Hilcorp's post-campaign $25,000 donation to Dunleavy and the fate of Hollis French

UPDATE: Gov. Mike Dunleavy fired Hollis French on Feb. 26, alleging that he neglected his work, making no mention of the underlying fight about the regulatory authority of the AOGCC.

ORIGINAL POST: On Jan. 29, nearly three months after Mike Dunleavy won the governor’s race, Hilcorp Energy gave $25,000 to the Dunleavy shadow campaign, the so-called “independent expenditure" group that pushed the Dunleavy cause before the election.

Why donate money after the election?

Maybe it was a token of thanks for Dunleavy taking the first step to remove former Sen. Hollis French from the Alaska Oil and Gas Conservation Commission. Or maybe it was an attempt to let the governor know who his friends are. The shadow campaign account is not controlled by Dunleavy, but by his supporters.

The website doesn’t exist anymore, except on the Internet Archive, but the group still exists, according to the Alaska Public Offices Commission.

The $25,000 came from Jeff Hildebrand of Houston, the billionaire owner of Hilcorp, the biggest privately owned energy company in the nation and an enterprise with extensive holdings in Alaska.

The Hilcorp donation took place 12 days after Dunleavy told French he wanted to remove him from the commission. The Dunleavy shadow campaign, with hundreds of thousands of dollars from Francis Dunleavy and Bob Penney, was in large part responsible for making Mike Dunleavy known across the state.

As of this writing, French is suspended from the commission, but has not been fired. This has all the markings of a political takedown by Dunleavy and Tuckerman Babcock, who are unhappy that French, a Democrat, has an influential position.

A 19-page report that followed a hearing on French’s fate did not make a convincing case for the firing, but it’s not clear what the governor will do. A court case is possible if French is fired and that would provide a chance to examine the political foundation of the attack on French.

As far as Hilcorp goes, the company surely would have reason to celebrate French’s departure.

It was the lack of a commission response to a leaking Hilcorp gas pipeline that created some of the internal dissension that deepened a divide between French and the two other commissioners who want him gone—Cathy Foerster and Dan Seamount.

The commission exists to “protect the public interest in exploration and development” of Alaska resources and part of that job is to “prevent waste of Alaska’s oil and gas resources.”

French had argued that the commission had jurisdiction to respond to a leaking Hilcorp gas line in Cook Inlet, but Foerster and Seamount did not. French contended that the waste of natural gas from the 52-year-old pipeline had to be dealt with by the state because it was in state waters.

The other commissioners argued that it was a leaking fuel line and it did not meet the legal definition of “waste.”

To bolster his point of view, French cited a quote from Congressional testimony in 2017 by Foerester in which she said the AOGCC has responsibility to “exert jurisdiction” on all state lands and “all state waters.”

The Hilcorp pipeline broke northwest of Nikiski, about 3.5 miles off the coast and leaked from December 2016 until April 2017.

Last May, French wrote Walker to say that the waste of gas from the Hilcorp pipeline should have prompted a state response by AOGCC. The others on the commission concluded that anything that leaks after it has been measured is not “waste” and is not subject to commission jurisdiction.

“I believe a small course correction for the agency is in order,” French wrote the governor.

Foerester and Seamount wrote to Walker that French did not speak for them and they concluded that the leaking gas from the Hilcorp pipeline had already been purchased and therefore the leak “did not constitute waste.”

They said that “no course correction for the agency is in order,” a point of view that led to Dunleavy’s attempt to get rid of French, whose term expires in 2021.

In 2017, during a legislative vote on French’s appointment, there was evidence that legislators had picked up on the dissatisfaction of Foerester and Seamount with French. He was confirmed on the 34-25 vote.

“Eagle River GOP Sen. Anna MacKinnon of Eagle River, justified her vote against French by accusing him of wrongly pushing for jurisdiction over a gas leak in Cook Inlet that took place in 2017,” Alaska Public Media reported.

After the pipeline leak, Hilcorp found itself temporarily shutting down the Middle Ground Shoal A offshore platform. Before the shutdown, the platform had been producing about 1,150 barrels of oil per day. This dropped to 975 barrels per day sometime later.

Hildebrand’s company asked the Walker administration for “royalty relief” because of the decline, hoping to reduce the state’s share of oil payments under a provision in state law designed to give an incentive to oil production sites pumping less than 975 barrels a day.

In October, Andy Mack, then the commissioner of natural resources, refused to allow Hilcorp to reduce its payments to the state, saying the decline was the result of mechanical factors and the company was not eligible for an incentive.

There is no reason why the state should pay the price for a mechanical problem created by Hilcorp.