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Tolsona responds to proposed AOGCC fines Company calls proposed $380,000 fine excessive, with $260,000 inappropriate for this well, says compliance procedures in place Kristen Nelson Petroleum News
After repeated efforts to get information and compliance from Tolsona Oil and Gas Exploration LLC on the company’s suspended Tolsona 1 well in the Copper River basin, the Alaska Oil and Gas Conservation Commission said in a May 24 order that it proposed to fine the company $380,000 (see story in June 4 issue).
In a June 23 response Tolsona told the commission: “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. These were caused by changes in personnel, the loss of experienced technical capacity, a failure to create internal redundancy, and lack of oversight in the communication channel.” Tolsona said it has remedied equipment deficiencies and communication issues.
Tolsona challenged the amount and regulatory basis of the commission’s proposed fine, saying fines were imposed based on an inapplicable regulation and “the amount of the fines imposed are excessive and disproportionate to fines assessed against other operators who committed similar, or more serious, regulatory violations,” and called for a downward revision of the fines.
Change in personnel Tolsona said that when the commission approved an application for suspension of the Tolsona 1 in December, the company’s drilling manager and drilling engineer, both with significant experience in the oil and gas industry, were the designated contacts between Tolsona and the commission.
The drilling manager’s contract with the company terminated Jan. 31 and the company’s oil and gas development manager became the new point of contact.
While the company continued to take pressure readings as required in February, Tolsona said it could not find evidence that it notified the commission prior to taking the readings or that those readings were sent to the commission.
Tolsona said the development manager responded to a request from the commission on March 3, “but did not provide the February pressure reading,” and promised a phone call that Tolsona believes never occurred.
Inspector at well site An AOGCC inspector met with a Tolsona representative at the well site in early March, and the commission notified the company of a violation because, among other things, well pressures had not been recorded for 30 days and the representative did not know the mechanical condition of the well.
Tolsona said its development manager provided the commission with February and March pressure readings and responded to a March 6 notice of violation with an apology, but the company said it couldn’t find any evidence that the notice of violation was given to Tolsona senior management, nor was a promised follow-up letter sent to the commission.
The commission asked for the written follow-up and for information on required equipment installation, to which the development manager responded that there were “outstanding invoice issues” impeding equipment installation but that he believed the needed work would be done in a timely manner.
April 11 notice When the commission sent a notice of proposed enforcement action by certified mail on April 11, proposing fines, Tolsona said the notice was signed for by the company’s front desk, but said it could find no evidence that senior management received a copy of the notice and believed only the development manager was aware of it.
But when the commission issued Other Order 121 on May 24, that did reach senior management and the company’s chief executive officer called the commission to establish a line of communication, the company said.
Tolsona began an internal investigation.
Remedial action Tolsona said as a result of its internal investigation it has implemented a new policy, recognizing “the critically important role that the AOGCC plays to protect the health and safety of Tolsona’s employees and contractors and to protect the important and cherished natural resources within Ahtna, Inc.’s region and the State of Alaska.”
The company’s drilling engineer rewrote Tolsona’s well pressure monitoring procedures and the company adopted a communications procedure whereby emails to and from the commission are copied to Tolsona’s contract engineer, CEO, and a member of the Legal, Finance and Safety, Health and Environmental Professional departments at Ahtna.
Tolsona is also retaining the services of Petrotechnical Services of Alaska for assistance in monitoring communications between the company and the commission and to provide any needed technical assistance.
Deficiencies and reaction to fines Tolsona listed deficiencies in its communication with the commission and detailed remedial measures.
But the company also said the proposed penalties of $380,000 are disproportionate to fines imposed on other operators for similar infractions. Tolsona said that while they were tardy, pressure readings were taken, and said the company understands the root causes of its noncompliance and has put corrective measures in place.
Tolsona compared the proposed fines to others imposed by the commission and said they “are many times larger than penalties imposed against much larger and far more experienced operators for similar or more serious violations.”
In addition, $260,000 of the fine relates, Tolsona said, to an inapplicable regulation, one governing production practices. “This regulation does not apply to operations involving suspension of a well, which are governed by a completely different Article and Section” of the commission’s regulations, the company said.
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