When Alaska became a state in 1959, the newfound government was allowed to select 100 million acres of land to help build an economy from scratch. Tom Marshall, a state employee with a background in geology, urged the governor to consider the northern stretches of Prudhoe Bay—where he suspected the remote tundra’s windblown drifts might conceal a billion-dollar oil field. On a map laying out the proposed area, a skeptical colleague labeled the selection “Marshall’s Folly.”
Less than a decade later, BP struck oil under the tundra. The discovery dramatically changed the state, as oil quickly became the centerpiece of its economy; by the 1980s, Alaska produced about a quarter of U.S. oil, the majority of which came from the North Slope.
But before the North Slope’s massive field could start generating profits, oil had to be transported out of the wilderness. In the scramble to start pumping in earnest, several major oil companies—including what’s now known as ConocoPhillips Company, ExxonMobil, and BP—formed a joint venture to build a pipeline across 800 miles, navigating mountain ranges and fording rivers. It cost $8 billion, and when it was built in the 1970s, was the most expensive privately funded infrastructure project in the world.
Now this pipeline is at the center of a lawsuit—one with the potential to change the state’s fate once again. The small city of Valdez, which endured the devastating 1989 Exxon Valdez oil spill, is suing Hilcorp Energy Company in the Alaska Supreme Court. The trial, which begins this week, has the potential to affect Alaska’s environmental future and expose important information about the country’s largest privately owned oil company. “It’s literally regulators and oil companies standing together versus an Alaskan community, which I think is really telling,” said Phil Wight, a policy analyst at Alaska Public Interest Research Group.
Four years ago, BP sold its majority share in the pipeline, known as the Trans Alaska Pipeline System, to Hilcorp Energy Company. Hilcorp’s business strategy relies on wringing profits from older oil and gas fields. Unlike every previous pipeline owner—all publicly traded companies—it doesn’t have to publicly release its financial information. (Hilcorp did not respond to an interview request.)
The move was one of Alaska’s largest sales in a generation and made Hilcorp one of the largest oil producers in the state. But the agency overseeing the transaction, the Regulatory Commission of Alaska, allowed Hilcorp to keep the details of the $5.6 billion deal, and information about the company’s assets, private. In fact, the RCA actually suggested what regulation Hilcorp could use to keep its finances from further scrutiny. (A representative from the RCA said in an email that it cannot comment on open matters.)
Normally, the RCA would have held an evidentiary hearing prior to the sale, where entities like the City of Valdez, where the pipeline ends, could have requested additional information. That didn’t happen—the RCA will claim in the trial this week that a hearing wasn’t legally required. As a result, the city filed suit, saying Hilcorp and the RCA violated its fundamental free speech and due process rights. “It’s a foundational right to have access to this kind of information, so that you can meaningfully participate in your democracy,” said Robin Brena, the attorney representing Valdez.
Critics say that the lack of transparency around the sale means the public doesn’t know if Hilcorp can afford to safely operate the pipeline or if it will be able to respond in the case of an environmental disaster. The costs of an accident can be huge: Exxon, by some estimates, spent $7 billion in the aftermath of its spill in Prince William Sound. (It also fought punitive damages for years in court, ultimately reducing a $5 billion settlement to $507 million.) The true toll of the spill was measured in more than just dollars. Ecosystems have permanently shifted near Valdez, and the spill’s impact on the fishing economy—and the drawn-out court battle with a tiny resulting payout—have forever changed residents’ lives.
Alaska oil production has been declining for decades, and Hilcorp’s acquisition raises crucial questions about what happens when drilling stops. While no one wants to be left holding the check after the party’s over, Hilcorp avoided assuming all of BP’s responsibility for the pipeline’s eventual cleanup. When the pipeline was constructed, funds were supposed to be collected for the project’s remediation. While Hilcorp will be responsible for incremental costs after the acquisition, BP agreed to retain the roughly $2.5 billion liability it accrued prior to the sale—although it no longer operates in the state, and those funds remain in corporate accounts. Brena said that the RCA’s approval of this horse-trading without a public hearing is “inconsistent with the law, and inconsistent with the agency’s prior interpretation of the law.”
Wight, meanwhile, worries that these untested promises will make it easier for companies to shrug off their responsibilities to remediate the pipeline. “What assurances do we have that we’re ever going to see a dime of that money?” he said.
Adding to concerns is that in Hilcorp’s roughly decade of operation in Alaska, the company has quickly developed a long list of environmental and safety violations, including a pipeline repeatedly leaking natural gas into Cook Inlet and a worker’s death on the North Slope in 2018. The Alaska Oil and Gas Conservation Commission has frequently issued fines, including as recently as this month, saying the company’s behavior “call[s] into question the seriousness and effectiveness of Hilcorp’s efforts to improve its regulatory compliance.” (This reprimand from regulators is nothing new: In 2015, the commission called Hilcorp’s repeated violations of state regulations “inexcusable.”) Yet, the city of Valdez will argue this week, the RCA didn’t seriously consider Hilcorp’s track record during its review of the pipeline deal.
Wight said that what happens next will be precedent-setting. As Alaskan oil production dwindles, large multinational corporations like BP are leaving, and smaller firms are moving in. “How Alaska decides to regulate those firms is going to be a big part of our energy future, and what our lands and waters look like in 50 years,” he said.
It can be easy to glaze over the details of what Wight called “boring regulatory stuff.” But the RCA also oversees many other important public interests in Alaska, including telecommunications, and electric utilities—sectors the outcome of this lawsuit will influence. “Fundamentally, this is about public regulation versus corporate power,” he said.
Since the approval of the deal in 2020, public criticisms of Hilcorp have only mounted. This April, the Prince William Sound Regional Citizens’ Advisory Council, a congressionally mandated citizens’ oil spill prevention group, issued a report finding a “real risk of a serious accident or incident in the near future” at the marine terminal in Valdez, where all of the oil from the pipeline is shipped. The pipeline service company’s own surveys found a significant percentage of the workforce believes a serious accident is likely, and suggested leadership over the last several years has “eroded” safety measures in a variety of ways, including pressure to cut costs. “We are as safe as the budget allows,” one anonymous pipeline employee is quoted as saying in the report.
Hilcorp now has a significant influence over the maintenance and operations of both the pipeline and its marine terminal in Valdez, a representative from the advisory council said. And the operating risks are increasing: As temperatures warm, thawing permafrost has added a new hazard. A 2020 state report found that supports in a remote section had started to shift thanks to previously frozen ground beginning to warm, threatening the pipeline’s structural integrity.
Hilcorp’s dealings aren’t limited to Alaska. The company, which is based in Houston, also has sizable operations in Louisiana, where a spill shut down oyster beds last year; New Mexico, where it’s been sued for “improper” remediation work; and Ohio. Across the United States, Wight said, whole oil fields are now nearing the end of their productive life—and Hilcorp’s business model may become more common as private firms squeeze profits from nearly spent oil fields. This, in turn, introduces new uncertainties in the cleanup process. A May 2023 report found that the future profits of California’s oil sites are now less than half of what it will cost to clean them up. Nationwide, abandoned and orphaned wells are surging. “We’ve never had a full-scale managed decline on the scale we’re talking about now,” Wight said. This Alaskan lawsuit has the potential to send a signal—for better or worse—to other states about how to effectively regulate this transition.
The state, says Alyssa Sappenfield, an energy analyst for the Fairbanks Climate Action Coalition and the Alaska Public Interest Research Group, is at a pivotal moment. BP won’t be the last major oil company to leave in search of greener pastures; Hilcorp won’t be the last private company to swoop in to siphon off what remains. But if regulators do their jobs, Alaska will be assured thousands of jobs remediating the pipeline, easing this transition. The alternative is massive economic and ecological debt.
“Alaska can be a leader in what happens next, or it can remain a poster child for what happens when you hold on to oil too long—and too blindly,” Sappenfield said.