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Hilcorp practices take fire from AOGCC Agency proposing $910,000 in penalties for violations including incident at Milne Point unit where 3 workers overcome by nitrogen KRISTEN NELSON Petroleum News
The Alaska Oil and Gas Conservation Commission is proposing some $910,000 in penalties against Hilcorp Alaska for violations it says are “neither isolated nor innocent” and which it calls “emblematic of ongoing compliance problems with Hilcorp rig workover operations.”
In a statement provided by spokeswoman Lori Nelson of Hilcorp Alaska the company said it is taking the “alleged violations seriously” and conducting its own review.
“That being said, we do take issue with the characterization of our conduct by the AOGCC in its correspondence.”
Following a story first reported by Alaska Dispatch News, Petroleum News obtained copies from the commission of its recent actions against Hilcorp.
Milne Point J-08A workover The most significant event - for which the commission is proposing $720,000 in penalties - occurred at the Hilcorp Alaska-operated Milne Point unit in September.
Hilcorp was performing workover operations with Automated Service Rig No. 1 at the MPU J-08A well. It had received permission from the commission to pull a failed electric submersible pump and rerun a new ESP completion, with a “fill cleanout step” included in the procedure. The commission said only seawater was referenced in the sundry work procedure filed by Hilcorp, but in the course of the work nitrogen was used in the well cleanout.
Hilcorp notified the commission Sept. 25 that three ASR1 personnel were “overcome by something” in the enclosed mud trailer at the well and were evacuated from the rig.
An AOGCC inspector sent to the location that same day was told that the fill cleanout was done with nitrogen and seawater; the commission subsequently requested more information from Hilcorp and determined that a valve was left open during the workover, providing “a flow path for the nitrogen in the return fluids to enter the enclosed mud trailer and displace oxygen to a deadly level.”
Details of the incident cited by the commission say the three men had initial symptoms from exposure to the oxygen-deficient atmosphere in the mud trailer, but subsequently returned to work in the trailer and then lost consciousness.
“The events associated with subsequent entry into the oxygen-deficient space would have been fatal for three ASR1 personnel except for one worker’s good fortune to collapse into the fresh air environment outside of the enclosed trailer,” the commission said.
No approval for nitrogen use The commission said its regulations require approval by AOGCC for any change to an approved program or activity, and said the approval it provided did not authorize the use of nitrogen. Hilcorp told the commission the use of nitrogen for fill cleanout is a contingent plan executed only if well conditions warrant it.
The commission said hazards associated with commercial use of nitrogen are well known and said “Hilcorp failed adequately to identify the hazards, to assess the hazards, and to implement actions to mitigate the hazards and in doing so failed to maintain a safe work environment during the fill cleanout operations.”
“Responsibility for assuring rig operations comply with good oilfield practices rests with Hilcorp management and engineering staff,” the commission said.
Not isolated The commission said the violations at the MPU J-08A well “are neither isolated nor innocent and are emblematic of going compliance problems with Hilcorp rig workover operations.”
AOGCC said issues with Hilcorp include “ongoing failures to obtain necessary approvals; failures to install, maintain, and test required well control safety systems; failures to perform required tests; and use of equipment that is unsuitable for the operating environment.”
The $720,000 penalty includes $100,000 for changing work procedures, $600,000 “for failure to maintain a safe work environment in accordance with good oilfield engineering practices” and $20,000 for failure to provide results of a BOPE test.
“In addition to the potential severity of the outcome of Hilcorp’s actions, Hilcorp’s ongoing history of performing work outside of approved permits or management-of-change protocols, its history of compliance issues and the need to deter are factors in AOGCC’s analysis.” The commission said a prior $115,000 penalty “imposed upon Hilcorp for violations of essentially the same nature has had no significant impact on Hilcorp’s conduct.”
Other penalties proposed The commission is also proposing fines for failure to notify the commission that blowout prevention equipment was used at the MPU 1-03 well and failure to test BOPE, for which a $40,000 penalty is proposed.
In addition to the proposed penalty, AOGCC said it intends to require Hilcorp to provide a description and example of its “regulatory compliance tracking program”; “written management of change procedures”; and a written explanation of how Hilcorp “intends to prevent recurrence of this violation.”
Two other fines, $75,000 each, are proposed for changing work procedures without approval - in both cases nitrogen was used in cleanout procedures without commission approval.
Health and safety In the statement which it provided Hilcorp said: “The health and safety of our employees and contractors is of the utmost importance to Hilcorp.” The company said the personnel affected by the nitrogen were employed by a well service contractor, and said they were “temporarily overcome by nitrogen gas during a well cleanout operation, but quickly regained consciousness and were released for duty.”
The company said it takes the allegations seriously and is conducting its own review.
It also said that “Hilcorp, like other operators in Alaska, will receive proposed enforcement actions from the AOGCC. However, Hilcorp maintains a strong record of regulatory and safety compliance in its operations across the United States.”
The company said in the statement, sent by email Dec. 24, that it is “engaged with AOGCC on these matters and continue to work to ensure we are providing a safe work environment and are developing Alaska’s resources responsibly.”
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