Biting the Hand That Feeds You

Jim Musselman and Caelus Energy would be happy to help Alaska solve its fiscal crisis. If it would only let him.

- Christopher Helman

There’s no road to Smith Bay, Alaska. No people live there. The nearest town is Barrow, 70 miles away. Deadhorse is a bit farther. To protect delicate tundra where the North Slope meets the Beaufort Sea, oil drilling is allowed only in the dead of winter, when the average temperature is 20 below and the ice 3 feet thick. Last winter Caelus Energy drilled two wildcat wells at Smith Bay that led to the discovery of an estimated 2 billion barrels of recoverable oil. The find could someday provide an over-due slug of crude for the Trans-Alaska Pipeline, which currently transports just 500,000 barrels a day, down from a peak of 2 million in 1988. “That [strike is] just the start,” says Jim Musselman, CEO of Dallas-based Caelus. “There’s so much oil yet to be found.”

But instead of celebrating his new find, Musselman is wondering whether he’ll ever be able to get the oil out at all. The problem? Alaska’s governor, Bill Walker. In June Walker vetoed a bill that would have paid the $100 million that Alaska currently owes Caelus (which claims the state will owe an additional $100 million in 2017). That’s a lot of loot for any company, especially a privately held startup that has sunk $700 million into Alaska.