Cook Inlet Energy fends off fine, must take steps on gas flaring

Alaska drilling regulators hit Cook Inlet Energy LLC with a nearly $295,000 fine - then dropped it.

But the company still must take certain steps as part of an enforcement action brought by the Alaska Oil and Gas Conservation Commission.

Cook Inlet Energy is an Anchorage-based firm that operates, among other properties, the Osprey oil and gas platform in the offshore Redoubt unit and the related, shore-based Kustatan production facility.

On Oct. 23, 2014, the AOGCC issued a notice of proposed enforcement action against the company regarding failure to minimize or prevent gas flaring. The notice advised that Cook Inlet Energy had failed to shut-in a well, known as RU-3, when the Kustatan facility was undergoing a major overhaul, and flared nearly 24.7 million cubic feet of gas from Nov. 26, 2013, through Feb. 28, 2014.

The notice proposed corrective actions and a $294,834 civil penalty.

State regulations generally discourage the waste of gas through burning or free releases into the air.

Cook Inlet Energy asked AOGCC for an “informal review,” which was held on Dec. 1.

The agency issued its decision and order on Jan. 7, eliminating the fine but requiring the company to take certain steps. The order cited “mitigating circumstances” for dropping the fine.

Oil and gas production from the Osprey platform is piped ashore to the Kustatan production facility.

The order said flaring of gas from the RU-3 well began at Kustatan in late November 2013 during a planned compressor overhaul at the facility.

“No approval was sought from the AOGCC for this flaring which continued through Feb. 28, 2014,” the order said.

Cook Inlet Energy previously had requested authorization to flare from RU-3 at start-up after a rig workover in February 2013. But that authorization was good for only 72 hours, the AOGCC said.

“CIE claims that AOGCC’s flaring authorization was ‘unclear,’” the order said. “CIE also claims that the AOGCC approval granted in February 2013 … was valid nine to 12 months later for flaring during the planned extended compressor overhaul. These assertions find no support in the record.”

Touchy well

“In its correspondence and during the informal meeting, CIE outlined the difficulty with choking back RU-3 to achieve lower flow rates because of water influx and low wellhead pressures,” the order said. “Also, CIE outlined the difficulty with restarting RU-3 once the well was shut-in. Since the well is an extended reach deviated well, a rig or coiled tubing unit is usually necessary to restore the well’s production. These difficulties are evident in a review of the well file. CIE’s initial request for authorization to flare and its subsequent efforts to mitigate its flaring from RU-3 demonstrate that CIE understood the potential for a finding of waste due to flaring during the compressor overhaul.”

The order added: “AOGCC has given CIE’s mitigation efforts, as well as the condition of RU-3, due consideration in adjusting the final penalty imposed.”

The AOGCC found that the company violated regulations, and ordered several actions. The company must provide the agency a detailed description of its regulatory compliance tracking program. It also must provide a root-cause analysis on the violations and show evidence its employees and contractors have been trained on AOGCC regulatory requirements, including how to request approval for flaring.

- WESLEY LOY