Investigation Into Hilcorp, Marathon Deal Closed

Shaylon Cochran

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     The energy company Hilcorp has announced another step toward finalizing its acquisition of Cook Inlet assets from Marathon.  The transaction had been under investigation by the Federal Trade Commission, but that investigation has closed and the deal will move forward as Southcentral Alaska braces for a possible natural gas shortage in the coming years.

     In letters to both Hilcorp and Marathon, the FTC notified the companies that it had closed its investigation of the purchase of Marathon’s assets in Cook Inlet as a possible violation of both the Clayton Act and the Federal Trade Commission Act.  

     In a separate statement released by the FTC Wednesday, the Commission said the transaction raised “competitive concerns for the Commission because Marathon, Hilcorp and ConocoPhilips today account for over ninety-percent of the natural gas produced in Cook Inlet”.  

     The commission was also concerned that because Hilcorp will control all of the gas storage capacity in southcentral Alaska and the majority of the infrastructure necessary to deliver the gas, there is a potential to “impair efforts to bolster natural gas production from sources other than Hilcorp”.

     In an October presentation to the Regulatory Commission of Alaska and several southcentral utility companies, Petrotechnical Resources of Alaska managing partner Tom Walsh presented a dim outlook for the immediate future of energy supply and demand dynamic in south-central, concluding that importing natural gas would be the only way to ensure stable supplies until more development from Cook Inlet comes online.  

     That’s where the Hilcorp deal with Marathon comes in.

     “Getting support for the acquisition is of the utmost importance to us at this time,” said Hilcorp spokesperson Lori Nelson.  She did not go so far as to say that short-term energy needs outweigh the FTC’s concerns, but that they do recognize that demand will soon outpace production.

     “There will be a 60-day public comment period that is part of the process of approval of the consent decree and we hope that folks will reach out and support the acquisition because until this decree is actually approved by the Court, we won’t be able to move forward with any of our development plans,” she said.

     In its statement Wednesday, the FTC said the concerns about both energy security and the competitive implications of the agreement led the Alaska Attorney General’s office to file a consent decree and recommend the merger not be challenged.

     Cooperation from the state of Alaska, including the Attorney General and the Department of Natural Resources made this next step possible, Nelson said.

     “They recognized that we’re here and we’re a reputable company and we’re willing to make the investments necessary to further develop and increase production out of the basin,” she said.

     Terms of the consent decree include price caps for customers over the next five years.  Under the control of Marathon, net production from the assets in question averaged 93 million cubic feet per day of gas and one-hundred-twelve barrels per day of oil in 2011.  Nelson says that until the deal is finalized, they can’t say what their production plans will be.

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