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AOGCC eliminates proposed Kuparuk penalty Agency cites $6 million ConocoPhillips has put into improving SVS management systems in eliminating proposed $580,000 civil fine Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission has eliminated a proposed civil penalty of $580,000 against ConocoPhillips Alaska Inc. for failure to test well safety valve systems at the Kuparuk River unit 2B pad.
In a May 17 order the commission said it issued a notice of proposed enforcement action against ConocoPhillips in July 2011 based on the company’s failure to test safety valve systems at intervals required for two years prior to the violation.
The 2011 notice proposed a civil penalty and specific correction action; ConocoPhillips requested an informal review, which was held in August 2011.
The commission said the KRU 2B pad was placed on a 90-day SVS test interval in February 2010, with testing required at the 90-day interval until a component failure rate less than 10 percent was achieved.
ConocoPhillips was notified in May 2010 that because tests early in that month repeated a component failure rate exceeding 10 percent that the company was “subject to an indefinite extension for SVS testing every 90 days.”
“There was also a defeated SVS component on one well which was discovered during the AOGCC witness of SVS tests done May 10, 2010.” Commission approval was required before dropping the 90-day test interval at the KRU 2B pad back to the routine six month interval.
But, the commission said, its records showed that beginning Aug. 1, 2010, ConocoPhillips performed the SVS tests at KRU 2B pad wells every six months, not every 90 days as required.
“There was no AOGCC approval to change the test interval,” the commission said.
Because of the violations the commission conducted a comprehensive review of ConocoPhillips’ SVS testing in the state, determining that the failure rates at the KRU 2B pad were not isolated occurrences. The commission said ConocoPhillips’ SVS test failure rate for all wells since Sept. 1, 2009, was 5.03 percent, “the highest failure rate among operators with more than 1000 SVS components tested.”
Ten ConocoPhillips-operated pads were on 90-day SVS test frequencies due to the high failure rates, with four pads “requiring SVS tests at intervals not to exceed 90 days until the AOGCC determined that an acceptable level of performance had been achieved.”
Informal review In requesting an informal review ConocoPhillips said it did not concur with the proposed enforcement and would present written and oral testimony for the commission’s consideration.
ConocoPhillips said the imposition of the maximum allowable penalty was “out of proportion to the circumstances” and said the violation represented a communication and scheduling error, not a substantive deviation from SVS installation or performance regulations.
The company also disputed “any nexus between the alleged 2B scheduling and the overbroad enforcement proposals based on issues disconnected to 2B SVS testing.”
The commission said that during the August 2011 informal review ConocoPhillips “presented information suggesting SVS testing at KRU 2B during May 2010 met the AOGCC’s passing criteria, and that the enforcement action was unfounded.” But, the commission said, ConocoPhillips did not acknowledge that part of AOGCC’s decision to put 2B on 90-day testing was based “on a defeated SVS component.”
ConocoPhillips provided information about improvements to its SVS management programs, including timeframes for completing ongoing and upcoming actions, and committed to communicating with the commission as it proceeded with improvements.
No ambiguity The commission said there was no ambiguity about its testing requirements, and said ConocoPhillips’ failure to test SVS at a specified interval was a serious matter. ConocoPhillips did not dispute that it failed to comply with the 90-day testing requirement, AOGCC said.
But the commission said it found that ConocoPhillips has made significant efforts to improve equipment reliability and tracking of instructions from AOGCC, including: upgrades and standardization of SVS components; root cause analysis of low pressure detection devices; procedural enhancements; analyzing trends and comparing SVS component performance against other operators; focused preventive maintenance; improved human performance through training, communication and feedback; and automation upgrades to track and notify appropriate personnel of approaching test due dates.
Improvements The commission said ConocoPhillips has met with AOGCC staff at least annually since the notice of proposed enforcement action was issued to update the commission on progress in SVS management program efforts and SVS performance. “Significant improvements have been achieved” and current performance tests show ConocoPhillips has one of the lowest component failure rates among Alaska operators, the commission said.
AOGCC said it has found no evidence of “bad faith, no benefits derived from failing to test, and no injury to the public,” supporting ConocoPhillips’ position that the maximum penalty amounts are unfounded.
The commission said it also considered that ConocoPhillips has made significant expenditures, estimated by the company at more than $6 million to date, to improve its SVS management program.
AOGCC did find that ConocoPhillips violated SVS testing requirements.
“Because of the SVS Management Program efforts - several which were initiated prior to receiving the notice - AOGCC is eliminating the proposed civil penalty,” the commission said, adding that the value of ConocoPhillips’ efforts to improve its SVS compliance “far our-weigh any benefits derived from retention of civil penalties in this enforcement action.” AOGCC noted it has issued ConocoPhillips just one non-civil penalty enforcement action since the 2011 notice and the company operates more than 800 wells with required SVS systems per year.
The commission is requiring that ConocoPhillips continue communicating SVS management program improvement progress to AOGCC during annual meetings until the commission deems that unnecessary.
“All other corrective actions and the civil penalty are revoked,” AOGCC said in its May 17 order.
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