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AOGCC rules against CIE on Badami flaring Cook Inlet Energy has been disputing findings on flaring of produced gas in 2024-25; original order in October, final in January
Kristen Nelson Petroleum News
Inlet Energy, operator of leaseholder Savant Alaska's North Slope Badami unit, has been disputing Alaska Oil and Gas Conservation Commission findings that its release of natural gas from October 2024 through March 2025 constituted waste.
In a Jan. 23 final order the commission found CIE had wasted natural gas and imposed a civil fine.
CIE was unable to recover produced gas because the vapor recovery unit at Badami was non-functioning from October 2024 to March 2025.
After the commission issued a notice of proposed enforcement action on May 27, 2025, it issued an order Aug. 14 imposing a civil fine of $357,905 for the flaring but, as reported in Petroleum News, allowed the company to write-off upgrading or replacement of the non-functioning vapor recovery unit if those expenses were documented within a one-year period following issuance of its final order.
CIE appealed the order. After a public hearing in October and receipt of additional information from CIE, AOGCC issued its final order Jan. 23. CIE has 20 days to file for reconsideration and if that is denied, the final order may be appealed in Alaska Superior Court.
Reduced fine In addition to discussing information received from CIE, AOGCC's final order imposed a civil penalty of $313,166, again providing CIE the opportunity to reduce the penalty by replacing or upgrading the vapor recovery unit and eductor system over a one-year period following the issuance of the order and requiring submission of supporting documentation for parts and labor for the work.
The fine was reduced from the original order because of a difference in volumes of gas flared. AOGCC said CIE had not accurately reported volumes as it had included purchased gas.
AOGCC said CIE included gas purchased from Endicott, resulting in "an inflated initial waste determination volume."
Issues cited by CIE AOGCC said CIE characterized the flaring event as "emergency- and safety-driven and hence not subject to waste cauterization" under AOGCC regulations, citing vapor recovery unit failure, power turbine failure, arctic conditions, Nutaaq Pipeline flow assurance, personnel safety and facility integrity.
The commission said it agreed "that the primary cause of the flaring was the failure of the VRU unit, for which CIE had no backup unit to provide redundancy."
As for the arctic conditions, those "are prevalent across the Alaska North Slope and are thus a reality faced by all North Slope operators for much of each year. Good oilfield practices are expected to be followed throughout the year by all operators, regardless of weather challenges," AOGCC said.
There was also a 23-day power turbine failure at Badami during which all wells were shut-in and there was no flaring. "As such, any emergency situation caused by the power turbine outage does not justify Badami's flaring associated with the extended VRU failure" and the order addresses only flared volumes "related solely to the VRU failure," the commission said.
During the 23-day power turbine outage, diesel generators at the field powered the Point Thomson (Nutaaq) pipeline systems at Badami. Point Thomson operator Hilcorp Alaska told the commission in an email that Point Thomson production via the Nutaaq pipeline does not rely on Badami oil production, but only on power for pipeline systems.
The commission said it agreed on the importance of personnel safety and facility integrity but said "those considerations cannot be used as blanket justifications for a facility to operate at full production and remain in continuous flaring status for nearly half a year."
The commission said "flaring did not occur during the power turbine outage and therefore had no direct relation to personnel safety concerns or the prevention of life-threatening conditions. Rather, the evidence demonstrates that preserving existing oil production was a primary driver for the flaring, as CIE elected to maintain full production throughout the flaring period."
AOGCC said "CIE provided no evidence demonstrating that it took actions in accordance with good oil field engineering practices and conservation purposes to minimize the volume of gas released, burned, or permitted to escape into the air."
Other operators CIE told the commission it was being treated differently than other Slope operators, citing the commission's approval of flaring by Great Bear Pantheon at its Alkaid 2 well.
The commission said applicable statutes and regulations only allow pre-authorization of flaring or venting of gas "for the purpose of testing a well before regular production."
CIE described Badami B1-33A as an exploration well, but the commission said B1-33A had been in regular production through the Badami production facility for some 134 days prior to the power turbine outage, precluding pre-authorization of flaring or venting from the well.
The commission said it approved flaring at the Alkaid 2 well because that was required to allow Great Bear Pantheon to determine whether it had made an economic discovery and to design production facilities for that discovery. Alkaid 2 relied on temporary production facilities which lacked gas injection capability with produced liquids trucked to another field for final processing.
"CIE also appears to confuse the usage of the word 'economics'," AOGCC said. "In the case of Great Bear Pantheon, the flaring was needed to help determine project economics. In the case of CIE, the flaring was used to contribute to its bottom-line economics."
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