hen John Hendrix’s company HEX Cook Inlet purchased Furie Operating Alaska, it was run by outside management and there was only one Alaskan working there. Now the company is 100 percent Alaskan-owned and operated.

In August 2019, Furie Operating Alaska filed for Chapter 11 bankruptcy protection and was marketed nationally to find new owners. At a December 2019 auction overseen by the courts, Hendrix made the highest bid, securing the rights to purchase Furie. In July 2020, Hendrix’s newly formed HEX Cook Inlet acquired the rest of Furie and its partners Cornucopia Oil & Gas Company and Corsair Oil & Gas in bankruptcy proceedings. With those acquisitions complete, Furie Operating Alaska became the state’s only Alaskan-owned natural gas producer.

Hendrix believes more oil and gas businesses need to be owned and operated by Alaskans, but that requires an understanding of the business. “I think it would be good for our residents to have a more intimate knowledge of the oil and gas industry,” he explains. “The primary talent base has really been from out of state, but we have home-grown energy here and we need more home-grown people that understand it. We have locally owned companies in the oil and gas support industry, like Udelhoven Oilfield Support Services, Petroleum Equipment & Services, and Pollard Wireline, so why not more locally owned producers?”

In Hendrix’s opinion, an increased knowledge about the oil and gas industry among Alaskans would lead to an increased comfort level across the entire industry. “There’s always been this untrusting relationship between Alaskans and Outside companies. It’s personified in the movies and everywhere else,” he says. “I’m the only Alaskan owner producing gas for our state, and I don’t think that is good for Alaska. It’s also not good for the oil and gas industry. If our residents see more Alaskan-owned companies in the industry, they will trust that companies are doing the right thing for our state and aren’t here just to make a fast buck and leave a mess for Alaskans to clean up.”

Furie’s Kitchen Lights Unit (KLU) leases cover Upper Cook Inlet waters about 5 miles offshore from a beach north of Nikiski; in the other direction, about 5 miles inland, is the site of Alaska’s first major oil discovery. Congress deemed that 1957 discovery at Swanson River as a secure economic base in Alaska, and thus Cook Inlet oil and gas laid the foundation for statehood. “With oil and gas from Cook Inlet, we were on our way to independent success,” Hendrix observes, “when the discovery of oil and gas in Prudhoe Bay came along.”

The Prudhoe Bay field was discovered in March 1968 by ARCO and ExxonMobil through the Prudhoe Bay State #1 well. “Prudhoe Bay was too big, and we couldn’t handle it ourselves, so the major players in the oil and gas industry came in from places like Texas and Oklahoma,” Hendrix explains. “They basically operated at a different level, and they also over-comply, which led to more industry regulations. The entire focus of the state’s oil and gas sector switched overnight from Cook Inlet to the North Slope,” he says. “Cook Inlet became an afterthought even though it had world class energy reserves and contains the majority of the state’s population.”

Hendrix believes that heavy regulations are manageable for the big players, but they put an unfair burden on small companies. “These extensive regulations place a hefty weight on the industry which puts the small guy out of business,” he says.

Hendrix believes reevaluating the past could benefit the industry now and in the future. “We have to take a good look at a lot of the heritage paradigms that we put the oil and gas industry into,” says Hendrix. “We built this in a way that only major oil and gas companies can operate here. We need to work our way back in order to understand what is realistic and what is unrealistic.”

Hendrix grew up in Homer, where he attended public schools and participated in varsity sports and other school activities. He spent his college years in the Lower 48, where he majored in engineering at the University of Tennessee Knoxville. After adding a minor in environmental engineering, he returned to Alaska to work for Schlumberger (now SLB) and BP on the North Slope.

Hendrix has accumulated nearly four decades of experience in the energy industry in Alaska and internationally, such as assignments in the United Kingdom and Egypt. Hendrix returned again to Alaska to work for Apache Corp. in 2011.

When Apache exited Alaska in 2016, Hendrix chose to continue his business pursuits in his home state as a way to give back. He served on then-Governor Bill Walker’s cabinet as his oil and gas policy advisor, participating in international negotiations and supporting development of the energy industry.

Hex’s acquisition of Furie came with numerous challenges. Under its previous owners, Furie brought KLU into production with a single well in 2015 and subsequently drilled three more production wells. By the time HEX took control, one of the four wells was no longer working and was in need of upgrades and repairs. “When we took over the company, there were a lot of foundation issues we needed to fix,” says Hendrix. “If you don’t fix the foundation, it cracks, and that will kill your business.”

The prior owners attempted to produce gas from the wetter Sterling gas formations in late 2018 and early 2019. That attempt cost the previous owners $17 million when they froze the flowline due to excess water production in the winter of 2019. To remediate that issue, HEX obtained permits to allow production from gas zones with higher water content. The company invested $1.8 million in a water handling system, which was installed last year mainly for the Sterling formation. Hendrix believes this may result in increased gas recovery once the Sterling formation is brought on production.

At KLU, the A-1 Sterling well has been put into test and, so far, the test has been encouraging. Additionally, the KLU A-2A and KLU A-4 Sterling zones have been tested; the KLU A-4 test is negative. Due to the inability to comingle production from the Beluga and Sterling formations, HEX is strategically placing individual zones in test to minimize any disruptions to overall production.

The state of Alaska assesses property taxes on oil and gas exploration, production, and transportation properties—including drilling rigs, pump houses, and offshore platforms—at the beginning of each year. The state has consistently valued HEX’s KLU property at $81.7 million.

“The state valued our property at four times more than we purchased it for and more than the IRS allows us to depreciate,” says Hendrix. HEX/Furie’s current property tax is $1.6 million a year, which is split between the State of Alaska and the Kenai Peninsula Borough. Hendrix appealed the assessment in 2021 and 2022. Both times, the State Assessment Review Board upheld the $81.7 million assessment. The assessment is now the subject of an active lawsuit in which Hendrix hopes to prevail, despite mounting legal fees.

Hendrix believes the state is not accounting for the purchase price, the value, and the challenges of producing oil and gas in Cook Inlet, which many companies have abandoned. He believes those challenges warrant a reduction in the tax assessment. “The taxes we are paying each year could be put into production and into paying a Kenai Peninsula workforce,” he says, noting that HEX sells all of its gas to buyers in Southcentral.

Hendrix sees the property tax assessment as a roadblock to future success for his company and for Alaska generally: “We need to look at the totality of what we’re doing. According to our state constitution, Alaska employers and elected officials are tasked with maximizing the resources for all Alaskans. If I’m penalized on the tax front, I can’t provide royalties, can’t employ other Alaskans, and can’t provide comfort for investors.”

Honesty remains at the center of Hendrix’s business ventures. “A lot of smaller oil and gas companies looking to raise money and attract investors try to hype their prospects and so-called proved reserves. Our reputation is to be a good honest player. We’re going to show them the facts,” says Hendrix. “Alaskans need to know there is a difference between a non-SEC [Securities and Exchange Commission] company stating what is proved reserves and an SEC stock listed company. Even though we are not a publicly listed company, we strive to provide SEC proved reserves.”

The main natural gas supplier for Southcentral, Hilcorp, has warned utilities that it can’t guarantee sufficient production volume in its next long-term contracts. Thus, Railbelt utilities are looking into alternatives, which could include an expanded portfolio of renewable energy sources to stretch the supply of Cook Inlet gas.

“I’m not opposed to renewable energy sources,” Hendrix says, “but why am I going to drill a well for $20 million or $30 million if my company is going to be replaced by renewables in five or ten years? There’s no incentive to spend the money.”

What frustrates him, Hendrix adds, is the lack of conversation about the future with regard to renewable energy. “Nothing is coordinated,” he says. “There is no transitions and mitigation plan. What happens if it doesn’t work? Renewables are part of the solution but they are benefitting from state and federal subsidies and tax breaks to make them competitive—and they don’t pay royalties to the state. HEX pays 12.5 percent royalties to the state, so it would be a different economic model if renewables had to pay 12.5 percent of their revenue, as well. We need to start having these conversations now before it bites us in the butt. Alaska produces home-grown energy, and we want to keep it that way!”

More than sixty-five years after the Swanson River unit brought commercial oil and gas to the Cook Inlet basin, the industry is hardly ready for retirement age.

“Although we’re evolving as a state, when it comes to oil and gas, we’re still kind of like teenagers,” says Hendrix. “I’m Alaskan, but we need to understand how the major players in the industry from Texas and Oklahoma operate.”

As long as one piece of Alaska’s oil and gas sector is under Alaskan ownership, the door is open for more players to join.