Providing coverage of Alaska and northern Canada's oil and gas industry
March 2020

Vol. 25, No.12 Week of March 22, 2020

Financial data confidentiality allowed

RCA accepts unaudited statements; finds filings in pipeline transfers to be confidential; says final orders to be issued Sept. 28

Kristen Nelson

Petroleum News

The Regulatory Commission of Alaska ruled March 12 that financial information submitted in its dockets on the common carrier components of the proposed BP-Hilcorp transaction must be considered confidential. It also allowed Harvest Alaska and BP Pipelines (Alaska) to file unaudited statements.

But it refused to strike a filing made by the City of Valdez and denied a motion for expedited consideration.

RCA said it has “not yet determined whether we need an evidentiary hearing in these dockets,” making the transfer requests in the dockets non-hearing matters. Under its regulations, the commission said, anyone may file statements in opposition to a petition for confidential treatment.

And, dashing any hopes BP and Hilcorp had of closing the deal in the second quarter of this year, the commission said it would issue orders in the proceedings by Sept. 28. The dockets at the commission were opened Sept. 27 last year, following announcement of the sale in August.

Four RCA dockets

RCA has four dockets covering approval of the acquisition by Harvest Alaska of BP Pipelines (Alaska)’s indirect 32% interest in PTE Pipelines, the Point Thomson pipeline; the acquisition by Harvest Alaska of BP Pipeline (Alaska)’s indirect 50% interest in the Milne Point Pipeline, in which Harvest already holds a 50% interest; the transfer of certificate of public convenience and necessity No. 311 for the Trans Alaska Pipeline System from BP Pipelines (Alaska) to Harvest Alaska; and the transfer of a 5% ownership interest in PTE Pipeline from ExxonMobil Pipeline Co. to BP Transportation (Alaska), a move which would align BP’s Point Thomson ownership share with its share in the PTE Pipeline.

Unaudited statements

Harvest Alaska requested that RCA waive requirements for audited financial statements for the two most recent fiscal years and accept unaudited financial statements in three dockets; Harvest Alaska and BP Pipelines (Alaska) made the same request in a fourth docket.

RCA said its regulations allow a party to request a waiver of filing audited financial statements and said the request must be accompanied by a certification that independent audits are not performed and submit financial statements “consisting of, at a minimum, comparative balance sheets, income, and cash flow statements for the most recent fiscal years preceding the date of the application, verified and certified for accuracy.”

The commission said the companies satisfied those requirements, and it accepted the unaudited financial statements.

More information required

The commission required petitions for confidential treatment to be supplemented with a more detailed discussion of those financial statements and “an explanation of specific harm that would result from disclosure of components of the financial statements.” It also asked, “whether any of the financial statements were required to be filed with a federal agency and explain how and whether they relate to the finances or operations of a federally regulated pipeline.”

In response to the requirement for more detailed information, Hilcorp and Harvest told RCA that over “multiple decades” they “have developed a business model that has relied on their competitive advantage of being private, while foregoing many of the advantages their peers enjoy by being public (such as increased access to capital markets). The trade-off Hilcorp and Harvest have made by choosing to remain private and to keep their financial and operational information private is what allows the companies to be purchasers and operators of late-life, mature fields and assets.”

The companies said that in the ordinary course of business they would not produce standalone financial statements for subsidiaries, but in response to requests from various State of Alaska agencies, “the companies have created these financial statements.”

But, they told the commission, because these are financial statements of subsidiaries “that would not be produced in the ordinary course of business,” they contain detail that “far exceeds that of their public peers” and contain specific items about the business of Hilcorp Alaska and Harvest Alaska “that were never intended for an audience other than a regulatory agency and that would not be included if these financial statements were simply those of a publicly-traded company doing business at the size and scale of Hilcorp and Harvest.”

Those financial statements directly relate to the finances of federally regulated pipelines, the companies told RCA. They have also told the commission that the financial statements at issue were not required to be filed and were not filed with the federal regulator of common carrier pipelines, the Federal Energy Regulatory Commission.

RCA said the protection of documents provided by AS 42.06.445(c) “in unusual among public records statutes,” with only three requirements. If those requirements are met, the commission said, it must treat the documents are confidential.

The document must relate to the “finances or operations” of a pipeline; the pipeline must be subject to federal jurisdiction; and the information must not be required to be filed with the appropriate federal agency.

The commission said the documents meet all those requirements.

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