A state corporation has agreed to change the terms of a multi-million dollar loan to a Cook Inlet oil company. Texas-based BlueCrest asked for the loan modification to help the company deal with construction delays and the loss of oil tax credit payments from the state. Earlier this year, Gov. Bill Walker vetoed $430 million in oil tax credits, delaying payments to companies, including BlueCrest.
In 2015, the state agreed to give Texas-based BlueCrest Energy Inc., and its subsidiaries, a $30 million line of credit to buy a drilling rig and camp, which the company is using produce oil from the Cosmopolitan Field in southern Cook Inlet. When the oil starts flowing, the project is supposed to produce thousands of barrels of oil a day in Cook Inlet and bring in more than $150 million in new oil taxes and royalties to the state.
But there were delays in the completion of the drilling rig and that led to postponed oil production from the field. Then, Walker decided to postpone tax credit payments owed to the company.
Now, BlueCrest is asking the Alaska Industrial Development and Export Authority, or AIDEA, to change the terms of its loan. It wants to make interest-only payments for most of 2017. And it wants to lower the amount of money it keeps in an account that would reimburse the state if the company defaults on it loan.
The authority’s board members heard public testimony during their Dec. 1 meeting.
Some Kenai Peninsula residents were dismayed that the company is getting financing at all, let alone being allowed to relax the terms of its loan.
“I don’t have a clue how that would be a worthy investment. With the price of oil that’s been discussed already, it seems to be a huge gamble,” Katie Kennedy of Ninilchik said.
Kennedy’s community neighbors BlueCrest’s pad in Southern Cook Inlet. She said BlueCrest’s ties to Buccaneer Energy, a now-bankrupt company that also operated in Cook Inlet, show that the company doesn’t deserve a state loan.
But others say the company has a viable business plan that was derailed when it lost tax credit revenue it needed to meet the terms of the loan.
Kara Moriarty, president and CEO of the Alaska Oil and Gas Association, placed the blame for the loan modification squarely on the shoulders of the state.
“We’re here, not because of anything BlueCrest did. It was part of the business plan the state was aware of with AIDEA that the tax credit payments would be part of the financial package for AIDEA and for BlueCrest. And with the Governor’s veto it has caused a lot of companies to refinance their projects,” Moriarty said. “There are other companies that have had to do the same thing with private lending institutions.”
Ultimately, AIDEA board members unanimously voted to modify the loan.