Friday, November 29, 2019

Alaska’s Public Education Failure: 
What will it take to fix it?


First Published January, 2016; 
a story from Gov. Dunleavy’s former Mat-Su Senate District.

A new student in my Wasilla, Alaska, Adult Basic Education (ABE) class recently expressed wonder in how much he had progressed in just a few days of math study here, and, further expressing himself told of the public high school he had attended previously in a small community in California. Silverado High School in Victorville, California, had initially been built to be a prison, he told the class, but the greater need for a high school re-purposed the nearly finished lockup. In the early 2000s this high school featured a watchtower, bars on the windows and doors, and a metal fence with razor wire spiraled around the top. Parents of high school students in that zip code dropped their kids off, and yellow buses cycled through transporting idealistic youth each day for matriculation. 

In such a setting teachers may easily be mistaken for correctional officers.

Other members of my Wasilla class laughed and one expressed the opinion that his Alaska school was the same kind of place only not as obvious.

Imagine. This adult who had never finished high school in California said he was in Alaska to escape his past. He told the assembled class proudly that he didn’t know a person in Alaska and his goal here was to overcome the drugs and criminal activities of his recent past. He recognizes his future depends on making decisions to assure positive consequences now that he knows what happens when bad choices cause negative consequences. He enthused to all present that my declaration--that as his teacher my goal is to “see how fast I can get him out of my class"--really appealed to him!  For the first time in this young man’s life, he was motivated to gain education toward his GED and seek a meaningful career path.

Instructional Note: Since 2014 the has been normed at 12th grade. Students can withdraw from Alaska public education and take the GED as early as 17 years old. Parents can go to the web page and download practice tests to begin preparation for taking the math, reading, writing, science and social studies tests.

Alaska’s Soft Bigotry of Low Expectations

I attended eighth grade at the Yakutat FAA School. There were two Grade 1-8 schools in Yakutat then; the white school near the airport and the Native school in town. Our previous Lt. Governor, Byron Mallott was then manager of his family’s general store in Yakutat, himself having attended Mt. Edgecoumbe Boarding School in Sitka. (

The year in Yakutat was the worst year of my educational career, with a couple of itinerant teachers generally terrorizing the students with their marital drama: she was big and mean and taught 1-3, and he was Harvey Milktoast frequently interrupted and pre-empted by his brash wife.  My parents supplemented our school work with after-school studies because they realized this school was a travesty. It didn’t help that I was an angry youth, and by the time my folks shipped me off to Washington’s Okanagan Valley to live with a family there for my freshman and sophomore years of high school, my dad was fed up with my attitude and behavior. His last words were: “If you get in trouble, buster, you are on your own.”

This was possibly the biggest break of my life! I moved to a small community, lived with a family of apple farmers, and attended a high school where most of the kids were in training to follow the family business in agriculture. The school taught academic basics, Washington History, mechanical drafting, woodshop, and auto mechanics to boys like me. We went to church regularly, I played guitar in the youth group, and I experienced a normal family. Many Alaskans at that time who went away from their villages also learned the difference between living in rural Alaska poverty and experiencing American bounty Outside. Some never returned permanently and others returned to be leaders in their communities.

This dynamic of Alaska public education changed in the early 1970s. A group of Alaska Natives residing in Nunapitchuk--described then as an Eskimo village of 400 people located 410 miles west of Anchorage--decided that it was unfair to send rural students away to high school for nine months per year to get an education. Additionally, one Anna Tobeluk was to lend her name to a lawsuit against the State of Alaska because--as described by Andover, Massachusetts attorney Stephen E. Cotton--she was “an 18-year-old casualty of Alaska’s failure to provide rural high schools.”1

With all due respect, I am a success of that system. So is former Lt. Gov. Mallott.

UAF Chancellor
Emeritus Marshall L. Lind
In 1975 Anna joined as a plaintiff in a lawsuit, Tobeluk v. Lind in what became the Molly Hootch Case for the Eskimo girl whose name headed the original 1972 list of plaintiffs suing the state for failing to provide rural community high schools. In 1976 Marshall Lind, Commissioner of Education under Governor Jay Hammond, signed a detailed consent decree providing for establishment of a high school program in 126 villages covered by the litigation, unless people in the village decided against a local program. This was the easy political way out; Alaska was about to become wealthy beyond most people’s imaginations from oil development, and throwing money at public education meant construction jobs building schools and communities keeping their young people at home in programs run mostly by Outside teachers on their Alaskan Adventures. With more than 50 Alaska school districts, each with an elected school board, this was a political win-win-win for Gov. Hammond.

I submit this political maneuver was a mistake. Instead of having the wisdom to examine best educational options for rural Alaska, our public education system was set for what today is a “money pit;” like a home that defies making enough repairs to be marketable, but is marginally inhabitable, while it keeps costing more and more to maintain as an abode.

The Goal of Education is Autonomy

This chart shows Alaska's ranking among the states in 2013.
It has not improved since then.
It is a cliché that “Parents are the first teachers.” But what options do parents have when their kids are not doing well in public school? As a newly credentialed teacher myself in 2003, I sought venues in and out of public school systems in Juneau and Anchorage to develop my craft. One option I pursued was Sylvan Learning Center, while substituting for the Anchorage School District (ASD). I received training and became a Sylvan on-site teacher, helping students having trouble in public education or students doing alright but not good enough. I found the Sylvan system provides an interesting approach to educational enrichment.

Two young entrepreneurs, Christopher Hoehn- Saric and Douglas L. Becker, took over Sylvan in 1991, and transformed it from a chain of tutoring centers dotting suburban shopping malls around the country to an international education-oriented firm that earned revenues of $246 million in 1997. In addition to tutoring centers, Sylvan had expanded to offer teacher training, computerized testing, distance learning, and other services.2 In March of 2003 Sylvan Learning Systems Inc. sold its tutoring and other K-12 educational businesses to a private equity firm to focus on online and overseas higher education services. The tutoring company still does business as Sylvan Learning Centers and other variations.3

When an Anchorage parent decides they want their child’s public education to be supplemented in a Sylvan Learning Center that child is tested through a computer program for current skills. This test provides an overview of knowledge learned to date and evaluates what past learning voids might be leading to current difficulties. Additionally, a child failing a class in ASD can pass that course by passing the corresponding Sylvan coursework.

Cheaper than private school.

Based on analysis of an entry evaluation, applicants are provided a guided learning program, in which the supplementary curriculum is keyed to missing knowledge and skills. As an instructor for Sylvan in Anchorage, I sat at a table joined by three students at a time. They encountered individually prescribed lessons to build skills over 50-minute learning segments. They did work packets, and I checked the answers after the bell rang. The entire program is animated and goal-oriented, because parents get their money back for any kid who won’t become involved. Thus, the slogan for Sylvan when I worked there was: “We make learning fun!”

Imagine if parents of kids who were floated through the public system could get their tax payments going to local education back if they didn't have a 12th grade education when they were graduated! And, while the Sylvan approach to training young Alaskans is effective, it isn’t cheap. I know one parent who took a second mortgage on the family home to pay for Sylvan supplemental services for one child—but that child passed high school!

Sylvan is based in Behavior Modification techniques which provide tangible rewards for achievement. Students are given tokens for reaching milestones in daily learning activities.  After each 50-minute segment various students are publicly recognized by their instructor for achieving instructional goals in the room full of peers. Tokens can be spent to purchase a variety of items from a “store” in the Sylvan Center. In my experience this approach worked best with younger students who wanted toys from the store.

The author at left with one of many Adult Basic Education classes he taught over 9 years.
If All Else Fails

Alaskans who leave early from public education often get a GED. Some have had “Individual Education Plans” for diagnosed learning disabilities, some were distracted from attending school or paying attention in class, some didn’t care, some tried but gave up and some never attended any school. Public education, including special programs, charter schools, special schools and assigned attendants to shepherd students toward a diploma, didn’t work for these adults. Parents may be wondering what to do with such a dependent--or individual early leavers may be homeless--but whatever the case Alaskans who don’t make it in our money pit system must find an alternative. 

That is usually through passing the GED (

This problem of declining public education is not unique to Alaska, but the fact we have invested so much while going so many years without even a meaningful conversation about what we are getting for our considerable investment, is shameful. Parents often must accept what is provided unless they have the means for private school or supplemental assistance. Choice in public education is one option that does not have political favor among the education establishment who continue to strive for more financial support without accountability. The problem is getting worse and proposed solutions at this time are mostly cosmetic.

At its website, Sylvan declares: “We Believe learning is everything; learning should be personal; great teachers inspire; technology accelerates learning; Results Matter.”

Making public education accountable and focused on what students need to know should NOT preclude making learning fun.

1 Cotton, Stephen (1984) Educational Research Quarterly
2Cavanaugh, Joanne P. (September 1998). "Sylvan's Fast Learners". Johns Hopkins Magazine. Retrieved 2015-02-22.
3Walsh, Mark (19 March 2003). "Sylvan Learning, Changing Focus, Sells K-12 Sector". Education Week. Retrieved 22 October 2013.

Tuesday, November 19, 2019

What would Wally Hickel Do?


President-elect Richard Nixon talks with Gov. Walter Hickel of Alaska in New York in 1968. CreditAssociated Press
There have been times when Alaska politics were entertaining, candidates knew every vote counted, and campaigns could take on the atmosphere of a circus. Many were especially amused when die-hard Republicans, Wally Hickel and Jack Coghill ran for governor/lt governor as AIPs and won! 
(Alaska Independent Party
Sen. Bob Bartlett

For background: Alaska’s statehood convention knew Natural Resources had to be developed for an economic base. The point was made early by Alaska’s delegate to Congress, Bob Bartlett, in his key note speech to the delegates: …fifty years from now, the people of Alaska may very well judge the product of this Convention not by the decisions taken upon issues like local government, apportionment, and the structure and powers of the three branches of government, but rather by the decisions taken upon the vital issue of resource policy.

Everyone seeking statehood believed disposition of resources had to be done right. More than 60 years later we see the wisdom of Sen. Bartlett’s words as our $66 Billion Permanent Fund from oil revenues becomes a political target by some politicians.

Gordon S. Harrison further explains importance of Natural Resource consideration in Alaska’s Constitution, 4th Edition: Thus, the convention delegates sought to enshrine in the state constitution the principle that the resources of Alaska must be managed for the long-run benefit of the people as a whole—that is, the resources of the state must be managed as a public trust.  They did not attempt to write a resource code; rather, they sought to fix the general concept of the public interest firmly in the resource law and resource administration of the state, as well as in the consciousness of Alaskans, so it would not be subverted through the indifference or avarice of future generations.1

The founders were looking to the future. Among the states of the United States Alaska’s constitution is unique with its emphasis on “utilization, development, and conservation of all natural resources belonging to the state, including land and waters, for the maximum benefit of its people.” (Article VII-Natural Resources-Section 2)

Walter J. Hickel popularized this concept, describing Alaska as “The Owner State” in his 1971 memoir “Who Owns America,” written after being fired by President Richard M. Nixon as Secretary of the Interior:  The public must demand that government face the fact that it is in business. The president’s Cabinet is the board of directors for the largest company in America. Its stockholders are 200 million Americans.  The poorest ghetto child has as much stock interest in the Continental Shelf, for example, as the president of any large company. He is an owner. The great rivers are his, as are the lakes and millions of acres of rugged beauty from Cape Cod to the Redwoods. These are not for anyone’s private exploitation. This does not mean that they will not be used privately, It means that they will not be abused privately.2

Stock in this company is set by citizenship but the economy determines the stock’s value. Hickel also famously said: “You can’t just let nature run wild,” and on another occasion “every Alaskan is an environmentalist.” He was capable of glorious contradictions.

While Alaskan resource ownership was specified in the state constitution, Hickel believed it extended to the entire nation through our parks and national heritage institutions. But Hickel was also controversial in Alaska. His successful campaign for governor in 1990 was a circus. The media mocked him as Hickel and Lt. Gov. Coghill, (one of the constitution signers who had formerly declared himself “Mr. Republican”), won election to office. Like two porcupines, once elected they distanced each other.

Alaska Independent candidates Hickel/Coghill received 75,721 votes (38.8%) to Democrats Tony Knowles/Willie Hensley 60,201 (30.9%) and Republicans Arliss Sturgulewski/Jim Campbell with 50,991 (26.1%).

“Alaskans have brought back from the past one of the biggest drillin’, sawin’, digging’, dreamers in all this big, wild state to be their governor,” declared John Balzar, reporting in the Los Angeles Times, February 7, 1992. “He has just finished this first year in office, trying to lead the charge toward his grand vision of another free-spending development boom for oil, minerals, timber, railroads and highways.”

No mention of seceding from the United States, which was in the AIP platform.

“Hickel, champion of the great Alaska oil rush at Prudhoe Bay, the political wildcatter who promoted the colossal Alaska oil pipeline, flamboyant Wally Hickel who stood up to Richard M. Nixon, the hard-hewn Hickel who made himself a millionaire out of 37 cents in pocket change, is today, at 72 smack up against a different dream for Alaska—the dream of preserving it against the large-scale development he champions,” continued Balzar in that story, reprinted in the Juneau Empire on the same day in 1992.

Hickel is further described by Balzar as: “…a champion of states’ rights, a ho-hum politician and the operator of the best hotel in Anchorage.” Of course that is the Captain Cook Hotel.
“Late in 1990, on the day before the registration deadline, Hickel strode out of the shadows as an independent third-party candidate,” wrote Balzar. “If he could not command a majority of Alaskan voters behind him, here was an exploitable alignment of political forces: The Republicans and Democrats nominated moderates who wore the drab grays of consensus politics.” (Sturgulewski/Campbell and Knowles/Hensley)

Joe Vogler Started the Alaska Independent Party (AIP). The Alaska Legislature honored him with a Memoriam in 1995 declaring in part: Vogler challenged the federal government's practice of owning land in Alaska or any other state outside the original limits of the United States Constitution. Vogler believed that federal claims of land for preserves and parks is outside of the original intent of the framers of the Constitution and that the federal government has no right to own land in the western states except for "forts, arsenals, dockyards and other needful government uses.
Balzar continued: “His dreams remain as wide-eyed and unshakable as a young Klondike prospector’s: Push roads through national parks, drill for oil in wildlife refuges, cut more timber from the vast national forests, activate a gigantic gold mine in the capital, build another pipeline from the North Slope—to carry natural gas. Bigger ports, longer rail lines, more and wider highways—these, too, are in Hickel’s big dreams.” 

Then there is the pugilist Hickel:

“What some idealists don’t realize is that the color of the environment is not just green. It is real. A person who is cold, hungry and unemployed is in an ugly environment. Poverty is the worst enemy of the environment. My question is, what has the Sierra Club ever done for the poor?” Hickel said.

Walking the walk, Sec. Hickel was the first ever to use the Endangered Species Act to try and save an animal--whales.

Balzar also pointed to oil companies financing 87 percent of the budget of the richest state government in America--six times the per-capita spending of other states. As governor, Hickel contributed to our state’s wealth, securing a $1.1 billion cash settlement just three years after the Exxon Valdez oil spill, avoiding an epic court trial. (The battle over the Amoco Cadiz spill in France in 1978, by contrast, was still being waged in U.S. Courts. It happened when the supertanker Amoco Cadiz, foundered off the coast of Brittany to produce Europe`s worst oil spill. That claim settled in 1988 for $85.2 million.)3

Hickel honored the law regarding distribution of Permanent Fund payments to Owner State residents under the original formula. His further accomplishments as governor the second time are detailed at as follows:

… negotiating and collecting a number of tax settlements with oil companies, including a $1.4 billion settlement with British Petroleum (BP), the largest in state history.  A number of lawsuits were filed against the federal government to assert state rights.47  He settled the Mental Health Lands Trust dispute.  The State of Alaska selected the final 23 million acres of its 103 million acre entitlement.  Settlement of the 1989 Exxon Valdez oil spill resulted in use of the billion dollar fund collected to buy land and support science in Prince William Sound, Kachemak Bay, and on Kodiak and Afognak Islands.  He proposed significant cuts in the state budget by cutting the general operating budget by six percent per year (eight percent with inflation), even though Alaska expected a $1 billion windfall because of higher oil prices caused by the Gulf War.  He proposed placing the windfall into an investment fund to finance costly megaprojects to help diversify the state’s economy.  Included among the projects was a huge port near Anchorage, extension of the Alaska Railroad, and an $11 billion pipeline to bring stranded gas to Asian markets.  Two projects that caught particular notice, but that he did not push, were a water pipeline to California48 and an undersea railroad to Siberia.  He allocated more funds for upgrading village water and sewer systems than the past three administrations combined.  49

During this time of major accomplishments Hickel endured a nagging recall effort. Hickel chose not to run for reelection in 1994.

Wally Hickel was straight forward about politics. Again, from Who Owns Alaska: Politics is the art of compromise. If those words were carved out of solid granite in ten-foot letters up each side of the Washington Monument, they would be no more revered than they already are in the American capital.  The expression has been used for generations as an excuse for selling out one’s beliefs and “making a deal.” The man who listens, who finds out the naked truth and goes forward without compromise, is a truly great leader.  The real challenge for a leader is to sell those ideas he absolutely believes in from the heart. His greatest achievement is to gain support for those ideas that do not compromise his principles.”5

The Permanent Fund is a trust account established under Gov. Jay Hammond as a means to assure future Alaskans--including those not even alive when oil was discovered--are given their share of Alaska’s non-renewable resource wealth. Bill Walker was the first governor (12/2014 to 12/2018) to invade the sanctity of the Permanent Fund and deviate from statute in distribution of the annual PF Dividend. He was a one-term governor.

Now, Gov. Mike Dunleavy is facing strong opposition as he attempts to reign in State spending and accomplish a return to the statutory intent of the Permanent Fund. A majority coalition of legislators, many of whom were elected on their promise to protect the Permanent Fund, have shown they believe spending on government--even in a recession--is in the state’s best interest as oil revenues continue to decline.

Alaskans have a heritage of settling these kinds of disputes at the ballot box. Trying to recall a governor for doing what he campaigned on doing is futile. If it didn’t work with Hickel/Coghill, who were elected with a 39% vote, it isn’t going to work with Dunleavy/Meyer elected by 51.44% of the voters.

Wally was a scrapper and good ringmaster. It’s been one year and Dunleavy may need to take a lesson from the former Golden Gloves Champ and remove the kid gloves.


1 Harrison, Gordon S., “Alaska’s Constitution, a Citizen’s Guide, 4th Edition, Alaska Legislative Affairs Agency,2002, p 127

2Hickel, Walter J., “Who Ownes America?,” Prentice-Hall, Inc. Englewood Cliffs, New Jersey, 1971 p 115

47. Stephen Haycox, Frigid Embrace:  Politics, Economics and Environment in Alaska, 150-152.

48. Terrence Cole, “Wally Hickel’s Big Garden Hose:  The Alaska Water Pipeline to California,” Pacific Northwest Quarterly, v. 86, no. 2 (Spring 1995):  59-71.

49. Claus-M. Naske and Herman E. Slotnick, Alaska:  A History, 363-364 and 369; Sam Cockerham, “Alaska’s Walter Hickel, who Nixon fired over Vietnam, dies,” Anchorage Daily News, May 10, 2010, (accessed November 15, 2015); Biography:  Walter J. Hickel, Institute of the North; (accessed November 18, 2015); Elizabeth Tower, Anchorage:  From Its Humble Origins as a Railroad Construction Camp, 153-154; and entry for Walter J. Hickel, in Fond Memories of Anchorage Pioneers, Volume 1, 230-231.

5Hickel, Walter J., “Who Ownes America?,” Prentice-Hall, Inc. Englewood Cliffs, New Jersey, 1971 p 297

Tuesday, November 12, 2019

Why is BP Leaving Alaska?


A 30-year BP Manager provides perspective.

BP’s Anchorage headquarters is a 15-floor, 324,000-square foot, class A office building. It was built from 1983 to 1985, and the entire campus is 18 acres and includes a cafeteria and atrium. It is one of the most recognizable buildings in Alaska. (The company also built and operates the BP Energy Center, a building in midtown where nonprofit groups can meet for free. The Energy Center is the only Alaska asset not included in the sale to Hilcorp and BP has said it will remain in Anchorage “as a legacy.”)

It’s been a good run since 1977 when the first tanker full of Alaskan Crude oil left Valdez and this state’s future was bought and paid for by the oil industry. No state taxes, incredible infrastructure improvements, a Permanent Fund that pays annual dividends to anybody (and their kids!) who has lived here at least one year.

What a ride it’s been!

Some of us have never known anything else and may have taken certain things for granted. We remember when the oil was supposed to run out in 1990, yet it has continued to bolster our economy and lifestyle far beyond that date.

“I think initial estimates of production from the North Slope were 8-9 Billion barrels of oil,” explained Gary Lillo, from the comfort of his home overlooking Eagle River Valley. “By the time I left after 30 years I believe they were already up to 14 Billion barrels from that reservoir.”

Gary Lillo and wife Joy Journeay

From the August 27, 2019 BP company press release:

BP today announced that it has agreed to sell its entire business in Alaska to Hilcorp Alaska, based in Anchorage, Alaska. Under the terms of the agreement, Hilcorp will purchase all of BP’s interests in the state for a total consideration of $5.6 billion.

The sale will include BP’s entire upstream and midstream business in the state, including BP Exploration (Alaska) Inc., that owns all of BP’s upstream oil and gas interests in Alaska, and BP Pipelines (Alaska) Inc.’s interest in the Trans Alaska Pipeline System (TAPS).1

For elected officials and policymakers THIS should be wake up call.

Old Chinese saying: When food is on the table family have many problems. When no food on the table family have only one problem.

A legacy: BP Energy Center
From a personal perspective for me as an Alaskan, working on the North Slope has given me a lifestyle that even my college degree would never have given me even a whisper of hope of anything like it in my lifetime,” Lillo said. “And I know so many colleagues that are in the same boat; many in retirement living right along Eagle River road here, who I know retired around the time I did. I also know a lot who are Outside now, they bought ranches or property in Hawaii, but a lot are Alaskans still.”

Additionally, Lillo expressed appreciation for the fact that since we haven’t paid income taxes over some four decades a lot of young families have had a better lifestyle. “They didn’t have to work for the oil companies but they got the benefit of our oil wealth,” he adds.

The British are Coming!

BP Exploration has deep roots in Alaska. In his book “Crude Dreams” Jack Roderick details the early days of Alaska oil development and BP’s entrance:

In the summer of 1958, just six months before Alaska Statehood, Anchorage had about 40,000 people (including those at the two military bases), three banks, two movie theaters, streets that were mostly un-paved, and a total of two buildings that stood higher than three stories. Visiting oilmen found entertainment at a number of drinking establishments or chose from the likes of the Oasis Club out on the Seward Highway or the Last Chance at the end of Fifth Avenue. That summer, with the appearance of British Petroleum, the oil scene in Alaska changed permanently.2

As Roderick tells it, BP geologists had looked over the North Slope during the early 1950s, and believed it had the same potential as the oil fields of Iran. But at the time it was too remote for serious consideration for development.

Events in Iran changed that viewpoint. Assassination of prime minister General Ali Razmara led to nationalization of the Iran oil fields by his successor. According to Roderick: “BP suspended Iranian operations, terminated 70,000 Iranian employees, and pulled out. In so doing, it lost two-thirds of its worldwide production and refining capacity.”

Other circumstances also caused BP to look north to Alaska. And investment by a British company beginning in 1959 was welcomed by many who believed the Federal government was dragging its feet. Roderick references a comment at the time by geologist F.G. “Geoff” Larminie: “There was a very significant degree of support for BP people in Alaska, because Alaskans were basically saying to the federal government, ‘You have neglected Alaska for so bloody long and here comes a foreign operation, they move in, they are operating in a big way, nuts to you. If they can see what’s happening, why can’t you idiots in Washington realize just how important this state is?’”3

Lillo retired from BP in 2009 after spending considerable time at the end of his career innovating routine processes using technology. When he started working for the company they were using Apple IIe computers.

“I worked as a technician for 6 months, then they hired me as a manager for the warehouse complexes on the north slope on the west side of the field. That’s what I did for the next 12 years,” said Lillo. “When I started in ‘79 I worked for an entity called “Materials Management.” They operated warehouses in Anchorage and on the North Slope, took care of transportation of goods up and down the Haul Road, flights in and out of Prudhoe. We had a 727 charter aircraft that had a compartment in the front where we could put an igloo for high priority freight.”

Lillo continued: “At that time BP operated the western side of Prudhoe Bay; Atlantic Richfield Company (ARCO) managed and operated the Eastern part. BP Gathering Center #3 had just been commissioned in the summer of 1979. That was the third gathering center on the west side of the field.

“There are a total of six gathering centers,” said Lillo. “Even in the early 80’s there were several hundreds of wells that had been drilled. With the uplift of oil comes also water and natural gas. These gathering centers separated the water from the oil, the gas from the oil; they re-injected the gas back into the reservoir and pumped the oil over to Pump Station #1. From there it enters the trans-Alaska pipeline to go down to Valdez.”

Within a decade of starting to work there BP and ARCO were producing about 2.1 MILLION barrels per day. For a few years during the 1980s they were at maximum production; then production started to plateau, then decline. That has been the story ever since.
Alaska Oil & Gas Association information

ARCO left Alaska in March of 2000, selling its assets to BP but the sale was deemed illegal and BP sold that holding to Conoco Phillips.

Survival of the fittest

This decline has required producers to change how they do business.

“On the North Slope at the time I started BP employees worked a week on and a week off,” Lillo explained. “The reason for that schedule was that it kept the workers in the state of Alaska instead of encouraging them to leave in their off time and not be a state resident. BP was always concerned about keeping money in Alaska.”

He continued: “When I first started working up there the Materials Management Department had several dozen people that worked two shifts, 12-hours per day 7-days per week. I was one of the last people in that department to come off the North Slope in 1992 after it was outsourced to a third-party contractor. Everybody else either got fired, let go, took an early retirement or went to work for a contractor.”

This is one way the company sought cost efficiencies--through outsourcing.

“As things were being outsourced they were moving people out of the BP Alaska organization to other places, whether it was Chicago, Los Angeles, Houston or they would come up with an early retirement scheme,” Lillo added. “They offered incentives if you opted out of employment with them. I believe I went through six downsizings. But I figured “If I worked for them a week they owed me a weeks wages, they don’t owe me $125,000 if I say ‘Gary’s gonna leave.’ I wasn’t ready to leave—I loved working for them. Other people knew the handwriting was on the wall when the department they were working in was outsourced to a third party contractor; well either you go to work for that third party contractor and accept whatever they offer you—and you know it isn’t going to be as good as your deal with BP—or you might want to hang on and take the risk, but a lot of people took the $100,000 or $80,000 cash and left.”
The Oil Business Challenge

The volatility of oil as a commodity over time should be understood; the producers have a constant number of employees, a constant overhead, operating expenses and taxes while dealing with the uncertainty of oil prices determined by world markets.

“Back in the 80’s I remember the price per 42-gallon barrel of oil was nine dollars and thirty some cents,” said Lillo. “Subsequent to that it shot up to something like $140/barrel and now I think it’s in the $60/barrel range.”

To forecast operation costs for budgeting, planners must establish the lifting cost of a single barrel of oil and balance it with expenses. When the lifting cost of a single barrel of oil reaches a tipping point--where taxes didn’t leave enough to provide a return on invested capital--North Slope operators determine whether they should drill more exploratory wells, upgrade facilities, or cut back. Reduction of spending has occurred over recent years.

“BP is an International corporation as most of the big oil companies are, with operations all over the world,” Lillo explained. “If they are going to spend money anywhere they are going to do it with an eye on return on invested capital. If they are making 8-1/2 percent on their money invested in this part of the globe, with one particular entity, and over here in another place they are making 6-1/2 percent, it’s a no-brainer. Where are they going to invest more? Oil companies are in the business of making a profit. If they aren’t making money something has got to change.”

Over the years, as the amount of production has declined, expenses have either stayed flat or rose a bit because of the unstable tax environment in Alaska.

An Expensive Event

According to the National Oceanic and Atmospheric Administration: On April 20, 2010, an explosion occurred on BP’s Deepwater Horizon drilling platform in the Gulf of Mexico. The explosion, which killed 11 men, caused the rig to sink and started a catastrophic oil leak from the well. Before it was capped three months later, approximately 134 million gallons of oil had spilled into the Gulf, the largest offshore oil spill in U.S. history.4

“I worked on that spill response a few months after I had retired,” Lillo said. “So far that spill has cost them $65 Billion, cash. $65 Billion!” he emphasized. “I think that is what they need money for. The company set a target for 2019 of divestitures of $10 Billion and Company President Janet Weiss was quoted as saying it was “cash for the bottom line.”

This litigation is far from over. Previously BP has divested itself of Milne Point, Endicott, sold the Anchorage headquarters building and gotten out of Russian holdings as well as selective other holdings elsewhere around the globe.

“I am of the opinion that one, the return on invested capital is probably not as good in ‘Alaska now as in the past, and two, you cannot sell a dead cow to a butcher shop,” said Lillo. “The North Slope has some life left in it but it isn’t somewhere BP wants to go and punch a bunch of new holes and expect to increase production.”

Hope springs eternal in the Arctic National Wildlife Refuge.

“You may know BP is the only oil company that actually poked a hole in ANWR but there is no way you are going to find out what happened!” Lillo concluded. “The leases for drilling there have not been sold yet, either. If anything could bring BP back to Alaska, it could be ANWR.”

2John R. Roderick, Crude Dreams; a Personal History of Oil and Politics in Alaska, 1997, Epicenter Press, p-123.
3ibid p-129

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