Econ 919 — Resisting Hilcorp offers
Don Shaw bought his nearly 10-acre property in Clam Gulch for $9,000 in 2003 with an inheritance from his mother’s death. He’s a self-described techno-hermit, and can stay on his property for upwards of two months, leaving only for cigarettes. He’s also a member of the Exxon Valdez oil spill class-action lawsuit from 1994, and has deep resentments about the way oil companies have affected the state.
“It murdered my life, I’ve never recovered from it, I’m out here in the woods minding my own business,” Shaw said. “I despise the way the state handles the oil industry.”
But he uses a wifi hotspot from his phone and an old PC laptop to keep up with the battle against the oil and gas company Hilcorp that he’s been waging for more than five years.
To illustrate just how close he is to Hilcorp’s wells, Shaw sends me to Frances 1, a high-producing well on a property overlooking Cook Inlet, and fires two shotgun shots into the air from his property, which I hear about four seconds later.
Hilcorp wants to lease the area underneath Shaw’s property to explore for gas. Shaw says they’ve made him offers in exchange for that lease, like this one:
“Maybe my boss will let me come down and we can go on a deer hunting charter and you can sign a lease,” he says, recounting what a Hilcorp landman told him. “Or maybe we can go on a fishing charter and you can sign a lease.”
Hilcorp wouldn’t confirm or deny that interaction. But the company is expanding its presence in the Ninilchik area as it looks for more gas.
Hilcorp is the main producer of natural gas on the Kenai Peninsula. As it looks for more gas, the company needs to extract the resource from beneath private parcels like Shaw’s. The company asks private property owners to lease the land underneath them, and then pays them royalties on the gas produced there.
The vast majority of people have taken those deals. But Shaw is one of the holdouts. He’s worried it would devalue his property and that any payment would be inadequate.
Shaw isn’t the only one standing his ground against the company.
At a Nov. 3 hearing with the state commission that oversees oil and gas regulation in Alaska — requested by Shaw — two Hilcorp officials explained how they’re trying to get an exception from the state in order to drill a new well. An existing rule limits oil and gas producers to staying 1,500 feet away from private properties.
McKibben Jackinsky lives on a homestead property so close to a Hilcorp pad that they share a driveway. She protested when Hilcorp first moved in, and says she has refused to sign three leases presented to her by the company. She says she doesn’t think the state should grant Hilcorp that exception, given their history of noncompliance, including a local meter reporting violation in 2020.
For Jackinsky, it isn’t about the money.
“I’m not refusing to sign on based on the dollar value,” she said. “I just don’t want this intrusion on land that has been in my family for…my grandchildren are now the fifth generation.”
Jackinsky has concerns about the way drilling impacts local wildlife, the beach near her house, and her own safety. Over the summer, while Southcentral Alaska went under a burn notice to avoid potential wildfires, she says Hilcorp conducted flaring, a process of burning off natural gas while a production site is set up.
At the hearing, Jackinsky testified about her fears over her proximity to the well.
“The disturbance that their activity has caused already — and they’ve not even started to produce — has been immense,” she said. “The noise of the flaring that went on this last summer, the noise of their activity, the disturbance that causes to the neighborhood and wildlife is immeasurable.”
One other resident testified at the hearing. Patricia Wagner lives within a mile of three Hilcorp pads, and spoke against all future drilling and reduced spacing, because of how the noise of drilling has affected her life.
“I’m impacted by all three sides, multiple years of lost sleep,” she said. “The adjacent residents and I commiserate at three in the morning.”
She also mentioned her frustration with the few opportunities for members of the public to make comments about drilling.
Even if property owners don’t sign leases, they can’t control what their neighbors do. According to what Jackinsky was told by a Hilcorp representative, it plans to begin gas production on the new Pearl Pad in Ninilchik by the end of the year. A Hilcorp spokesperson declined to clarify whether this is true.
Hilcorp also did not respond to questions about how far they’ll go to get leases. But Sean Clifton with the Department of Natural Resources Oil and Gas Division says those who refuse to grant a lease can’t stop development of their neighbors’ resources.
Subsurface resources like natural gas don’t follow the property lines on the surface. Instead, the company is obligated to put the royalties owed for the share of production generated from their properties into what’s called an escrow account. And unlike the lease-signers, who get a monthly royalty check, the holdouts have to wait until production is over to get their money.
Jackinsky is steadfast in her decision not to sign a lease, but is concerned about how her proximity to the well will impact the livability of her home.
“I don’t know if there’ll come a point when it’s too aggressive. My daughters and I have talked about this: How much change before this piece of land has lost its value to us? But we can’t even think of an answer, because it’s very sad to think of,” Jackinsky said.
And Shaw says he’ll never be on board.
“I don’t care if it’s a Stay Puft Marshmallow oil company, I would still fight them just as diligently,” he said.
He says he learned from his grandfather to never sign a contract.