|
Hilcorp pipelines transfer before RCA Closing on acquisition of Union Oil’s Cook Inlet assets requires Regulatory Commission of Alaska to approve transfer of pipelines Kristen Nelson Petroleum News
Hilcorp Alaska LLC and Union Oil Co. of California have applied to the Regulatory Commission of Alaska to transfer Union’s interest in Cook Inlet Gas Gathering System, Cook Inlet Pipeline Co. and Kenai Kachemak Pipeline LLC to Hilcorp.
Hilcorp signed an agreement July 19 to buy the Cook Inlet interests of Chevron subsidiary Union Oil, including its interests in the three pipelines; interests in the Granite Point, Middle Ground Shoal, Trading Bay and MacArthur River fields in Cook Inlet; interests in 10 offshore platforms; interests in onshore gas fields including the Ninilchik unit and the Beluga River unit; and two gas storage facilities.
The companies applied separately to transfer interests in the three pipelines and have also applied to have the three applications considered jointly.
“The closing of the sale transaction is conditioned on receipt of the Commission approvals sought in the three dockets and the failure to obtain approval in any of the three dockets will be grounds to terminate the entire transaction, including the sale of the exploration and production assets,” the companies told RCA, adding that closing of the transaction will not occur until RCA has approved all three transfers.
Cook Inlet Gas Gathering System Union holds a 50 percent interest (Marathon Oil Co. owns the other 50 percent) in Certificate of Public Convenience and Necessity No. 711, doing business as Cook Inlet Gas Gathering System. Approval of the application to transfer the interest will result in Hilcorp Alaska replacing Union as the owner of Union’s interest in CIGGS and CPCN No. 711, the companies said in an Aug. 24 application to RCA.
The companies requested that RCA determine that the transfer is in the public interest and issue and approve the application.
The companies said the transfer would have no effect on CIGGS’ tariff, governed by a tariff settlement accepted by RCA. “Neither the settlement nor rates filed pursuant to the settlement will be affected by changes in the ownership of Union’s interest in CIGGS,” the companies said.
The companies said that Alaska statutes state that prior commission approval is required for “sale of substantially all of the stock or assets of a pipeline carrier” but note that this transfer is of only 50 percent of the interests of CIGGS, and they argue that RCA should “summarily approve the transfer of Union’s ownership interests in CIGGS to Hilcorp Alaska.”
Arrowhead, Harvest experience Although Hilcorp Alaska is a newly formed entity, it “will have access to the substantial operating experience of other Hilcorp entities,” including Arrowhead Pipeline L.P. and its general partner, Harvest Pipeline Co.
“These entities have substantial experience operating various midstream assets, including regulated pipelines,” the companies told RCA. Harvest has 71 employees and a management team with more than 75 years cumulative experience in ownership and operation of petroleum pipeline systems, some operated as common carriers, including more than 1,250 miles of crude oil and natural gas pipelines.
“Hilcorp Alaska will have its own team of professionals to manage its proposed ownership in the regulated pipelines being acquired from Union,” the companies told RCA, but Harvest management will be involved in establishing the Alaska team “and will provide support and oversight as appropriate to the proposed ownership in CIGGS, CIPL and KKPL.”
Cook Inlet Pipe Line Co. Hilcorp would also acquire Union’s 50 percent interest in the Cook Inlet Pipe Line Co., and become the operator. Pacific Energy Alaska Holdings LLC owns the other 50 percent.
As with CIGGS, the companies told RCA that approval of the transfer would have no effect on CIPL’s tariffs, which are governed by RCA-accepted tariff settlements.
And as with CIGGS, the companies argue that since the transfer is of only 50 percent of the shares of stock in CIPL, they believe Alaska statute “mandates summary approval” of the application.
The companies told RCA that “Hilcorp Alaska does not propose to change the operation, personnel, or equipment in CIPL.” It will become the operator “and expects to keep the current Alaska personnel who operate the CIPL pipeline on a day-to-day basis.”
“In addition to retaining the Alaska operating personnel, Hilcorp Alaska’s own team of professionals will manage its proposed ownership in the regulated pipelines being acquired from Union.”
As in the CIGGS application, the experience of Hilcorp’s Harvest Pipeline Co. is discussed as an advantage of the transfer.
Kenai Kachemak Pipeline The third application, for transfer of Union’s interest in Kenai Kachemak Pipeline LLC, involved Hilcorp Alaska acquiring GUT LLC, which holds a 40 percent interest in KKPL.
Marathon Oil Co. holds 60 percent interest in KKPL, and would remain the operator.
As with the CIGGS and CIPL applications, the companies told RCA that KKPL’s current transportation rates, governed by RCA-accepted tariff settlements, would not be affected by the transfer.
And as with the other applications, the companies argue that state statutes mandate summary approval of the application, which is much less than “substantially all” of the entity.
Existing offices The companies told RCA that upon closing of the asset sale and purchase agreement, Hilcorp Alaska “will establish an office location in Anchorage, most likely at the existing offices of Union.”
In a narrative statement about Hilcorp’s proposed acquisition, the company said it “has identified the Cook Inlet basin as a region holding significant potential for continued oil and gas exploration and development opportunities, and, consistent with its overall corporate mission, upon completion of the acquisition, Hilcorp intends to pursue a maintenance and development program at existing fields, as well as a comprehensive exploration program.”
Hilcorp said it “is poised to begin making substantial investments in its newly acquired Cook Inlet assets over the next several years,” and said the investment “is anticipated to lead to increased production from the underlying oil and gas assets, which should increase the useful life of these pipeline assets,” while benefitting “the broader economy in Southcentral Alaska as well by creating jobs and stimulating economic activity.
The companies have requested confidentiality for the asset sale and purchase agreement and consolidated financial statements of Hilcorp.
| 