Hilcorp entered  into  a                                                               
financial assurance  agreement, which  enables the state  to have                                                               
up-to-date bonding  information for  any future  abandonment risk                                                               
at the  end of an  asset's life.  Since  2012, she said,  DNR has                                                               
received   Hilcorp's   annual   audited   financial   statements,                                                               
quarterly   unaudited    financial   statements,    and   reserve                                                               
information,  allowing  the  department to  judge  the  company's                                                               
financial  strength.     Additionally,  every  three   years,  an                                                               
independent  third party  prepares  a DR&R  report that  analyzes                                                               
Hilcorp and Harvest Alaska's oil  and gas properties, assets, and                                                               
infrastructure, and  provides an abandonment cost  estimate.  The                                                               
estimate   is  subsequently   incorporated  into   the  financial                                                               
assurance agreement  and sets the  new bonding requirement.   She                                                               
noted  that  Hilcorp's  bonding amount  has  increased  with  the                                                               
company's  growth, later  adding  that Hilcorp  is currently  the                                                               
"most heavily  bonded oil and gas  company in Alaska."   She said                                                               
Hilcorp will take over BP's  share of DR&R responsibility for all                                                               
upstream components and non-TAPS  midstream assets, while BP will                                                               
remain  liable for  its approximately  49 percent  of TAPS  DR&R.                                                               
Furthermore,  BP  will leave  its  parent  company guarantees  in                                                               
place for  those obligations.   She opined that  this transaction                                                               
puts Alaska  in a better position,  as another large oil  and gas                                                               
company will be partially responsible for  TAPS at the end of the                                                               
asset life.   She noted  that Fortune magazine placed  Hilcorp on                                                               
its "one  of the  best places  to work in  America" list  for the                                                               
seventh time.   She said Hilcorp is proud  of its accomplishments                                                               
in  Alaska and  looks forward  to sharing  more successes  in the                                                               
6:23:01 PM                                                                                                                    
REPRESENTATIVE  RASMUSSEN inquired  as  to the  plan  for the  BP                                                               
building in Anchorage.                                                                                                          
MR.  WILKINS  said Hilcorp  plans  to  retain  the lease  of  the                                                               
6:23:37 PM                                                                                                                    
SENATOR GIESSEL referenced  a report submitted by  Hilcorp to the                                                               
RCA claiming that the disclosure  of confidential documents would                                                               
be harmful to the company.  She asked Mr. Wilkins to elaborate.                                                                 
MS.  KEMPPEL acknowledged  that Hilcorp  submitted a  filing with                                                               
the RCA.   The filing emphasized the competitive  harm that would                                                               
result to  Hilcorp by  publicly disclosing  financial statements.                                                               
She  specified   that  the  financial  statements   would  reveal                                                               
Hilcorp's  cost  structure,  which   could  allow  for  effective                                                               
competition; further,  she argued  that the  financial statements                                                               
include  a  level of  specificity,  such  as customer  names  and                                                               
contract  details,  which doesn't  exist  in  a public  company's                                                               
financial statements.   She also  noted that the RCA  has granted                                                               
Hilcorp confidentiality  on its financial statements  19 times in                                                               
the last 9 years.                                                                                                               
MR. WILKINS remarked:                                                                                                           
     It would  be like you were  bidding on a home  and that                                                                    
     bid  ... [was]  made public  so that  everybody bidding                                                                    
     against  you could  see what  you were  bidding, and  I                                                                    
     don't think that's fair.                                                                                                   
6:26:05 PM                                                                                                                    
REPRESENTATIVE HOPKINS inquired as  to Hilcorp's future plans for                                                               
existing union  contracts on the  North Slope.   Additionally, he                                                               
asked about  plans to  increase the  number of  Alaskans employed                                                               
through Hilcorp's contractors.                                                                                                  
MR. WILKINS  said he welcomes  unions, later adding  that Hilcorp                                                               
will engage  them at the  proper time  and is "pro-work  and pro-                                                               
project" with all its workers and contracts.                                                                                    
6:27:25 PM                                                                                                                    
REPRESENTATIVE HANNAN asked how  much of Hilcorp's management and                                                               
technical staff  is based in  Alaska versus Houston and  how much                                                               
authority  that  management  staff  would have  over  the  Alaska                                                               
MR. WILKINS replied that day-to-day decisions are run locally.                                                                  
6:28:24 PM                                                                                                                    
SENATOR REVAK inquired  as to Hilcorp's goals  for production and                                                               
how the legislature can support Hilcorp's future in Alaska.                                                                     
MR.  WILKINS answered  that Hilcorp  is currently  in a  "seek to                                                               
understand" mode  at Prudhoe Bay.   He explained that  Hilcorp is                                                               
engaging with  its partners  at Prudhoe  Bay to  understand their                                                               
ideas and how  things work.  He added that  Hilcorp looks forward                                                               
to  a long  time in  Alaska;  however, he  expressed his  concern                                                               
about the  uncertainty regarding  the tax structure,  which takes                                                               
away from Hilcorp's capital and increased production.                                                                           
6:31:01 PM                                                                                                                    
CO-CHAIR  TARR asked  how  Hilcorp plans  to  upscale with  fewer                                                               
employees without cutting corners.                                                                                              
MR.  WILKINS  stated  that  Hilcorp  has  a  five-level  employee                                                               
structure and  pushes responsibilities down to  the lowest level.                                                               
Additionally, he said,  Hilcorp maps out tasks,  hires smart, and                                                               
trains its employees to make  decisions.  He added that regarding                                                               
the  current  transition, Hilcorp  plans  to  upscale with  fewer                                                               
employees by targeting efficiencies.                                                                                            
6:34:35 PM                                                                                                                    
REPRESENTATIVE   SPOHNHOLZ   expressed   her   appreciation   for                                                               
Hilcorp's  hire of  Alaskans,  specifically  into its  leadership                                                               
team, as well  as the company's commitment to  philanthropy.  She                                                               
acknowledged  that   Milne  Point  is  a   "shining  example"  of                                                               
increasing  production; nonetheless,  she opined  that there  are                                                               
risks associated with Hilcorp's "lean"  model of work.  She noted                                                               
the loss  of a Hilcorp employee  at Milne Point in  December 2018                                                               
and asked what the organization  has learned from that experience                                                               
and what  it plans to do  ensure that Hilcorp employees  are safe                                                               
on the job.                                                                                                                     
MR. WILKINS said the experience  was tragic and motivated Hilcorp                                                               
to reflect and recommit to  work safety.  Additionally, he shared                                                               
that Hilcorp worked  with OSHA on implementing  changes to ensure                                                               
the incident doesn't happen again.                                                                                              
6:36:05 PM                                                                                                                    
SENATOR KIEHL  sought clarification  on how Hilcorp  is financing                                                               
the BP purchase.                                                                                                                
MS.  KEMPPEL  indicated  that Hilcorp  is  still  evaluating  all                                                               
options for financing  the transaction.  She noted  that two $250                                                               
million payments have already been made to BP.                                                                                  
SENATOR  KIEHL  asked  whether  Hilcorp  is  borrowing  money  to                                                               
finance the acquisition.                                                                                                        
MS.  KEMPPEL said  Hilcorp works  with a  sophisticated group  of                                                               
banks  and is  currently in  discussion  with a  number of  those                                                               
banks on the best path forward.                                                                                                 
6:38:04 PM                                                                                                                    
REPRESENTATIVE RASMUSSEN  offered her belief that  putting a $500                                                               
million down payment on an  investment of $5 billion demonstrates                                                               
financial competence.                                                                                                           
6:38:58 PM                                                                                                                    
CHAIR MICCICHE  asked for Hilcorp's position  on paying corporate                                                               
income tax.                                                                                                                     
MR. WILKINS  stated Hilcorp  has no  opinion on  corporate income                                                               
tax as it is  a policy decision for the legislature.   He said if                                                               
there were a corporate income tax, Hilcorp would pay it.                                                                        
6:40:25 PM                                                                                                                    
REPRESENTATIVE  HANNAN questioned  whether Hilcorp  has corporate                                                               
tax exclusions in any other states where the company operates.                                                                  
MR. WILKINS said he does not know.                                                                                              
CHAIR MICCICHE asked Mr. Wilkins  to follow up with the requested                                                               
6:41:08 PM                                                                                                                    
CO-CHAIR TARR  sought clarification  on the  relationship between                                                               
the parent company and the Harvest Alaska subsidiary.                                                                           
MS.  KEMPPEL said  she would  provide a  corporate organizational                                                               
CHAIR  MICCICHE  shared  several  personal  anecdotes  about  his                                                               
positive experiences  with Hilcorp.   He added that  Alaskans are                                                               
concerned and  interested about the  BP/Hilcorp transaction.   He                                                               
said keeping  Alaskans informed throughout  the process  would be                                                               
6:43:27 PM                                                                                                                    
SENATOR  KIEHL asked  Commissioner  Feige  which entity  provides                                                               
corporate assurances for future DR&R.                                                                                           
COMMISSIONER FEIGE  said the state  will seek an entity  with the                                                               
greatest  durability, wherewithal,  and security  to satisfy  the                                                               
state's requirements.   She added DNR will continue  to work with                                                               
BP to select the appropriate entity.   She further noted that the                                                               
DR&R agreements are updated every  three years to ensure that the                                                               
appropriate bonding and "financial instruments" are in place.                                                                   
6:46:02 PM                                                                                                                    
REPRESENTATIVE TUCK  questioned whether it's necessary  for BP to                                                               
be the secondary liability if Hilcorp  "[is] able to bond for the                                                               
full value of ... any DR&R  activities that need to take place in                                                               
the future."                                                                                                                    
COMMISSIONER FEIGE  answered yes.   She explained  that secondary                                                               
liability is  important to  protect the  state's interest  if the                                                               
entity responsible for  the primary liability were  to default in                                                               
the future.                                                                                                                     
REPRESENTATIVE  TUCK  posited  that  the  bonding  company  would                                                               
assume responsibility if Hilcorp were to default.                                                                               
COMMISSIONER  FEIGE  confirmed  that.   She  noted  that  bonding                                                               
covers  what is  on  the ground  at  the time.    She added  that                                                               
bonding is a  place holder and does not cover  100 percent of the                                                               
value.  She continued:                                                                                                          
     But  at this  point,  where we  stand  today, we  don't                                                                    
     actually  understand what  -  at the  end  of the,  for                                                                    
     example, Prudhoe  Bay field life  - the state  or other                                                                    
     entities may want to have  removed and what we may want                                                                    
     to  retain.   So, when  we're doing  our estimates  for                                                                    
     DR&R,  they contemplate  removal of  roads, removal  of                                                                    
     pads, removal of  all facilities.  When we  get to that                                                                    
     point  in  time,  it's   entirely  possible  that  road                                                                    
     infrastructure    the state or the  North Slope Borough                                                                    
     or some other entity - may  want to stay in place.  So,                                                                    
     that's  why I  point back  to the  fact that  these are                                                                    
     living documents.   We put a bonded amount  in place to                                                                    
     cover those  initial stages or percentage,  and then we                                                                    
     have  other  financial  vehicles  that  further  go  to                                                                    
     support  that   to  make  sure   that  the   full  DR&R                                                                    
     obligation can be accounted for.                                                                                           
REPRESENTATIVE   TUCK  questioned   whether  entities   that  are                                                               
responsible  for  secondary  liabilities  are  required  to  have                                                               
bonding abilities.                                                                                                              
COMMISSIONER  FEIGE   said  that   will  be  considered   in  the                                                               
contractual  agreements  with  BP.    She  noted  that  secondary                                                               
liability is typically a durable,  corporate or parent guarantee.                                                               
She offered to follow up with  a primer on how DR&R, bonding, and                                                               
insurance are consolidated into a financial assurance agreement.                                                                
6:50:33 PM                                                                                                                    
SENATOR  GIESSEL posited  that  DNR isn't  the  only entity  that                                                               
levies bonding  requirements.  She  asked whether Alaska  Oil and                                                               
Gas   Conservation   Commission    (AOGCC)   has   more   bonding                                                               
COMMISSIONER  FEIGE confirmed  that  is correct.   She  explained                                                               
that AOGCC  has its own  bonding provisions and  requirements for                                                               
all wells  that are drilled.   She added that every  well drilled                                                               
in  the  state  must  be  bonded  for  plugging  and  abandonment                                                               
responsibility.  Furthermore, in  May 2019, AOGCC increased those                                                               
bonding levels  significantly.  Currently,  BP and  Hilcorp carry                                                               
all the necessary  bonding to cover AOGCC's  requirements as well                                                               
as financial  assurance agreements for  DR&R.  She noted  that in                                                               
the   DR&R,  plugging   and  abandonment   is  also   considered;                                                               
therefore,  the   avoidance  of  "double  dipping"   and  "double                                                               
charging"  for the  plugging and  abandonment of  wells is  being                                                               
considered  during the  preparation  of  the financial  assurance                                                               
agreements  to transfer  the assets  included  in the  BP/Hilcorp                                                               
SENATOR GIESSEL requested that AOGCC provide a summary of the                                                                   
bonds it is requiring of the companies.                                                                                         
6:53:40 PM                                                                                                                    
There being no further business before the committees, the joint                                                                
meeting of the House Resources Standing Committee and the Senate                                                                
Resources Standing Committee was adjourned at 6:54 p.m.                                                                         

Document Name Date/Time Subjects
DNR Update Jt Res Committee 2.26.2020.pdf SRES 2/26/2020 5:00:00 PM
DNR Presentation to Jt. Resources 02.26.2020