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AOGCC reduces Hilcorp fine to $200,000 Cites changes in company’s behavior, losses while commission had rigs shut down, some duplication of fines in proposed action KRISTEN NELSON Petroleum News
The Alaska Oil and Gas Conservation Commission has reduced a civil penalty it charged Hilcorp Alaska from $720,000 proposed in November 2015 to $200,000. AOGCC imposed the fine for regulatory violations during operations at Milne Point unit well J-08A in September 2015. During a workover operation on the well, three workers on Automated Service Rig. No. 1 were overcome by nitrogen in an enclosed mud trailer.
The commission said approved workover operations on MPU J-08A included replacement of a failed electric submersible pump and the use of seawater to perform a well cleanout. Use of nitrogen during the workover operations was not authorized, AOGCC said.
“Hilcorp has a significant history of noncompliance with AOGCC regulations,” the commission said in its March 3 order, but also said Hilcorp has taken steps to improve regulatory compliance. It said Hilcorp took a considerable financial hit when the commission shut down the company’s four workover rigs in the state for most of October 2015 and said it partially agreed with Hilcorp’s argument that some of what it proposed consisted of multiple penalties for a single act.
Hilcorp’s response Hilcorp said in a March 3 release that the company has worked closely with regulators, done its own investigation and applied lessons learned.
The company emphasized its focus on safety, environmental preservation and adherence to regulatory requirements. “Personal health and safety is of the utmost importance to Hilcorp and we are doing everything we can to ensure responsible operations,” the company said. It also said it has reviewed procedures “and has taken steps to make sure we do not have a similar incident occur.”
The company said that over the past 12 months it has worked to improve regulatory compliance, and said while it has more than doubled its Alaska workforce in the last five years, its “Occupational Safety and Health Administration performance in Alaska has remained above the national average.”
“Although Hilcorp disagrees with some of the findings in this order, the company does not plan on appealing this decision,” the company said.
Potential severity of outcome When the commission imposed the $720,000 civil penalty in November 2015 it cited “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” in setting the amount of the proposed fine.
Most seriously, the three ASR1 workers were overcome by nitrogen in the process of the workover operation, lost consciousness and the event “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. Exposure could have been prevented,” the commission said in its November 2015 notice of proposed enforcement.
The commission said Hilcorp was not authorized to use nitrogen in the operation and had applied only to use seawater in the well cleanout portion of the work. Nitrogen was used, a valve was left open during the workover and nitrogen displaced oxygen “to a deadly level” in an enclosed mud trailer.
Reduced fine In discussing the reduction of the fine to $200,000 the commission said “during the past twelve months, Hilcorp has taken initiatives that have improved their overall regulatory compliance.” AOGCC also said that after its initial investigation it had stopped work on all four Hilcorp workover rigs in Alaska from Oct. 1 to Oct. 26, 2015, until the company could demonstrate compliance with the commission’s conditions for restarting work, and said it “recognizes that this shutdown of well workover operations had a significant financial impact to Hilcorp.”
And the commission said it found “some merit in Hilcorp’s claim that AOGCC has issued multiple penalties for a single act,” with some penalties overlapping, but said it “does not agree the entire incident comprises a single act and finds that Hilcorp has violated three distinct regulations in the conduct of workover operations at MPU J-08A.”
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