Morning Headlamp – Words you don’t want to hear from the government: Do as I say, not as I do. 

cook inlet jobs lostDo as I say, not as I do. A company drilling extended-reach oil wells at a fracking operation in Cook Inlet says it likely cannot afford to drill additional wells, and expects to lay off more than 150 full-time workers, because the state has not paid the oil-tax credit cash it planned on receiving. Headlamp was shocked to see this quote from John Hendrix, the governor’s oil and gas consultant: “We want them to have success and they’ve been working hard, but we need to see some production also, drill for oil, not tax credits.” 

In a previous life, Hendrix was in charge of Apache, a company exploring in Cook Inlet. During Hendrix’s tenure, the company applied for, and received tax credits, without any production. Additionally, Apache has since left the state but has continued to collect credits – $10 million according to the latest report.    

A boon for the Kenai economy. By fall 2018, oil produced by Hilcorp on the west side of Cook Inlet could be traveling by pipeline instead of barge, according to a plan for a cross-inlet oil pipeline introduced by Hilcorp Alaska Vice President David Wilkins in May. Operations manager Richard Novcaski of Hilcorp’s pipeline-owning subsidiary Harvest Alaska provided details at a Wednesday Kenai Chamber of Commerce luncheon. “The general concept, is to create a swap of capacity,” Novcaski said. The plan would repurpose an existing cross-inlet natural gas pipeline as an oil pipeline, and use part of an existing pipeline to transport the displaced gas. In all, the design — estimated to cost about $73 million — would require only about 9 miles of new pipe to be laid.

Pipelines Proceed. New U.S. sanctions will make it harder for Russia to build two gas export pipelines to Europe but the projects are unlikely to be stopped. U.S. President Donald Trump has reluctantly signed further sanctions on Russia into law, but some of the measures are discretionary and most White House watchers believe he will not take action against Russia’s energy infrastructure. This would allow Gazprom’s two big pipeline projects to go ahead — although at a higher price and with some delays.

Big deal for Alaska and CH2M. Jacobs Engineering and CH2M HILL Companies Ltd. announced they have entered into a definitive agreement under which Jacobs will acquire all of the outstanding shares of CH2M in a cash and stock transaction with an enterprise value (EV) of approximately $3.27 billion, including approximately $416 million of CH2M net debt. The combination unites two industry-leading, innovative companies with complementary capabilities, cultures and relationships, resulting in a differentiated, end-to-end value proposition for clients and an enhanced platform for sustainable, profitable growth. With trailing twelve month (TTM) revenues of $4.4 billion1 and a team of 20,000 employees, CH2M is a world-renowned design, engineering and program management firm, and is a leader in key infrastructure and government service sectors that Jacobs has previously targeted for growth, including water, transportation, environmental and nuclear. Applying CH2M’s advanced design, technical and program management expertise across Jacobs’ global footprint will enable the combined company to deliver more solutions to more clients in both the government and private sector.

First Reads:

Russian gas pipelines to go ahead despite U.S. sanctions
Arctic Now/Reuters, Oksana Kobzeva and Alissa de Carbonnel, August 3, 2017

Oil company says it likely can’t continue to drill unless state pays tax credits
Alaska Dispatch News, Alex DeMarban, August 2, 2017

Jacobs to Acquire CH2M to Create Premier $15 Billion Global Solutions Provider
Business Wire, August 2, 2017

Hilcorp details plans for cross-inlet oil pipeline
Peninsula Clarion, Ben Boettger, August 2, 2017