AOGCC fines AIX $30,000 at Kenai Loop

Kristen Nelson

Petroleum News

The Alaska Oil and Gas Conservation Commission issued an order Jan. 25, fining AIX Energy LLC $30,000 for failure to maintain a functional subsurface safety valve on the KL1-1 well at the Kenai Loop gas field.

The commission said it issued a notice of proposed enforcement action to the company Dec. 15, specifying correction actions and the $30,000 civil penalty.

In addition to identifying the violation, the December notice proposed that the company submit an application for sundry approval to bring the KL1-1 well into regulatory compliance “and describe how it will prevent recurrence of this violation.”

The commission said AIX installed a subsurface safety valve in the well prior to beginning production in January 2012.

The commission granted a SSSV waiver in February 2012 as part of approval to install a 4,000-foot capillary string inside the well’s production tubing “to mitigate flow assurance issues from hydrate formation in the well, and installation of a lock-out ring across the SSSV to prevent its closure.”

But a February 2020 inspection by the commission “confirmed the capillary string was no longer installed in the KL1-1 production tubing.”

AOGCC said it notified AIX in an Aug. 13 letter that it was reviewing whether the safety valve system in the well met the commission’s regulations “and specifically the requirement to make operational the SSSV when the capillary string was removed from the production tubing.”

The commission said information gathered during its review “shows the capillary string was removed from KL1-1 on June 23, 2015,” and said removal of the capillary string “violated the SSSV waiver.”

The commission said AIX acknowledged receipt of the notice of proposed enforcement in a Jan. 8 letter and “concurred in whole with the proposed action.”

On Jan. 18, the company “provided additional information regarding the timing for procurement and installation of an SSSV in KL1-1.”

The commission said mitigating circumstances include demonstrated good performance of the SSSV system during testing at six-month intervals since production began from KL1-1, AIX’s compliance history at Kenai Loop and no injury to the public.

In addition to the fine, AIX has until Feb. 25 to apply for sundry approvals for well work necessary to make the KL1-1 SSSV functional, and within 10 days of the decision the company “shall provide a detailed written explanation that describes how it intends to prevent recurrence of this violation.”

- KRISTEN NELSON