Texas Billionaire Jeffery Hildebrand’s operations have left a long trail of environmental and safety violations, with few repercussions.
The Revelator’s five-part investigative series this week on Texas billionaire Jeffery Hildebrand’s Hilcorp Energy companies exposed a blatant history of environmental and safety violations in Alaska and Louisiana that has put endangered wildlife at risk and workers’ lives in serious jeopardy.
The reclusive Hildebrand built his fortune by rehabilitating played-out oil and gas fields previously abandoned by other fossil fuel companies. His strategy involves deploying an aggressive cost-cutting workforce and advanced technology to extract remaining supplies of oil and gas that previous exploitation left behind.
Hildebrand created a corporate culture based on six-figure bonuses for every employee when certain production goals are met. Generous rewards can certainly boost employee morale, but our investigation shows they also can lead to a workforce that puts increasing production ahead of protecting the environment and worker safety.
As with most environmental violations, state and federal regulators in the fossil fuel industry rarely impose fines substantive enough to act as a significant deterrence. That has definitely been the case with Hilcorp. Alaska regulators, for example, fined Hilcorp $200,000 for an incident that nearly killed three workers. But the fine was equal to only two of the $100,000 bonuses Hildebrand paid to each of his 1,000 or so employees in December 2015.
In Louisiana, the series revealed, a Hilcorp employee appears to have provided false information to federal regulators when he denied the company used tugboats to drag drilling barges through oyster beds, destroying the oysters and contributing to rapid coastal erosion. Hilcorp is Louisiana’s largest oil producer and has benefited from years of lax regulatory oversight.
The series also shows the impact of massive taxpayer subsidies provided to the fossil fuel industry to stimulate production. In Alaska, the availability of hundreds of millions of dollars a year in subsidies was the fundamental reason Hilcorp purchased declining oil and gas fields in Cook Inlet and on the North Slope.
Hildebrand entered Alaska in 2011, when oil prices were above $100 a barrel and the state was flush with cash and willing to dole out subsidies. But the oil market crashed in 2014, and our investigation reveals that Hilcorp’s financial outlook in Alaska is now in question.
Compounding the publicity-shy company’s Alaska problems were the very public failure of two methane undersea pipelines last winter. The leaks exposed the serious dangers of operating 50-year-old infrastructure in treacherous Cook Inlet, which is subject to ice sheets, high tides, strong currents and powerful winds.
The rise and decline of the Cook Inlet oil and gas industry from the 1960s to today corresponds to a stunning decline in the number of the endangered Cook Inlet beluga whales (Delphinapterus leucas), which are facing extinction unless fundamental changes are imposed to protect their environment.
The Revelator will continue to report on Hilcorp’s nationwide operations as well as the environmental impacts of the fossil fuel industry in Cook Inlet, the North Slope and elsewhere.
Feds give company two years to install modern pipeline-testing technology.
(Editor’s note: This is the final story in The Revelator’s months-long investigation into Hilcorp Energy. You can find the entire investigation here.)
Newly released documents reveal that privately held energy producer Hilcorp Alaska has managed to avoid both federal and state fines in the wake of the company’s very public pipeline failure in Cook Inlet, which leaked methane gas into the fragile ecosystem for nearly four months. Cook Inlet is home to endangered beluga whales, among other at-risk wildlife.
The federal Pipeline and Hazardous Materials Safety Administration and Hilcorp quietly signed a “consent order” more than six weeks ago that sets deadlines — some as far in the future as September 2019 — for the company to inspect and repair the damaged pipeline and additional methane pipelines associated with Hilcorp’s Middle Ground Shoal oil and gas field.
The consent order — a binding legal agreement privately negotiated between Hilcorp and the pipeline safety administration, signed April 11 but not posted on the government website until early May — does not require Hilcorp, the largest oil and gas producer in Cook Inlet, to conduct additional inspections of its extensive oil and gas facilities in the area. These include a second methane pipeline that failed last month, which ran from the company’s Steelhead platform to shore days before the order was signed. The pipeline was shut down, but no information has been released on how much of the greenhouse gas escaped into the environment.
Environmental groups requested earlier this year that the pipeline safety administration require a system-wide inspection of all oil and gas pipelines in Cook Inlet. An agency official not authorized to speak publicly told The Revelator that the administration is “reviewing this request and will respond appropriately.”
The federal consent order’s lack of a penalty is alarming to Lois Epstein, engineering and Arctic program director at The Wilderness Society, who reviewed it. “They should be fining the company when they have these kinds of problems,” she says.
Bob Shavelson, advocacy director at a Homer, Alaska environmental group called Cook Inletkeeper, says the consent order is a “little stronger than we have seen in the past,” but adds that oil and gas operators in Cook Inlet continue to “get special treatment from regulators.”
Kristen Monsell, a staff attorney with the Center for Biological Diversity’s Oceans Program, says the consent order fails to protect Cook Inlet’s beluga whales, fish and local communities from offshore drilling in the Inlet.
“Giving the company years to inspect and repair the rest of its damaged pipeline would be laughable if it weren’t so reckless,” she says, calling the company’s aging pipelines and infrastructure “nothing but a recipe for another disaster.” (The Revelator is published by the Center for Biological Diversity.)
Hilcorp has not issued a public statement concerning the consent order and did not respond to The Revelator’s written questions.
Houston-based Hilcorp arrived in Alaska in 2011 when it purchased Cook Inlet oil and gas production and pipeline facilities from Union Oil Company. See “Hilcorp Runs Aground,” Part I of our series.
Hilcorp’s cost-cutting philosophy collided with Alaska regulators. See “Hilcorp: Putting Lives in Danger,” Part II of our series.
Alaska to Conduct Oil and Gas Assessment in Cook Inlet
“The scope of the project is to perform an inventory of the oil and natural gas sub-sea infrastructure and platforms of Cook Inlet and identify the regulatory framework that dictates their operation,” stated Alaska Department of Environmental Conservation spokesperson Candice Bressler, in a May 23 email.
But the assessment will not include a visual inspection of the undersea pipelines, Bressler said. She said a taskforce of “interested regulatory agencies” has been formed to develop the scope of oil and gas infrastructure assessment. There is currently no date by which the assessment will be completed, and Hilcorp is not paying for the assessment.
The state agency issued its final report on the pipeline leak on May 22, saying Hilcorp divers completed permanent repairs on a 3/16 inch wide by 3/8 inch long crack in the pipeline on May 19 — four days after the consent order deadline to complete the permanent repair.
Methane leaked from the pipeline at a rate of between 210,000 to 310,000 cubic feet per day for nearly four months. Prior to the leak, the pipeline transported between 1.6 million and 2.5 million cubic feet of gas per day.
By comparison, Enstar Natural Gas Company’s 136,000 Alaska gas customers use about 33 billion cubic feet of natural gas a year, equal to about 665 cubic feet of gas per customer each day, according the Anchorage Daily News.
Harsh Conditions and a History of Leaks
Cook Inlet’s powerful tides and currents have long been known to cause pipelines to shift and scrape against dangerous rocks, and that’s what caused Hilcorp’s Middle Ground Shoal pipeline to crack, according to the Alaska Department of Environmental Conservation. The crack was the third for the same pipeline since 2014, which Hilcorp purchased from Exxon Mobil subsidiary XTO in 2015.
The first leak, in June 2014, lasted five days and released 240,000 cubic feet of methane a day, according to Bressler. The state “does not have an official record” of a second leak that occurred in August 2014, she said.
XTO, however, told federal regulators that both leaks were caused by rocks scraping against the pipeline, according to pipeline safety administration records. The 2014 leaks were 42 yards apart and about two-thirds of a mile from the latest failure.
The latest methane leak began in late December 2016 but was not visually verified by Hilcorp until Feb. 7. The company issued media statements and notified the Pipeline and Hazardous Materials Safety Administration it could not repair the leaking pipeline until the ice cleared from Cook Inlet.
And, the company said, it could not stop moving methane through the line. Hilcorp claimed water could infiltrate the pipeline through the crack and possibly release oil left over from when the line was used to transport crude oil rather than methane.
The company continued to pump onshore methane through the leaking pipeline to two oil-production platforms that used the gas to power their equipment. Hilcorp transported about 3,700 barrels of a mix of oil and water back to shore a day through another eight-inch pipeline that runs parallel to the methane line, federal records show.
Concerned that rocks could also damage the oil pipeline, causing an oil spill, the safety administration issued a “proposed safety order” to Hilcorp on March 17 requiring the company to visually inspect the line. Hilcorp shut down the oil pipeline on March 25 after discussions with Alaska Governor Bill Walker.
The oil pipeline remains shut down, states Bressler. Hilcorp continues to operate the repaired methane line at low pressure to supply energy to the offshore platforms — enough to operate lights and other maintenance operations.
Consent Order Requires Hilcorp to Upgrade Inspection Technology
The federal consent order requires Hilcorp to install in-line inspection monitoring technology, also known as “smart pigs,” in its Middle Ground Shoal gas pipelines.
Smart pigs are robotic devices capable of detecting gouges, metal loss, excessive bending and other anomalies in pipelines. For decades they’ve routinely been used by the oil and gas industry. The term “pig” comes from the squealing sound made by the device as it moves through a pipeline.
However, the Hilcorp pipelines in Middle Ground Shoal were not designed to use smart pig technology. Shell Oil Company installed the eight-inch pipelines in 1965, making them the oldest undersea pipelines in Cook Inlet, according to Shavelson.
The two pipelines are so old they don’t have the necessary equipment to launch and recover the pigs, said Epstein. Still, the order requires Hilcorp to somehow deploy smart pigs or an alternative federally approved technology and make necessary repairs on the failed pipeline segment by Sept. 30, 2018.
The 7.2-mile section runs from the shore to oil production Platform “A.” The leak occurred 2.6 miles from Platform A in about 80 feet of water.
Hilcorp is also required to use smart pigs and make necessary repairs to the additional gas pipelines that extend from Platform “A” to three other offshore facilities by Sept. 30, 2019.
The consent order also requires Hilcorp to conduct “high-resolution sonar inspection” of its entire Middle Ground Shoal methane pipeline system within 90 days of this year’s spring thaw. The inspection is supposed to identify sections of pipeline that are “not adequately supported” and “thus susceptible to excessive bending or current-induced vibrations that may damage” the pipeline.
In addition, the company must identify pipeline segments greater than 20 feet that are not supported by the seabed and where the gap between the pipeline and the seabed is greater than 8 inches. Federal safety officials initially sought inspections of pipeline segments greater than 10 feet not supported by seabed, according to a March 3 proposed safety order.
To accomplish these inspections, divers will need to traverse Cook Inlet’s dangerous tides to determine “those areas that require mitigation to address the threats of excessive bending and vibration induced failure.” The inspections must be completed by Oct. 31.
Hilcorp must also employ divers to inspect areas where the pipelines cross rock outcroppings in order to address the threat of additional damage.
Finally, the inspection of the pipeline segment that failed last winter must be completed by Oct. 31, 2017 and the rest of the Middle Ground Shoal gas lines by Oct. 31, 2018.
The consent order contains no cost estimation of the mandated inspections.
Carl Weimer, executive director of Pipeline Safety Trust, a Bellingham, Wash., citizen’s group that monitors pipelines nationally, said the consent order’s pipeline monitoring requirements are “reasonable.”
“Due to the short work window in Alaska it seems to us the required initial fix, sonar testing, diver inspections, modifying the pipeline to accommodate smart pigs, and then proceeding with the smart pig testing and any needed repairs all seems to be reasonable,” Weimer stated in a May 23 email.
Will Hilcorp continue to avoid punishment for the Cook Inlet leak?
The Alaska Department of Environmental Conservation considered the methane leak to be a “discharge of hazardous substance” that is prohibited unless approved by the state.
The state has not yet fined the company or sought restitution for damage to the environment. Bressler stated in a May 24 email that the state does not comment on ongoing investigations or potential enforcement actions.
Additional federal actions against the company could still be pending: Hilcorp and federal safety regulators held private discussions on May 9 that could lead to a second consent order in connection with the oil pipeline, according to an administration official not authorized to publicly discuss the negotiations.
The nature of that order remains to be seen, as do the long-term environmental impacts of Hilcorp Alaska’s four-month methane leak.
Rutger Bregman’s book Utopia for Realists offers solutions and an ambitious “dream big” vision.
Regulations protecting our air, water and public lands are under attack by President Trump and his industry-backed, science-denying political appointees. They’re even trying to derail nascent efforts to reduce the carbon emissions causing climate change and ocean acidification.
Things seem bleak. So it’s easy to fall into a grim pessimism and feel that the only thing the conservation community can do is play defense. We need to be realistic, right?
Yet Dutch writer Rutger Bregman has just the opposite advice: This is the moment to dream big and create a better world.
Bregman’s book Utopia for Realists: How We Can Build the Ideal World was a big hit in Europe when it came out in 2014, sparking a basic minimum income movement that’s gaining international attention. The book was just released in the United States this spring (Little, Brown and Company, $27).
Its basic premise is that as society made progress toward alleviating many of the problems that have plagued humanity — disease, hunger, violence, isolation, ignorance, fear — we stopped striving for utopia and left human progress up to the technocrats. We accepted the world as it is as the endpoint of human history.
But the reality is, argues Bregman, that most people are stressed out, unhappy, worried about the plight of our planet, and working either too much or not enough to meet their needs. So Bregman uses deep research and a lively, convincing writing style to explore ideas like universal basic income, drastically shortened workweeks, open borders and other radical ideas for fundamentally reordering society.
While the book largely avoids environmental issues (perhaps its greatest flaw), the solutions Bregman proffers for improving human happiness and creating a better, fairer economic system would bring benefits for addressing climate change and other environmental crises as well.
While working the San Francisco Bay Guardian a few years ago, I explored the connection between the long hours Americans work and our impact on climate change and habitat destruction. My article “Save the World, Work Less” drew on some of the same source material Bregman used in his book, concluding that reducing work hours is good for humanity and the planet.
What struck me during my reporting was that it was once widely assumed — across the ideological spectrum — that the increased productivity enabled by new technology would translate into fewer work hours and increased time for leisure, activism or other pursuits of our choosing.
Not only did that not happen, but even the goal was largely forgotten following World War II. Bregman chronicles similar societal amnesia when it comes to a universal basic income (which even President Nixon seriously considered in 1969), open borders and other utopian ideals.
The point is that we shouldn’t let the rich and powerful today dictate what’s possible, particularly given the self-serving limits they place on utopian dreams. Now is the moment to be bold.
“Don’t let anyone tell you what’s what,” Bregman writes in his book. “If we want to change the world, we need to be unrealistic, unreasonable, and impossible. Remember: those who called for the abolition of slavery, for suffrage for women, and for same-sex marriage were also once branded lunatics. Until history proved them right,” he concludes.
The Trump era will end, as bad as it is and may still become. The question is what we’re going to replace it with. If you take climate change, the current mass extinction crisis and other dire planetary threats seriously, then you may agree that tinkering at the margins won’t be enough.
Maybe we all need to help create a utopia that the people and wildlife of the world really need.
Programs to protect endangered species face the axe, as does the entire Marine Mammal Commission.
President Trump submitted his 2018 budget proposal on Monday, and it was far from wildlife-friendly. Advocates immediately criticized the so-called “Taxpayer First Budget,” pointing out that it slashes funding and changes priorities for many critical conservation programs.
The proposals, which are not final, include:
A 6 percent reduction in the U.S. Fish and Wildlife Service’s budget, and, according to numbers provided by the Service, around a 5.3 percent decrease in funding for recovery efforts under the Endangered Species Act. (That latter number is a story in itself, as it reflects last year’s tumultuous budget process.)
A 32-percent reduction in foreign-assistance funds, potentially including some programs to combat wildlife trafficking and related organized crime. “American security and global leadership depends on equal parts defense, diplomacy and development,” Cristián Samper, president and CEO of the Wildlife Conservation Society, said about the cuts in a prepared release. “Without strong support for all three, the world is a more dangerous place.”
The elimination of the Marine Mammal Commission, a 45-year-old program that supports whales, seals, manatees, polar bears and other species — all at a cost of just 1 cent per taxpayer per year. As commission chair Daryl J. Boness wrote in a prepared release: “The proposed elimination of the Commission comes at a time when decades of marine stewardship are achieving success because of a strong American environmental ethic that balances economic needs with the conservation of our natural resources. We are loyal to our Congressional mandate to responsibly manage and protect marine mammals and their ecosystems, which are vital to our economy, prosperity, and future.”
Opening up the biodiversity-rich Arctic National Wildlife Refuge to oil and gas leasing. ANWR, as it’s sometimes better known, is home of more than 200 bird species and a host of other wildlife. Environmental activists have long opposed such drilling efforts, but they remain in favor among Alaska’s Republican officials.
Of course, none of this is written in stone. President Trump’s budget proposal is just one step in a long process to fund the federal government for the coming year. Figuring out which of these cuts will remain at the end of that process will take weeks, if not months. The Revelator will be watching.
Hilcorp Energy’s history of violating Louisiana coastal protection regulations leads to citizens’ Clean Water Act lawsuit.
(Editor’s note: This is part three of The Revelator’s months-long investigation into Hilcorp Energy. You can find the entire investigation here.)
Gleason Alexis was ready with his camera phone to record the destruction of his family’s oyster beds by contractors working for Houston billionaire Jeffery Hildebrand’s Hilcorp Energy Company.
For the third time in five years, Alexis says, Hilcorp contractors used tugboats to drag an oil-drilling barge through a shallow Louisiana wetland where his mother has had a lease to grow oysters for more than 15 years. The lease is in Barataria Bay, on the Louisiana coast south of New Orleans.
Each time, Alexis says, the Hilcorp contractors’ drilling barge and tugboats cut channels into the seafloor, destroying the oyster beds and stirring up silt that deposits on other nearby oyster beds, smothering the shellfish.
“Every time it kills another generation of oysters,” Alexis, 49, says. It takes about three years to grow a generation of oysters. “Once the bottom is damaged it pretty much won’t repair itself,” he says.
Alexis says he saw workers at a Hilcorp well site in late January 2016, and they told him they were preparing the area for work. On Jan. 28, 2016, attorneys representing the Louisiana Oystermen Association sent a “cease and desist” email to Hilcorp asking the company to stop actions that could damage oyster leases.
The next day, while inspecting the oyster beds, Alexis saw a tugboat dragging a drilling barge through his family’s oyster lease.
“I was prepared to film the mud and wheel-washing so I would have some kind of proof,” he says of the Jan. 29, 2016 incident. Here’s that footage:
Wheel-washing, also known as prop-washing, is a method for dredging channels in shallow wetlands. Powerful tugboat engines are operated at high speed to forcefully churn the water to create a current that cuts channels into the seafloor.
“Prop-washing through oyster leases rips up and smothers hard bottom that is carefully cultivated by oyster farmers for harvest,” says Scott Eustis, coastal wetland specialist for the Gulf Restoration Network. “But that hard bottom and shell, or rip rap, is also a form of erosion control for the coastal marshes.”
For decades, oil companies used prop-washing to move their oil rigs into the marshes. The process has been linked to the steady erosion of Louisiana’s Gulf Coast, estimated at an acre per hour. (See a photographic timeline showing the erosion of Louisiana’s coastal area since the 1930s, produced by ProPublica, here.)
“The coastal law forbids prop-wash if there are practical alternatives to suction the sediment,” Eustis says.
Hilcorp, Eustis says, is one of the few companies that continue to use the process, even in areas where the state is trying to restore marshes. The corporation has been acquiring oyster leases to allow it to cut channels without conflicts with oyster growers, according to state records gathered by Gulf Restoration Network.
The channelization, Eustis says, makes a marshland restoration project located in the same area as some of Hilcorp’s oyster leases more expensive and perhaps even impossible to achieve.
“Every other company seems to get it but Hilcorp,” Eustis says, pointing out that the company is the largest oil producer in Louisiana. “They are a company whose business model is rip and run, and their acquisition of oyster leases is a plan to pollute.”
The prop-washing incident across Alexis’ leasehold is now the primary example in a federal Clean Water Act citizens’ lawsuit filed against Hilcorp last June by the Louisiana Oystermen Association.
Michael Brown, a New Orleans attorney representing the oystermen’s association, says Hilcorp did not obtain a state “coastal use permit” and federal Clean Water Act Section 404 permit required before damaging wetlands with dredged or fill material.
Initiating the permitting process would have given the public an opportunity to comment on Hilcorp’s plans to move the oil-drilling barge and its impact on wetlands — a process that could have forced the company to use alternative, more expensive methods to access the well site, Brown says.
“All of that is thrown out the window when Hilcorp fails to apply for the permits,” Brown says.
Hilcorp spokeswoman Lori Nelson said the company “cannot comment to ongoing litigation” with the Louisiana Oystermen Association. She said Hilcorp “has a strict adherence to all state and federal regulations.”
The oystermen’s association, as well as Brown’s law firm, notified the U.S. Army Corps of Engineers (USACE), which oversees 404 permitting, and the Louisiana Department of Natural Resources Office of Coastal Management (OCM) of Hilcorp’s prop-washing on the same day that Alexis videoed the tugboats dragging the drilling barge.
“In response to USACE and OCM inquiries, Hilcorp denied wrongdoing and illegally misrepresented key facts to enforcement personnel,” Brown’s law partner, Joel Waltzer, stated in a Dec. 19, 2016 letter to the Office of Coastal Management.
According to the letter, the Army Corps held a Feb. 1, 2016 conference call with Hilcorp to discuss the complaints. Hilcorp officials told the Corps their equipment had drafts between 4 feet and 6 feet and that the channel was 7 feet to 8.5 feet deep, notes from the conference call show.
“Most importantly — we did not prop-wash and/or dredge to access the location in question,” Hilcorp environmental specialist Cory Johnson stated in a Feb. 1, 2016 email to Corps inspector Rob Heffner.
Heffner accepted Hilcorp’s assertion and, without conducting a field inspection, closed the case. “Therefore it was determined that it was unlikely their equipment caused any damage to the water bottoms or oyster leases in the area,” Heffner wrote in the case file.
A copy of the Hilcorp email and Heffner’s notes are included in Waltzer’s Dec. 19, 2016 letter to the Office of Coastal Management.
Hilcorp declined to respond to The Revelator’s written question asking why Hilcorp environmental specialist Johnson sent an email to the Army Corps stating the company did not prop-wash.
Waltzer’s letter also states the video evidence, documentation of the drafts of the tugboats and drilling barge and seafloor measurements taken by an Office of Coastal Management investigator after the dredging was completed on Feb. 5, 2016 show that Hilcorp cut a channel at least eight feet deep through oyster beds that averaged six feet deep.
Hilcorp has a long history of violating state coastal regulations, dating back to at least 2006. Most of the violations claim Hilcorp was conducting activities without a state permit. In almost every case, the state retroactively granted an “after-the-fact,” or ATF, permit to Hilcorp. The violations, compiled by the oystermen association’s law firm, include:
Illegally damaging a marsh with marsh buggies (2006). ATF permit granted. “We shouldn’t have to be on their back about this,” the Louisiana Department of Natural Resource’s file states. “They’re cutting corners.”
Dumped fill excavated from the water bottom in a manner that posed a navigation hazard, without proper authorization (2009). ATF permit granted.
Prop-washing without a permit (2011). ATF permit granted.
Hilcorp was forced to obtain three ATF permits after failing to submit coastal use permits for emergency repairs (2013).
DNR discovered Hilcorp destroyed 1.83 acres of marsh after telling the state “no excavation or fill will be required.” DNR required Hilcorp to apply for an ATF permit and to pay $87,856 to Coastal Mitigation Fund and pay a small fine (2013).
Hilcorp was required to apply for two ATF permits after conducting well repairs. (2015)
Hilcorp allegedly removed an oil pipeline prior to receiving a permit. DNR is conducting an investigation (2016).
Hilcorp spokeswoman Nelson stated that the company does “not agree with the assessment of ‘after-the-fact’ permit attainment” and that Hilcorp “attains necessary permits as required for our operations.”
In addition to the DNR violations, the Louisiana Office of Conservation, which is in charge of drilling regulations, has an 18-page list of operator warnings, violations and compliance record for Hilcorp, with numerous civil fines issued against the company. The list is attached to the oystermen association’s initial pleading in the Clean Water Act lawsuit.
The U.S. Environmental Protection Agency has also reached 10 consent decrees with Hilcorp for Clean Water Act violations in Louisiana in the past decade, EPA records show.
After initially denying that it had done any work on the well site near Alexis’ oyster lease that required a permit, Hilcorp, once again, is a seeking an after-the-fact permit. Hilcorp’s request for retroactive approval triggered strong opposition during a March public hearing, according to The Lens, a New Orleans nonprofit news site.
“Hilcorp is a bad operator in coastal Louisiana,” The Lens reported Michael Roberts, president of the Association of Family Fishermen, as saying during the hearing. “They’ve done hundreds of thousands of dollars of damage to these people’s [oyster] leases, if not more. It’s time that every future permit for Hilcorp is done with the utmost scrutiny so that they start obeying the law.”
A DNR spokesman told The Revelator that the agency is not expected to make a decision on Hilcorp’s ATF application for months.
The oystermen’s association’s Clean Water Act lawsuit survived Hilcorp’s motion to dismiss when a federal judge ruled in January the case could proceed.
And the lawsuit is already having a direct impact on Alexis’ family. In the years following Hurricane Katrina, his brother had a tugboat contract with Hilcorp while he focused on the family oyster business.
“Hilcorp has been good to my family,” he says.
But that was before the conflict over the oyster leases eventually led to the federal lawsuit.
“When that happened, they took my brother off the vendors list,” Alexis says. His brother, he pointed out, has nothing to do with the oyster business.
Over the past 12 months, the company has been responsible for more than 23,000 gallons of oil spills.
Editor’s note: This is part of The Revelator’s months-long investigation into Hilcorp Energy. For the rest of this series, click here.
Hilcorp Energy’s oil and gas operations in Louisiana have been involved in at least seven oil spills since July, including two spills that dumped thousands of gallons into the Mississippi River and marshlands along the Louisiana Gulf Coast.
Scott Eustis, coastal wetland specialist for the Gulf Restoration Network, says Hilcorp’s history of regulatory violations and operating shortcuts contribute to the company’s repeated oil spills.
“If Hilcorp applied for permits properly, surveyed properly, and maintained equipment properly,” he says, “they would not have all these accidents.”
Hilcorp spokesperson Lori Nelson said in a May 10 email to The Revelator that “Hilcorp has a long history of investment which helps build and maintain Louisiana’s energy development.”
She said company “adheres to all state and federal regulations and attains necessary permits as required for our operations.”
Hilcorp’s Louisiana oil spills in the last 12 months include:
July 25, 2016: A Hilcorp abandoned pipeline leaked 4,200 gallons into the Lake Washington oil field in Plaquemines.
Aug. 23, 2016: About 42 gallons of crude oil was spilled due to an equipment failure in Little Lake Marsh.
Sept. 5, 2016: A pipeline owned by Hilcorp subsidiary Harvest Pipeline Co. was cut during dredging operations to rebuild an island and released 5,250 gallons of crude oil along the shores of Cheniere Ronquille Island.
Oct. 8, 2016: About 12,600 gallons of oil were released from the company’s Caillou Island Tank Battery in south Louisiana. Most of the oil was contained in a recovery system. On Oct. 11 about 1,050 gallons of oil was discovered on Timbalier Island that is believed to be associated with the discharge from Caillou Island.
Oct. 21, 2016: Approximately 126 gallons of crude oil were released from a storage facility in Lafitte, LA into a canal and nearby marsh area.
March 21, 2017: An abandoned wellhead leaked an estimated 840 gallons of crude oil into the Mississippi River.
April 5, 2017: A pinhole leak in a low flow oil line released more than 80 gallons of crude oil in Jefferson Parish.
A new book dives into the toxic history of the companies that poisoned dozens of young women.
Just over 100 years ago — on Feb. 1, 1917 — Katherine Schaub reported for the first day of her new job at Radium Luminous Materials Corporation in Newark, New Jersey, not knowing the job would eventually kill her.
Schaub, and hundreds of other young women just like her, found themselves employed thanks to the radium craze of the early decades of the 20th century. In the Newark factory, and others like it, women hunched over trays full of wristwatches, upon which they meticulously painted glow-in-the-dark numbers with a proprietary concoction containing something they were told was perfectly safe: radium.
Discovered less than two decades earlier, radium was considered something of a wonder material at the time, used on everything from toothpaste to furniture cleaner to purported medicines.
The watches, though, were something less trivial, intended for soldiers fighting in World War I. Thousands of them shipped from the Newark factory. To produce the watches, the girls would put fine-haired paintbrushes into their mouths to form a precise tip and then dip them into the radium paint, a process they repeated for hours on end.
Death for a dollar. Radium watch ad from the Granby Leader newspaper, Nov. 24, 1916
At the end of each day, the girls — their clothes and hair covered in tiny bits of radium dust — would walk home, glowing in the dark. The neighborhood called them the “ghost girls.”
In reality, they were the walking dead.
Years later the pain began to set in. The radium had settled into their bones and flesh, causing debilitating exhaustion, rotting necrosis and crippling bone fractures. But even as the women’s jaws and other bones began to decay, their doctors were at a loss as to why. The health risks of what later came to be known as radium poisoning had not yet made their way into the medial literature. So the women suffered as their bodies failed, and no one could tell them why.
The watch companies, however, had begun to understand what their wonder substance actually did to the human body. Rather than admit their mistake, they continued production and made every effort to hide any hint of their wrongdoing.
The truth eventually leaked out, but it was too late to save anyone. As the women’s bodies, in essence, rotted away, and as they died one by one, they struggled in court and in the press for any form of justice they could find.
Few found that justice, but those who did changed the world.
British author Kate Moore, who first encountered the Radium Girls while directing a play about them, now recounts their story in her meticulously researched new history book, “The Radium Girls” (Sourcebooks, $26.99). It’s a powerful, emotional and haunting volume — part medical mystery, part legal thriller, part horror story — that brings the women and their struggle to life in a way that eclipses previous articles, plays and documentaries.
“That that was my driving force,” Moore says, calling on Skype from her home in London. “I wanted the women to be real. I don’t think you can understand the tragedy unless you know who it is that’s been affected.”
To research her book, Moore unearthed reams of letters from the women, along with documentation from their health and court cases. She also tracked down surviving relatives who recalled the Radium Girls and shared their heartrending stories.
“A lot of the people I interviewed were in their late 80s or 90s,” Moore says, noting that some of the family stories might have been lost to time had she waited longer. The most moving of these interviews, she says, was with the great-niece of a Radium Girl named Catherine Donohue. “One of the questions I asked her was, do you remember Catherine crying out with the pain? Because I was trying to picture the scene of the sickbed and that sort of thing, and her response was that she didn’t have the energy to cry out. She would just moan.” She pauses. “That for me was really haunting.”
Unearthing the radium companies’ documents also gave Moore disturbing moments. “It’s not necessarily a new thing, but it was shocking reading,” she says, a hint of anger in her voice. “Just realizing they knew. There’s no two ways about it, it was a total cover-up. That was shocking to see that they knew they were killing these girls and it, you know, just didn’t mean anything.”
But from the horror of their decaying bodies came resolve. The Radium Girls, as they came to be known in the press, stood up for their rights, fought for themselves in court, and helped to create laws that would later protect millions of people.
“As I talk about in the book, it seems bizarre in a way that poisoning wasn’t originally listed as something that your employer could do to you,” Moore says. “It was the Radium Girls that got that put into the statutes. And then building from there, this was one of the first cases where employers were held liable.” Thanks to these women’s quest for justice, industrial employees in the United States have the right to know if they’re working with dangerous chemicals and to know the results of any company-sponsored medical tests. “They can’t conceal the results in the way that happened to the Radium Girls,” Moore says. “All of those are things that built from this case.”
Some of the protections took decades to materialize, but Moore says the ghost girls helped to pave the way. “It’s cases like the Radium Girls that have that kind of pressure that adds until something gets done,” she says.
Of course, that also makes the book — and the decades-old events it recounts — fiercely relevant today. “Hopefully Donald Trump won’t revoke all of those protections,” Moore says. “We were in the States at the end of January and talking to independent booksellers about the book, and they said how timely it is. People talk about bureaucracy and red tape and how it stops businesses from being able to be profitable, but a story like this actually reminds us that there’s a reason that red tape is there. We joke these days about health and safety laws, but actually they’re there for a very important reason — so that companies don’t put profits before people. They are supposed to be held to account if there is something dangerous they are getting employees to do.”
She adds that the book puts a human face on the need for worker-protection laws. “These laws that we now are supposed to abide by, they have human stories and faces behind them. They’re not just there for red tape, they’re there for a reason because other people have lost their lives.” (The Trump administration has already taken several actions that could increase worker exposure to toxins and reduce ability to track occupational injuries and illnesses.)
It’s also a reminder that the effects of little-understood toxins can take a long time to materialize — many of the Radium Girls worked for years before they got sick — and last for decades. While researching the book, Moore visited Ottawa, Illinois, the home of one of the radium companies, which is still an actively contaminated Superfund site. “That was the crazy thing about radium being used anyway, you know,” she says, incredulously. “It’s got a half-life of 1,600 years. Even though it was used on throwaway products and it was a kind of fun thing, it had this devastating legacy.”
Beyond the horror of what happened to these women, Moore says her readers have already found a positive message in “The Radium Girls.”
“It’s a story that gives hope and courage that in the face of implacable resistance and you know, the authority shouting down these people, these ordinary people who are fighting against injustice,” she says. “The Radium Girls did triumph. They did get the laws changed. They did make people see right from wrong, and so it’s the story that can give hope in these times as well, that when we bond together as the Radium Girls did, you can make change happen.”
She adds, “That’s what I really want readers to take away as the message. Read the book, remember the girls and let’s be brave like they were.”
Owner Jeffery Hildebrand’s emphasis on cost-cutting collides with Alaska regulators.
Editor’s Note: This is part two of The Revelator’s months-long investigation into Hilcorp Energy. You can find part one here.
After making more than $1 billion speculating on West Texas oil and gas shale in 2011, Houston billionaire Jeffery Hildebrand turned his focus to rehabilitating Alaska’s aging oilfields in ecologically sensitive Cook Inlet and the North Slope’s fragile tundra.
It looked like a perfect fit for Hildebrand’s business strategy of redeveloping oilfields after the major companies have moved on to more lucrative prospects. Oil prices were soaring above $100 a barrel, and the state was shelling out billions in subsidies to energy producers.
A key component in Hildebrand’s business model is to slash operating costs to the bone while offering six-figure bonuses for the rank-and-file as incentive to get the work done. The model appears to have worked well when oil prices were high.
But the 2014 collapse in oil to below $50 a barrel and the company’s aggressive operating philosophy put Hilcorp Alaska in regulators’ crosshairs as the company became the most cited energy producer in the history of the Alaska Oil and Gas Conservation Commission.
“The aggressiveness with which Hilcorp is moving forward with operations appears to be contributing to regulatory compliance issues,” the commission stated in its first formal enforcement action in April 2013, when it fined Hildebrand’s company $93,000. The fine was levied after regulators had issued a dozen violations between April and December 2012.
“Strong evidence indicates that Hilcorp has not adequately prepared its personnel for operations in compliance with AOGCC regulatory requirements,” the agency stated. “Left unaddressed and uncorrected these and similar violations will be repeated.”
The commission’s prediction of more problems with Hilcorp Alaska was on the mark.
In November 2013 the commission held what its records called an “unprecedented meeting with Hilcorp operations personnel” to “draw attention to and correct Hilcorp’s relatively high frequency of noncompliant activities.”
The violations included Hilcorp’s failure to follow approved well-drilling procedures, failure to notify the commission of well-safety tests and failure to notify the commission of changes to well-drilling plans.
The unusual meeting appears to have made little impression on Hildebrand.
In October 2014 Hilcorp Alaska narrowly escaped a disaster when fire broke out on an operating natural gas platform in Cook Inlet. Four workers were helicoptered off the Baker Platform after they were unable to put out an electrical fire that started in a heater installed in the 1960s. The fire destroyed the platform’s living quarters.
Hilcorp Baker Platform fire and response, October 2, 2014 (Photo/Nikiski Fire Department)
Hilcorp Alaska had another close call in September 2015 when three workers narrowly escaped death during a well-cleanout operation at its North Slope Milne Point oilfield. The oil and gas commission determined that Hilcorp’s unauthorized use of nitrogen gas during a well-rehabilitation operation resulted in a leak of nitrogen into a building where three workers were overcome by the gas and nearly died.
The commission must approve the use of nitrogen at well sites — an approval Hilcorp had not obtained. Nitrogen’s low density and high-pressure characteristics make it very useful in cleaning old oil wells of water and drilling fluids.
But nitrogen can also cause asphyxiation. All three Hilcorp employees working in a shed “lost consciousness for an unknown duration” and were saved only when a crewmember shut off nitrogen gas flowing into the building, the commission stated in an enforcement order.
“The extent and seriousness of the consequences cannot be overstated,” the commission stated in its March 2 enforcement order stemming from the incident. “Nothing but luck prevented the deaths of three workers during the clean out operation.”
Commission chair Cathy P. Foerster stated in a Nov. 12, 2015 proposed enforcement order that the Milne Point incident that nearly claimed three lives was a result of Hilcorp’s blatant mismanagement.
“The disregard for regulatory compliance is endemic to Hilcorp’s approach to its Alaska operations and virtually assured the occurrence” of the near-fatal event, she wrote. “Hilcorp’s conduct is inexcusable.”
Foerster was “unavailable” to comment for this story, a commission spokesperson stated in an email. The agency did not respond to a request to interview other commission officials about Hilcorp’s regulatory history.
After initially recommending a $720,000 fine for Hilcorp’s North Slope violations that nearly killed three of its workers, the commission ultimately fined Hilcorp $200,000 — equal to two of Hildebrand’s $100,000 bonus checks paid to each of his 1,300 employees in December 2015. The commission noted that the reduced fine came after it ordered Hilcorp to shut down four well-cleanup projects for three weeks in October 2015, costing the company a substantial amount of money.
Hilcorp Alaska has objected to the commission’s assessments of its operations, calling them “harsh” and “inflammatory,” and claims that “virtually all” of its operations are performed in full compliance, according to commission records.
Drift River Terminal Oil Spill. Excavation activity at dig site 1, September 23, 2016. (Photo/ADEC)
Hilcorp spokeswoman Lori Nelson stated in a May 10 email that the company is working with the state to improve regulatory compliance. She cited a March 21 order from the oil commission that states “during the past twelve months, Hilcorp has taken initiatives that have improved their overall regulatory compliance.”
At the same time Hilcorp Alaska was violating state regulations, it also came under fire from the U.S. Environmental Protection Agency for Clean Water Act violations stemming from a February 2015 Milne Point oil spill.
The EPA alleged Hilcorp Alaska and its partner, BP, spilled nearly 10,000 gallons of crude oil and oil-mixed water onto 40,000 square feet of Arctic tundra and gravel pad. The spill resulted from a pipeline leak. Hilcorp and BP each agreed to pay a $100,000 fine to settle the violation. This is just one of a dozen EPA enforcement actions against Hilcorp nationwide since 2011.
Milne Point spill cleanup. Photo: Starsman-ADEC
In 2015 and 2016, Hilcorp received five warning letters from the federal Pipeline and Hazardous Materials Safety Administration for an array of safety violations, including failure to inspect and test gas pipeline main valves and relief valves, failure to follow control-room management procedures and failure to accurately report pipeline flow data (2015 warning letters; 2016 warning letters).
Hilcorp’s record adds up
The spike in regulatory violations comes at the same time Hilcorp Alaska is facing mounting environmental problems.
The company’s deteriorating undersea pipelines in Cook Inlet are showing signs of systemic collapse. Two gas pipelines have failed since December. Environmental groups, including the Center for Biological Diversity (publisher of The Revelator) and Cook Inletkeeper, are demanding that state and federal regulators inspect all offshore pipelines in Cook Inlet for corrosion and other damage.
Nelson stated in her email that the company works closely with state and federal regulators to “monitor and manage Cook Inlet pipelines to ensure system integrity.”
But throughout the four months when one its undersea pipelines leaked more between 200,000 and 310,000 cubic feet a day of methane into the environmentally sensitive Cook Inlet, Hilcorp Alaska’s response was to downplay the potential of serious environmental problems and keep pumping oil.
“Hilcorp believes the samples also demonstrate that current water quality does not pose a threat to wildlife,” the company stated in March 24 press release about the methane leak.
State officials later criticized the company’s monitoring because the tests were not conducted in the actual methane plume.
When faced with the choice of immediately shutting down the methane pipeline when the leak was first discovered in late December and visually verified on Feb. 7, or keeping natural gas flowing to power two offshore oil platforms pumping $68,000 worth of oil a day (at $50/barrel), Hilcorp Alaska opted for the black gold.
Hilcorp said it needed to keep pumping oil to prevent an oil pipeline running parallel to the leaking methane pipeline from freezing and possibly rupturing. And the company stated it couldn’t fix the pipeline until the ice cleared from Cook Inlet.
“Ice conditions in the Cook Inlet prevented divers from safely accessing the pipeline following identification of the leak,” Nelson stated in her email.
Hilcorp stopped the leak coming from a half-inch crack in the 8-inch diameter pipeline with a temporary repair on April 13.
Hildebrand’s next big bet
Despite Hilcorp’s financial and infrastructure problems in Cook Inlet, Hildebrand still has big plans on Alaska’s North Slope.
Hilcorp Alaska is seeking federal permits to construct a 24-acre, artificial gravel island in 19 feet of water located five miles offshore in the Beaufort Sea to develop a massive oil reserve. The 60,000-to-70,000 barrel per day Liberty Project, which is 50 percent owned by BP, would be the nation’s first offshore oilfield in the Arctic Ocean relying entirely on federal leases.
The oil would be extracted from two federal offshore leases acquired by Shell Oil Co. in the 1990s. Hilcorp Alaska submitted a development plan in 2015 to the federal Bureau of Ocean Energy and Management. The agency is expected to release a draft “environmental impact statement” in May and hold public hearings this summer.
Hilcorp Alaska already has experience in operating the Northstar and Endicott offshore oil production islands purchased from BP in 2014. Northstar, built in 2001, is the first North Shore, manmade offshore production island. The company points to years of safe operations at four North Slope oil production islands as evidence that that the Liberty Project can be safely constructed and operated.
But Hilcorp Alaska’s history in Cook Inlet is raising red flags about the company’s ability to safely operate an offshore oil platform in the North Slope’s harsher climate. Hilcorp Alaska’s Milne Point facility has already been the site of a major oil spill and the accident that nearly claimed three lives.
“The fact that you have these high-risk, high-value operations offshore, means we need to have confidence in the people who are doing it,” says Lois Epstein, Arctic program director for the Wilderness Society. “The U.S. regulatory structure can never oversee it.”
“If Hilcorp can’t even stop a gas leak under the ice in Cook Inlet, then it has no business drilling its Liberty Project in the Arctic, where sea conditions are even more treacherous,” Miyoko Sakashita, ocean program director for the Center for Biological Diversity, said in a release.
But that argument may not sway federal regulators, says Epstein. “BOEM doesn’t care what goes on elsewhere,” she says. “They just hide behind their own jurisdiction.”
The Bureau did not respond to repeated interview requests.
The Liberty Project, even if approved, is years away from construction and would face substantially higher construction and production costs than other domestic U.S. oil sources that could make it too expensive to build. Hilcorp spokeswoman Nelson stated the Liberty project “will require in excess of $1 billion in investment.”
Meanwhile, Alaska, in a fundamental shift, is quickly moving away from its symbiotic relationship with oil. Faced with a massive $3 to $4 billion budget deficit last year, the state took steps to sharply reduce the billions of dollars in tax breaks to encourage oil production.
Alaska’s lucrative tax breaks were the primary reason Hildebrand set up operations in Alaska in 2011. Dave Wilkins, Hilcorp Alaska senior vice president, made that point to the Alaska Senate Resources Committee in April 2016 when he urged them to keep the tax breaks in place.
“It’s also no secret that Alaska’s tax credit system and the Cook Inlet Recovery Act were key drivers in bringing Hilcorp to Alaska and in our investments to date,” Wilkins testified.
Wilkins warned the committee that eliminating the tax breaks could have dire consequences. Hilcorp Alaska, he said, “isn’t going to continue to invest hundreds of millions of dollars in Alaska, especially in this price environment, when the fiscal structure continually changes.”
Alaska Gov. Bill Walker went one step further and slashed another $430 million in tax rebates through a line-item veto. More cuts are looming as the legislature is debating this year whether to end or reduce tax credits on the North Slope where the state reimburses 35 percent of oil company losses.
“If the legislature decides to change tax policy again, we will evaluate the economic impact to our company and adjust our spending accordingly,” Wilkins testified before the House Resources Committee on Feb. 1.
The economic outlook is not only increasingly uncertain for Hilcorp Alaska, it’s also hitting back home in Texas.
Jeffery Hildebrand’s personal wealth is taking a substantial hit in the face of the new reality of cheap oil and scaled-back subsidies.
Hildebrand’s “real time” net worth, according to Forbes, has declined from $5.9 billion in 2015 to a mere $3.9 billion as of May 21.
Coming next: We look at Hilcorp’s record in another state known for oil leaks: Louisiana.
A planned $12.3 billion coal mine in Australia has been “deferred” for now, a major victory for climate activists and conservationists trying to protect the nearby Great Barrier Reef. The Carmichael coal mine would have reportedly created as many as 5,000 construction jobs, but a study published last week found that it would have doubled Australia’s carbon emissions. The Queensland government had offered Indian billionaire Gautam Adani a “royalties holiday” subsidy that would have saved his company hundreds of millions of dollars, making it a potentially lucrative endeavor, but growing resistance to that tax scheme seems to have paved the way for Adani to pull out—at least for now.
Cook Inlet pipeline ruptures expose fractures in billionaire Jeffery Hildebrand’s Hilcorp Energy companies.
Houston multibillionaire Jeffery Hildebrand has a big problem brewing in Alaska, where one of his Hilcorp Energy companies has presided over two pipeline breaks in the ecologically rich Cook Inlet since December.
After decades of flying under media and public scrutiny, Hildebrand finds his Hilcorp Alaska operation in the limelight. It’s struggling to keep 50-year-old underwater pipelines in the treacherous inlet intact — and at the same time eke out a profit from a depleted oilfield.
It wasn’t supposed to turn out this way.
When he began investing more than $4 billion in Alaska in 2011, oil prices were above $100 a barrel, and Alaska was handing out billions of dollars in subsidies. It was a fat time for oilmen. Now oil prices are hovering near $50, and Alaska’s beginning to slash lucrative tax credits to oil and gas producers, putting a financial squeeze on independent energy producers such as Hildebrand.
Saddled with a history of negative cash flow and a decrepit infrastructure, Hildebrand’s Hilcorp Alaska is now attracting widespread public criticism and negative press focusing on its Cook Inlet pipeline failures.
One of the ruptured underwater pipelines released between 200,000 and 300,000 cubic feet methane a day from late December until April 13, posing a threat to the endangered Cook Inlet beluga whale (Delphinapterus leucas) and other marine mammals and fish. The number of beluga whales in the region has declined from 1,300 individuals in 1979 to just 349 in 2014.
“Hilcorp knew when it purchased the (Cook Inlet) property it was buying old infrastructure and did nothing to maintain and inspect it in way that would suggest they were a good neighbor,” says Bob Shavelson, advocacy director for Cook Inletkeeper, a Homer, Alaska environmental group. “They do the bare minimum to wring profits out of here.”
A two-month Revelator investigation of Hildebrand and Hilcorp Energy reveals the 58-year-old petroleum engineer found his way to vast wealth as an energy vulture. Hildebrand became America’s 134th richest person, worth $4 billion according to Forbes (or $9.5 billion/138th richest according to Bloomberg), by rehabilitating played-out oil and gas fields after major energy companies moved on to more lucrative opportunities.
(The Revelator is published by the Center for Biological Diversity, which on Feb. 27 filed a 60-day notice of intent to sue Hilcorp Alaska under the federal Clean Water Act for violations in Alaska.)
Hildebrand deploys a well-paid, highly motivated work force using advanced technology to squeeze out more oil from fields well past their prime. He also emphasizes aggressive cost-cutting that frequently sidesteps environmental and safety regulations, state and federal regulatory records show.
Our investigation shows that Hildebrand is adept at exploiting weak regulatory oversight that is characterized by warnings, forgiveness and slap-on-the-wrist fines. There is little incentive for Hilcorp and other energy producers not to cut corners to save money.
Hildebrand’s rapid-fire investments in the volatile oil and gas industry combined with a damn-the-regulations attitude show just how quickly an energy boom can fizzle and how downward economic pressure can increase threats to the environment and workers’ safety.
A window into Hilcorp’s operations provides a peek into the likely impact of the Trump administration’s “streamlining” and eliminating regulations for energy producers. Regulatory rollbacks have been welcomed on Wall Street, where stocks rose sharply after Trump’s surprise election.
Even before that election, efforts to tighten pipeline regulatory oversite have been stymied for decades by the powerful oil and gas industry, which writes the industry standards for operating and manufacturing pipelines that are then incorporated into federal regulations, says Carl Weimer, executive director of Pipeline Safety Trust, a nonprofit citizen’s group based in Bellingham, Wash., that monitors oil and gas pipeline operations, including Hilcorp’s.
The industry’s fundamental approach, he says is to “put a pipe in the ground, wait for it to fail and then go out and fix it.”
Hilcorp’s flouting of state and federal regulations certainly has not hindered Hildebrand’s ability to raise capital needed to expand his oil, gas and pipeline empire that includes operations in Alaska, Texas, Louisiana, Wyoming, New Mexico, Colorado, Ohio and Pennsylvania.
In fact his attitude is a plus on Wall Street, where it translates into lower costs, higher productivity and a bigger bottom line. This business philosophy has encouraged private equity firms like the Carlyle Group to invest up to $1.24 billion in Hilcorp to acquire, develop and operate onshore oil and natural gas properties in North America.
“We’re thrilled to be partnered with Hilcorp,” said Carlyle’s managing director David Albert of his firm’s December 2015 investment. Carlyle has raised an additional $2.8 billion to invest in privately run energy firms like Hildebrand’s, which have turned to private equity as commercial bank lending tightened after oil prices collapsed in late 2014.
Hildebrand and his wife, Mindy, operate River Oaks Donuts in the exclusive River Oaks neighborhood in Houston.
Hildebrand also remains a darling in the business press, which hailed him for handing out $100,000 bonuses to most of his employees in December 2015. The $100 million-plus payout was a reward for doubling daily oil production to 150,000 barrels over the previous five years. The big-league bonuses have buffed Hilcorp’s shining star — Fortune has hailed it as one of America’s best companies to work for five years running.
The production-based bonuses may have another purpose. Industry watchdogs caution that Hilcorp’s windfall bonuses can also create a powerful incentive for employees to ignore safety and environmental regulations to facilitate profits and another big bonus.
“One of the things you could get from compensating employees that way is people may be willing to lie for you,” says Carol M. Parker, a New Mexico attorney and former Pipeline Safety Trust board member.
In an emailed response to questions submitted by The Revelator, Hilcorp spokesperson Lori Nelson stated the company “absolutely” does not believe its bonuses provide an incentive to its employees to cut corners and mislead regulators.
“Our company incentives put safety and regulatory compliance above all else,” Nelson stated in a May 10 email: “Hilcorp’s incentives drive a ground up performance delivery of safe and efficient production of domestic energy sources.”
But a pattern of deceiving regulators has apparently played out multiple times. Alaska regulators, exasperated over Hilcorp’s flagrant disregard of safety and environmental regulations, have stated in writing that the company has not been truthful in communications. In Louisiana records show a Hilcorp employee provided false information to federal regulators concerning the destruction of wetlands. (See part III in our series, coming later this week.)
The Alaska Oil and Gas Conservation Commission sharply criticized Hilcorp for its misleading statements. In a Nov. 25, 2015 notice-of-enforcement letter concerning an incident that nearly killed three Hilcorp workers, the commission stated that Hilcorp’s “lack of candor” is “neither isolated nor innocent” since arriving in the state in 2011.
Hilcorp rapidly became one of Alaska’s largest energy companies producing 53,000 barrels of oil and 150 million cubic feet of natural gas per day from about 500 producing wells.
In doing so, Hilcorp became the most frequently cited company in the history of the Alaska Oil and Gas Conservation Commission, with a dozen formal enforcement actions since 2013.
Cashing in on Texas shale, Hildebrand turns to Alaska
Jeffery’s Hildebrand’s biggest payday came from speculating on the Texas Eagle Ford shale oil and gas prospect when oil prices were around $100 a barrel. Hildebrand gained control over 100,000 acres of the Eagle Ford shale belt for about $100 million. The belt extends from the Mexican border in southwest Texas into the middle of southeast Texas.
In June 2010 New York private equity firm KKR invested in Hildebrand’s Eagle Ford holdings through a new partnership called Hilcorp Resources LLC. KKR invested up to $400 million to acquire a 40 percent share of the new partnership.
A year later, with oil still hovering over $100 a barrel, Hilcorp Resources LLC sold its Eagle Ford assets, which had grown to 140,000 acres, to Marathon Oil & Gas for $3.5 billion. Moody’s Investors Services states Hildebrand’s share of the sale was $1.8 billion. Eagle Ford is now one of the nation’s leading oil and gas shale producers.
Flush with cash, Hildebrand turned his focus to Alaska’s Cook Inlet, an ecologically critical body of water extending from Anchorage 180 miles southwest to the Gulf of Alaska. Cook Inlet and the onshore areas surrounding it host the oldest oil and gas production and pipeline facilities in state, most of which were built in the 1960s.
The Cook Inlet Recovery Act enacted by the state legislature in 2010 was a key factor in Hildebrand investing in the state, according to a Hilcorp official’s 2016 testimony before that legislature. The act provided large subsidies to spur oil production that steadily declined to about 9,000 barrels per day from its 230,000 peak in 1970.
Hilcorp seized on what the Alaska Journal of Commerce called “one of the most generous” government subsidy packages in the world featuring hundreds of millions of dollars in refundable tax credits and drilling incentives. The state paid Cook Inlet producers $400 million in refundable tax credits in 2015.
Cook Inlet oil production from all producers totaled only 14,046 barrels per day in February, according to the Alaska Oil and Gas Conservation Commission. (The $400 million subsidy to produce 5,126,790 barrels of oil per year is equal to a $78/barrel subsidy.)
Hildebrand entered the Alaska market in June 2011, when Hilcorp Alaska acquired Chevron subsidiary Union Oil Co.’s production and pipeline facilities in Cook Inlet. At the time the investment appeared to fit nicely with Hildebrand’s operating strategy of purchasing aging oilfields from major oil companies and rehabilitating the production infrastructure.
Hilcorp Alaska expanded its Cook Inlet holdings in late 2012 when it purchased substantially all of Marathon’s oil and gas holdings, giving it control of 70 percent of the natural gas production in Cook Inlet. Together, Hilcorp’s Union Oil and Marathon acquisitions were valued at $879 million.
Over the next two years, Hilcorp Alaska invested an additional $1.2 billion in new drilling and production facility upgrades bringing its total investment in Cook Inlet by 2014 to more than $2.1 billion. The company drilled 50 new wells and now operates 20 oil and gas fields, including 14 offshore platforms. It also operates pipelines, storage facilities and a marine oil terminal.
Revenue from Hilcorp Alaska’s investments, however, has fallen far short of expenses. By the fall of 2014, the company was $600 million in the red, according to the Alaska Journal. Hilcorp’s projections of rapidly ramping up Cook Inlet oil production from 6,000 barrels per day to 25,000 barrels a day by 2014 fell also fell far short reaching only 12,000 to 13,000 barrels in 2015.
Cook Inlet oil production from all producers totaled only 14,046 barrels per day in February, according to the Alaska Oil and Gas Conservation Commission.
“With the track we’re on we still see six or seven years before payout on this, and we think we still need to invest another $1 billion to $2 billion,” Hilcorp Alaska CEO Greg Lalicker told the Alaska Journal in October 2014. His prediction was made before oil completed its dive to $50 and less.
Two years after Hilcorp Alaska began its Cook Inlet operations, Hildebrand invested heavily on the North Slope, where billions of dollars in state subsidies were also being doled out to oil producers.
In April 2014, with oil prices still over $100 a barrel, Hilcorp Alaska spent $1.25 billion to purchase two declining North Slope oilfields and 50 percent interest in two others, including the proposed offshore Liberty Project, from energy giant BP. In a risky move, Hilcorp issued $500 million in unsecured bonds to help finance the BP acquisition.
Hilcorp executed the deal right before it got caught in a major financial squeeze.
Beginning in September 2014, OPEC, led by Saudi Arabia, flooded the market and slashed oil prices in an attempt to wreck the booming U.S. oil shale industry. By January 2015 oil prices had plummeted from triple digits six months earlier to under $50 a barrel.
With Cook Inlet years out from turning a profit, the North Slope projects have only exacerbated Hilcorp’s financial problems in Alaska.
“We have a long ways to go before we’re coming anywhere close to making the money that we hoped to make when we originally made that (North Slope) investment a year and a half ago,” Hilcorp Alaska’s Greg Lalicker said during a luncheon for Alaska legislators in November 2015, according to the Petroleum News, an Anchorage weekly.
Hilcorp spokeswoman Nelson stated the company “can’t speculate on our future returns with our Alaska investments, but we continue to invest in Alaska’s energy future.”
The precipitous decline in oil prices and Hilcorp Alaska’s bleeding red ink coincides with a tsunami of regulatory violations. We’ll examine those in part two of our investigation, appearing tomorrow.
The federal Pipeline and Hazardous Materials Safety Administration and Hilcorp quietly signed a 
Bregman’s book 
British author Kate Moore, who first encountered the Radium Girls while directing a play about them, now recounts their story in her meticulously researched new history book, 
