AOGCC issues final decision on CIE

KRISTEN NELSON

Petroleum News

The Alaska Oil and Gas Conservation Commission has issued a final decision and order, fining Cook Inlet Energy $446,000 for regulatory violations for the safety valve system for the Sword No. 1 wells and for the company’s failure to provide information requested by the commission on the company’s safety valve system compliance systems.

In late 2014 AOGCC issued a notice of proposed enforcement action citing numerous regulatory violations and the company’s failure to provide requested information, and proposing a civil fine of $806,000. Cook Inlet Energy requested an informal review, which was held in February 2015.

In a May 2015 decision and order AOGCC reduced the civil penalty to $446,000, a decision which CIE appealed, calling the fine excessive; this is the fine the commission is imposing in its final order.

A hearing was delayed, at the request of the company, until the third seat on the commission was filled, which occurred in July 2016; a hearing was held in September.

A functioning safety valve system is required for every well, AOGCC said, with a surface SVS required for all wells which must be tested and pass the test within five days of a well being placed into service. Some wells, including Sword No. 1, are also required to have a subsurface SVS.

AOGCC said it approved completion of the Sword No. 1 on Nov. 1, 2013, and production began on Nov. 17, 2013.

An initial inspection on Dec. 11, 2013, revealed Sword No. 1 had no functional surface safety valve; a test of the surface safety valve on Dec. 13 failed, but CIE produced the well for 42 days without a working surface safety valve, Nov. 17, 2013, to Jan. 5, 2014.

At the first test of the subsurface safety value, witnessed by AOGCC, Feb. 16, 2014, the valve failed to close, requiring the well to be shut in until the valve was repaired or replaced and retested. The commission said CIE had 48 hours to do that work, but continued to produce without resolving the subsurface safety valve failure until the well was shut in on March 7, 2014

CIE told the commission it made multiple attempts to fix the valve in place following the failure, and after those attempts failed, sought a waiver of the requirement for a subsurface safety valve.

The commission said CIE failed to respond to a written request for an explanation by the Nov. 15, 2014, due date, and when the company did respond in February 2015 it said there was a failure in some parts of the company to communicate with AOGCC.

The commission said it considered statutory criteria in setting penalty amounts, and said the company’s knowledge of regulatory requirements precludes finding it was acting in good faith. It also said the company’s actions allowed it to benefit from three months of production from the well.

The only mitigating factor was the absence of harm to the public or the environment, AOGCC said.

The company can file for reconsideration with the commission, and if that is denied, the order can be appealed to Alaska Superior Court.