Contrary to Wall Street Journal report, AOGCC still does surprise North Slope inspections

Kristen Nelson

PNA Editor-in-Chief

The Wall Street Journal sent a reporter to Alaska in May — apparently to vet the job the state is doing monitoring current North Slope oil and gas activity and to determine if oil and gas companies should be allowed to explore on the coastal plain of the Arctic National Wildlife Refuge.

The Alaska Oil and Gas Conservation Commission’s petroleum inspectors appear to have borne much of the brunt of this visit: The way they do their jobs on the North Slope figured prominently in the July 10 front-page Wall Street Journal story, including the allegation that the inspectors do not make surprise inspections.

The commission wishes to make it clear its inspectors have not given up surprise inspections. Commission Chair Cammy Taylor and commissioners Julie Heusser and Dan Seamount told PNA July 20 that the commission’s petroleum inspectors do surprise inspections to verify operator tests and have done surprise inspections for many years.

The commissioners told PNA that implications in the article that its inspectors are not protecting the interests of the state are false.

The commissioners also said that contrary to statements in the article, the commission’s budget has not been cut. In fact the Legislature put the commission on “paid by the regulated” basis similar to the Regulatory Commission of Alaska and recently authorized increased staff.

And by way of correcting a piece of general misinformation in the article: Amoco never operated part of the Prudhoe Bay field. That was ARCO Alaska Inc., the company acquired by Phillips Petroleum Co.

Well, the first initial is the same… Inspectors play a vital role

The commission’s charge includes preventing waste and its primary function relates to subsurface activities: It issues drilling permits, establishes pool rules for operation of oil and gas fields and its petroleum inspectors check equipment on operating rigs, well head safety valves and meters to verify reports from operators.

It was commission inspectors, said Commission Chair Taylor, who alerted the commission in 1999 that surface safety valve components were failing in cold weather. The inspectors also bugged BP about it — and BP began insulating the component that was failing in the cold. (See related story page B1).

The commission requires certain equipment, such as blowout prevention equipment and safety valve systems, primarily related to prevention of waste, Taylor said, and also requires that the companies test the equipment and report test results.

“What our inspectors do, then, is to periodically — on a random basis — witness those tests to make sure that the information the companies are giving us is really correct.” Contrary to what the Wall Street Journal reported, Taylor said, the commission’s inspectors do surprise inspections and have done so for years. And the inspectors made it clear to the reporter, she said, that they do surprise inspections.

The operators are required to phone in 24 hours before they do any of the required tests, “so that in the event an inspector wants to go out and witness they can.” In the western operating area, BP Exploration (Alaska) Inc. uses a contractor to perform the tests, so that person has to be there for tests to be done, Taylor said. In other areas, employees do the tests, so the inspectors have the option of asking for a spur-of-the-moment test when that is appropriate.

Comparison with other states

But Commissioner Seamount said that kind of comparison is problematic for several reasons. States divide up enforcement duties differently — the commission’s petroleum inspectors are not the only regulators doing inspection work in Alaska’s oil and gas fields. Taylor said the commission is in discussions with the Alaska Department of Environmental Conservation and the Department of Natural Resources to provide joint North Slope housing for inspectors from all the agencies.

There are national organizations which deal with oil and gas issues — and have benchmarks for determining levels of funding, and things do vary from state to state, Taylor said. Alaska is more spread out geographically, “but generally the criteria focuses around looking at the factors that trigger the workload. And for the inspectors it’s the number of wells they have to be responsible for and the number of drilling activities that are going on.” The ratio of inspectors to wells is much better in Alaska than in most states, she said.

Inspectors unfairly portrayed

“If the message is the state could be doing more — that’s fine,” Taylor said.

“But to suggest that somehow these inspectors in the way that they do their job have compromised — that is completely untruthful,” she said.

The inspectors had brought to the commission’s attention the problems in the western operating area — that was not something the commission read about in the press.

“We were already working it,” Heusser said. “And we were in the process of going back and checking out the performance in previous test cycles and so it didn’t come as a surprise to us, yet it was represented that this was news to us.”

Taylor said that in any industry, employees and management have different views, “but our inspectors have historically been very receptive to what employees have had to say.”

Heusser said potential problems have often been brought to the inspectors’ attention by employees. “So there’s been historically open communication and they have on numerous occasions been approached with information about perceived problems.”

The problem of surface safety valve test failure in cold weather, was, however, determined by the inspectors doing their own work, Heusser said.

Adjustments will be made as appropriate

“And if there are any other concerns by members of the public out there we would invite them to left us know… if we don’t have the information, it would certainly be helpful to have that provided to us. And the commission has acted in the past on the basis of information provided to us by employees,” she said.

The Wall Street Journal article said that following a BP employee told the reporter that BP had done maintenance on some valves before a test and taken a well out of production so that it wouldn’t be counted in an upcoming test.

Commissioner Heusser said it is in the companies’ interest to do maintenance, because any failure in a test is recorded — even if the problem is immediately fixed. If there is a 10 percent failure on a pad, then the frequency of testing is increased — from every six months to every 90 days.

But, more importantly, she said, if a surface safety valve cannot be fixed within 24 hours, the commission requires that the well be shut in. The trans-Alaska pipeline is not running full, Heusser noted: Companies need to keep wells operating to keep oil flowing.

And if the commission determines that company maintenance is triggered by inspections, Taylor said, “all we do is change the test schedule.”