Providing coverage of Alaska and northern Canada's oil and gas industry
December 2017

Vol. 22, No. 49 Week of December 03, 2017

AOGCC reduces fine to Tolsona Oil & Gas

Kristen Nelson

Petroleum News

The Alaska Oil and Gas Conservation Commission has reduced a fine imposed in May on Tolsona Oil and Gas Exploration LLC from the $380,000 to $92,000, citing steps the company has taken since the fine was imposed to comply with AOGCC regulations and the fact that the company now proposes to plug and abandon the Tolsona 1 well, the cause of the fines.

The commission cited numerous violations by Tolsona and said those violations were of requirements the agency imposed when it approved Tolsona’s request to suspend the Tolsona No. 1 well, including the company’s failure to provide pressure reports, failure to afford AOGCC inspectors the opportunity to witness pressure tests and failure to install a required pressure gauge.

Tolsona requested reconsideration of the commission’s May decision and a hearing was held Sept. 12.

Communication issues

The commission had made numerous efforts to get information from Tolsona on the suspended Tolsona well in the Copper River basin prior to issuance of the May order, including a notice of the proposed order.

In a June 23 response to the commission’s order the company said: “immediately upon receipt of the Order, Tolsona performed a comprehensive internal investigation, which revealed numerous deficiencies in Tolsona’s communication, both internally and with the AOGCC.” Tolsona said those deficiencies were caused by changes to personnel, loss of experienced technical capacity, failure to create internal communication redundancy and a lack of oversight in communication.

The company told the commission it had remedied equipment deficiencies and communication issues.

In its Nov. 29 final order, the commission reviewed the basis for its finding of violations or noncompliance with regulations, as well as its attempts to communicate with the company.

Tolsona response

After the commission issued its May order, the company’s CEO called to say the company had not received the notice of proposed enforcement action. In response the commission supplied copies of the notice and signed certified mail receipts and Tolsona initiated an internal investigation.

The required pressure gauge was installed June 1 and on June 15 Tolsona provided notice to the commission so that inspectors could witness wellhead pressure readings. This was the first time, the commission said, that Tolsona had provided the required notice.

On June 23 Tolsona submitted a request for reconsideration of the civil penalties.

Commission’s conclusion

The commission said there is no dispute that the violations occurred, and said Tolsona has implemented steps to ensure compliance will occur in the future.

“Tolsona’s demonstrable disregard for regulatory compliance precludes any finding that it acted in good faith,” the commission said. While there were serious violations there was no injury to the public, but the absence of any effort by the company to correct the violation “and the need to deter such behavior weigh strongly in the penalty imposed.”

The commission said steps Tolsona has taken to ensure compliance for future work, and the company’s statement that it plans to plug and abandon the Tolsona 1 well, “warrant reduction of the proposed civil penalties.”

The reduced penalties include $60,000 for failure to install appropriate gauges on all annuli on the Tolsona 1 well and $32,000 for failure to provide monthly pressure reports on the well.

This is the commission’s final decision and may be appealed to superior court; any appeal to the court must be filed within 30 days.

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