Alaska v. Hilcorp Alaska et al.,No. 3An12-____ (Ak. Super. Ct. 3d Jud. Dist. Nov. 7, 2012)
Hilcorp Alaska LLC’s proposed to acquire Marathon Oil Company’s Cook Inlet, Alaska natural gas production, storage and pipeline assets for $375 million. Both the FTC and the state of Alaska expressed concerns about the acquisition because Marathon and Hilcorp are two of the three primary competitors for sales of natural gas in south-central Alaska, and account for over 90 percent of the natural gas produced in Cook Inlet and the acquisition would harm competition by diminishing the negotiating strength of the area’s primary purchasers, local utilities and industrial users. On the other hand, the acquisition could also alleviate concerns regarding local energy supply shortages. Existing fields in Cook Inlet are declining in production, and local utility demand is expected to exceed annual production within a few years. Because of this, the state has been actively working to encourage new investment in exploration and production in the Cook Inlet. The Alaska Attorney General entered into a consent decree with Hilcorp, which included (1) price caps on natural gas sold to local utilities and industrial users for the next five years; (2) a prohibition on selling Cook Inlet natural gas for liquefied natural gas export for five years; and (3) it will not knowingly sell Cook Inlet natural gas to other companies who intend to resell the gas for LNG export. The FTC decided to end its investigation as a result of the Alaska Attorney General’s action, in light of the concerns about energy scarcity in the future and the fact that only consumers in Alaska would be affected.