AOGCC schedules enforcement hearing

The case involves alleged safety valve system violations at Cook Inlet Energy’s Sword No. 1 oil well; hearing set for Aug. 4

Wesley Loy

For Petroleum News

The Alaska Oil and Gas Conservation Commission has scheduled a public hearing on an enforcement action involving a well on the west side of Cook Inlet.

The hearing comes at the request of Cook Inlet Energy LLC, which operates the Sword No. 1 oil well.

The AOGCC, which regulates drilling, on May 1 issued a decision and order imposing a $446,000 civil penalty against the company for safety valve system (SVS) violations.

David Hall, chief executive officer for Cook Inlet Energy, on May 11 requested a hearing on the case.

The AOGCC has scheduled the hearing for 9 a.m. Aug. 4 at the commission’s offices at 333 W. 7th Ave., Anchorage.

Anchorage-based Cook Inlet Energy is a subsidiary of Tennessee-based Miller Energy Resources Inc.

The directional, extended-reach Sword No. 1 well is located near the company’s West McArthur River oil field. The well began production on Nov. 17, 2013, according to the commission’s order.

The order says “multiple violations” occurred between production startup and March 7, 2014.

“Every oil well is required to be equipped and maintained with a functional SVS,” the order says. “The SVS must be maintained in good operating condition at all times. There are also established specific requirements for testing to verify the SVS integrity.”

A Dec. 11, 2013, inspection revealed the well had no functional SVS, the order says.

“Specifically, the surface safety valve was defeated and the subsurface safety valve, though installed, was not operational,” the order says.

Further, records show no performance test of the SVS had been done within five days of production startup as required, the order says.

Records indicate the SVS was defeated for 42 days between startup and Jan. 5, 2014.

“The Sword No. 1 was producing for that entire period,” the order says. “CIE has offered no evidence to the contrary.”

Cook Inlet Energy argued the Sword No. 1 well was an “unconventional completion” requiring an alternative SVS, the order says.

The order quotes the company as saying:

“Careful considerations were taken in the planning and design for the initial production from Sword No. 1 to ensure a safe and successful operation. Given the nature of the unconventional way of producing Sword No. 1 coupled with the fact that safety valve systems are geared toward more conventional completions, CIE implemented several comparable safety systems in addition to the SVS. These comparable safety systems are equally effective and add additional layers of protection to prevent an uncontrolled release of hydrocarbons to the surface.”

The order says Cook Inlet Energy acknowledged that the subsurface safety valve failed a performance test on Feb. 16, 2014, and that steps were not taken to shut in the well within 48 hours as required, the order says.

The commission said it considered mitigating circumstances in reducing the penalty from the $806,000 originally proposed to $446,000.

But the commission also noted Cook Inlet Energy’s “history of noncompliance.” An attachment to the order lists seven other cases such as unauthorized flaring, unauthorized production, and unapproved work.

“Even after commencement of this enforcement action, CIE continues to demonstrate that regulatory compliance remains a challenge,” the order says.