Walkers stroll along the Cook Inlet shoreline by Anchorage’s Kincaid Park on the afternoon of July 20, 2024. Mount Susitna is in the background. (Photo by Yereth Rosen/Alaska Beacon)
Most residential Chugach Electric members in Anchorage pay 22.5 cents per kilowatt-hour for their electricity — far higher than the national average of 16.6 cents/kWh. Rural Alaskans pay even more, and there are few signs of improvement. The lion’s share of Anchorage’s energy comes from natural gas, which is becoming more expensive as development in Cook Inlet stalls.
Cook Inlet isn’t running out of gas. The problem is that one privately held Texas company, Hilcorp, controls nearly 90% of Cook Inlet gas supply — a functional monopoly. Antitrust law exists for a reason. Monopolies can take advantage of consumers by artificially restricting the supply of goods and services, which in turn drives up prices. Hilcorp appears to be doing exactly that. Hilcorp claims that it does not have enough reserves to continue supplying our utilities, even as smaller operators report discoveries of large, untapped pools. The leading stopgap alternative, liquified natural gas imports, could produce price hikes for electricity and heat in the next few years.
Some entities have attempted to keep Hilcorp’s monopoly power in check. In 2012, the Federal Trade Commission began an investigation into Hilcorp’s acquisition of Marathon Oil’s Cook Inlet assets because of potential harm to consumers. But the FTC withdrew its investigation after the Alaska attorney general signed a negotiated consent decree — a cross between a contract and a court order — with Hilcorp. In that consent decree, Hilcorp pledged to “utilize commercially reasonable efforts to increase the production and development of natural gas” from Cook Inlet. The consent decree also gave the Alaska attorney general the authority to audit Hilcorp at any time to ensure that the company complied with the terms of the order. The FTC reasoned that the agreement between Hilcorp and the State mitigated their concerns about Hilcorp’s potential to abuse its monopoly power.
Yet in spring 2022, Hilcorp informed Alaska utilities that it would not renew their gas contracts. There are a couple reasons why Hilcorp seemingly lost interest in complying with its obligation to continue exploring Cook Inlet gas supplies. First, in 2019 state agencies greenlighted Hilcorp’s acquisition of BP’s North Slope assets. While Cook Inlet gas is still economical, Hilcorp appears to have shifted its attention to even-more-lucrative North Slope oil. Second, Hilcorp must be aware that it stands to profit from liquified natural gas imports. As the majority owner of gas storage pipeline delivery systems in Cook Inlet, Hilcorp could generate revenue from third-party storage contracts and transportation charges.
But out-of-state companies like Hilcorp are the only ones who will benefit from liquified natural gas imports — Alaskans will pay more on their utility bills. If the consent decree is meant to protect Alaskan ratepayers from Hilcorp’s monopolistic behavior, then why isn’t Gov. Mike Dunleavy’s administration using it?
Even after four electric utilities and a host of Alaska legislators urged Attorney General Treg Taylor to enforce the consent decree, the Dunleavy administration has done nothing to hold Hilcorp accountable. Dunleavy also did nothing when Hilcorp abused its virtual monopoly to intimidate lawmakers attempting to close a tax loophole (on top of everything else, Hilcorp pays no income taxes in Alaska). The Anchorage Daily News observed that Hilcorp’s actions were “tantamount to saying: If you tax us, we’ll turn off the gas to Alaska.”
The attorney general’s authority to audit Hilcorp under the consent decree expires on Dec. 31, 2024, and the Dunleavy administration has shown no signs of action. In response, two Alaska lawmakers–Senators Cathy Geissel and Bill Wielechowski–asked the FTC to resume its investigation. Alaskans should not have to rely on the federal government to protect ratepayers from Hilcorp’s monopolistic behavior. But the Dunleavy administration’s remarkable failure to act will leave us with one less tool to address the gas crisis in the New Year.
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