This week, Alaska oil and gas regulators imposed an unusually large fine on Hilcorp Alaska for violating an approved drilling process, saying the company continues to engage in a pattern of misconduct that has led the agency to issue more than 60 legal actions against him.
The Alaska Oil and Gas Conservation Commission issued the civil penalty of $267,500 after the company changed a procedure in 2021 at the Milne Point oil field on Alaska’s North Slope, contrary to what had been authorized in a permit. drilling. according to the order of the three pages. Hilcorp did not notify the commission of the change, the order says.
The decision, on Wednesday, describes Hilcorp’s “record of regulatory non-compliance” as a reason for the size of the penalty. It goes back to previous commission decisions over several years that have pointed to the company’s repeated violations. Decisions have sometimes included a list of enforcement actions against Hilcorp, though not this time.
Luke Miller, a Hilcorp spokesman, said in a statement that the company values its relationship with the commission and takes the order seriously.
“Hilcorp annually submits hundreds of drilling permits and miscellaneous and performs thousands of operations, always making it our top priority to operate in a safe and environmentally responsible manner,” said Miller. “Upon learning of this specific incident, Hilcorp immediately launched an investigation and took steps to improve our internal and oversight systems, including reviewing procedures, dedicating additional resources and strengthening training programs. An important part of Hilcorp’s culture is to improve every day, and we look forward to continuing to work closely with AOGCC to ensure responsible, safe and compliant operations.”
The commission’s decision said Hilcorp’s plan to prevent a recurrence of the problem is “insufficient.”
The fine is the second largest issued by the commission in the past decade, surpassed only by a $440,000 fine against oil company Eni in 2021 for failing to test the mechanical integrity associated with tubing at several injection wells, according to the filing in agency line.
Other fines against Hilcorp included a $25,000 fine when a worker died after being struck by a mishandled section of pipe on an oil rig in the Milne Point field in 2018, an incident that also led to a fine against a drilling contractor. of Hilcorp. Additionally, the federal Environmental Protection Agency in March 2022 fined Hilcorp $180,000 for methane leaks in Alaska and reporting violations.
Hilcorp is credited with helping stabilize production at aging oil fields, including at Prudhoe Bay, where it replaced BP as operator in 2020 in a $5.6 billion deal. But critics have said the company is prone to accidents, such as the Cook Inlet gas leaks in recent years. Hilcorp has rewarded employees with large bonuses for boosting oil production and company value.
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The state oil and gas commission said in its decision this week that Hilcorp has made frequent changes to operations without agency approval.
In this latest violation, the company improperly used a jet pump, instead of an electric submersible pump, after drilling a well at Milne Point in early 2021. The pumps are used in so-called “artificial lift” operations to increase oil production. The order notes that neither people nor the environment were harmed by the change.
Mark Myers, former director of the Alaska Division of Oil and Gas, said it appears the state agency is “sending a very strong message” to Hilcorp to stop violating its approved procedures.
“There are consequences even if you haven’t been in an accident with a change in operations,” Myers said. “They need to notify the commission of an operational change from an approved well design. The commission is saying, ‘this has happened too many times and enough is enough.’ ”
Lois Epstein, a longtime oil and gas monitor and owner of consultancy LNE Engineering and Policy, said Hilcorp’s pattern of not following allowed approvals could lead to a serious security problem.
“This could happen on something that is significant, where there is a clear security concern,” he said.
According to the decision, Hilcorp demonstrated a “lack of good faith in its attempts to comply with the approved plan” and made no attempt to address the discrepancy with the commission, additional factors that influenced the size of the penalty.
The agency’s decision says Hilcorp’s continued violations raise questions about its efforts to prevent future violations.
“Repeated violations, such as failure to notify changes to the Permit to Drill… cast doubt on the seriousness and effectiveness of Hilcorp’s efforts to improve its regulatory compliance,” the decision reads.
A watchdog group questioned whether the sanction would change the way the oil company operates.
“Today’s AOGCC action is an important first step,” said Robin O’Donoghue, spokesman for the Alaska Public Interest Research Group. “Still, we can expect Hilcorp to continue this pattern of environmental crime and negligence as long as the company is allowed to operate in the dark.”
The commission notified Hilcorp of the proposed fine on May 4. The company did not dispute the findings or request an informal review or public hearing, the decision says. Hilcorp sent a check for the fine in mid-May.
Hilcorp also proposed corrective actions, as needed, including reviewing the conditions that led to the incident with Hilcorp personnel, the agency says.
But the company’s plan to fix the problem is inadequate and likely won’t prevent it from happening again, the decision says. In response, the agency asked Hilcorp to provide more details on how it will prevent future violations.
“Hilcorp’s steps to prevent recurrence are lacking in detail and appear to be strictly focused on operational and regulatory personnel at Hilcorp Alaska,” the decision reads.
They “ignore the possibility of similar events occurring at Hilcorp North Slope LLC operations, fail to identify deficiencies in management oversight to ensure compliance with permit details (for example, type of artificial lift completion), and they do not provide a corporate structure to prevent a similar repeat violation,” the decision says.
“These omissions make it unlikely that a recurrence of this type of violation will be prevented,” he says.
The decision was signed by all three commissioners: Jessie Chmielowski, Gregory Wilson, and Brett Huber.
The agency “takes its compliance responsibilities seriously” and “cannot comment beyond what is contained in the order,” Huber said in an emailed statement.