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Home My WebLink AboutO 199Other Order 199 Docket Number: OTH-23-015 1. April 26, 2023 Request for information to Hilcorp 2. May 1, 2023 Hilcorp response to request for information 3. May 4, 2023 Notice of proposed enforcement action to Hilcorp 4. May 17, 2023 Hilcorp check for proposed enforcement action 5. May 19, 2023 Hilcorp response to proposed enforcement action 6. June 1, 2023 Hilcorp non-compliance history 7. June 12, 2023 Hilcorp response to enforcement order STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage Alaska 99501 Re: Failure to Notify of Changes to Approved Permit, Milne Point Unit I-27 ) ) ) ) ) Other Order 199 Docket Number: OTH-23-015 May 31, 2023 DECISION AND ORDER On May 4, 2023, the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Proposed Enforcement Action (Notice) to Hilcorp Alaska, LLC (Hilcorp) for failing to notify of changes to the type of well completion in accordance with approved Permit to Drill (PTD) 2210130. The Notice proposed a specific corrective action and a $267,500 civil penalty under AS 31.05.150(a). Summary of Proposed Enforcement Action: The Notice proposed a civil penalty for changing the type of artificial lift approved by AOGCC in the PTD. The Notice also proposed that Hilcorp submit a detailed written explanation that describes how recurrence of this violation will be prevented in future operations. Violation - Failure to Comply with PTD Approval Conditions: On February 8, 2021, the AOGCC conditionally approved PTD 2210130, authorizing Hilcorp to drill well Milne Point Unit (MPU) I-27. The well was spudded on April 14, 2021. Drilling and Completion operations permitted under this PTD ended on April 29, 2021. The approved PTD included an electrical submersible pump artificial lift completion. AOGCC investigation indicates Hilcorp installed a jet pump artificial lift completion in MPU I- 27 without AOGCC approval, in violation of 20 AAC 25.507(“Change of approved program”). Mitigating Circumstances: The factors in AS 31.05.150(g) were considered in determining the appropriate penalty. Hilcorp’s lack of good faith in its attempts to comply with the approved PTD, awareness that the well completion was different than required without making any attempt to address the discrepancy with AOGCC, the potential seriousness of the violation, benefits derived from the violation, track record of regulatory non-compliance and need to deter similar behavior in future operations are the factors which most heavily influenced AOGCC’s decision and the penalty being assessed. AOGCC has issued more than 60 enforcement actions against Hilcorp which include provisions for Hilcorp to identify corrective actions that, when implemented, will prevent recurrence of the violation or incident. Of those enforcement actions, several were issued for making changes to approved permits without prior approval. Repeat violations such as failing to notify of changes to the Permit-to-Drill regarding the approved type of artificial lift completion at MPU I-27 call into Other Order 199 May 31, 2023 Page 2 of 3 question the seriousness and effectiveness of Hilcorp’s efforts to improve its regulatory compliance. Mitigating circumstances include no injury to the public or the environment. Findings and Conclusions: Hilcorp neither requested informal review nor a public hearing regarding the notice of proposed enforcement. By letter dated May 17, 2023, Hilcorp sent a check in the amount of the proposed fine. In a letter dated May 19, 2023, Hilcorp offered four actions to prevent recurrence: - Review the Notice and the conditions which led to the incident with Hilcorp Alaska Operations Engineers, Drilling Engineers, and the Regulatory Technicians. - Update training for sundry requirements including the sundry change form and knowledge quiz questions. Once completed this will be reissued to all Hilcorp Alaska Operations and Drilling Engineers - Issue an internal bulletin regarding the violation, the conditions which led to the incident, and the requirements for PTD/Sundry Change Form. Distribution will be to drilling and interventions foreman and wellsite supervisors. - Update the PTD/Sundry Change Form to address approval levels and notifications. Distribution will be to Hilcorp Alaska Operations Engineers, Drilling Engineers, and the Regulatory Technicians. Hilcorp’s steps for preventing recurrence lack detail and appear to be narrowly focused to operations and regulatory personnel in Hilcorp Alaska and ignore the potential for similar events to occur at Hilcorp North Slope LLC operations, fail to identify management oversight shortcoming in assuring compliance with permit specifics (e.g., type of artificial lift completion), and fail to provide a corporate structure to avoid a similar repeat violation. These omissions make it unlikely to prevent recurrence of this type of violation. The AOGCC finds that Hilcorp failed to comply with 20 AAC 25.507. Hilcorp has not disputed the findings in the Notice of Proposed Enforcement and has paid the civil penalty proposed by AOGCC. Hilcorp has not provided any information that would warrant changing the proposed penalty amount. Now Therefore It Is Ordered That: Hilcorp is assessed a civil penalty in the amount of $267,500 (which has already been paid) for failing to comply with the approval conditions in PTD 2210130. The corrective actions identified by Hilcorp in its May 19, 2023, letter are insufficient, therefore within 10 days of the date of AOGCC’s final decision, Hilcorp shall provide additional information that demonstrates how it intends to prevent recurrence of this violation. The written explanation is sought pursuant to 20 AAC 25.300. As an Operator involved in an enforcement action, Hilcorp is required to preserve documents concerning the above action until after resolution of the proceeding. Other Order 199 May 31, 2023 Page 3 of 3 Done at Anchorage, Alaska and Dated May 31, 2023. Brett W. Huber, Sr. Jessie L. Chmielowski Gregory C. Wilson Chair, Commissioner Commissioner Commissioner cc: AOGCC Inspectors Phoebe Brooks (AOGCC) Mel Rixse (AOGCC) RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10-days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. Gregory Wilson Digitally signed by Gregory Wilson Date: 2023.05.31 10:23:15 -08'00' Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2023.05.31 10:32:24 -08'00' Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2023.06.01 08:10:56 -08'00' From:Carlisle, Samantha J (OGC) To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] Other Order 199 (Hilcorp) Date:Thursday, June 1, 2023 11:03:45 AM Attachments:other 199.pdf Failure to Notify of Changes to Approved Permit, Milne Point Unit I-27 Samantha Carlisle Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 __________________________________ List Name: AOGCC_Public_Notices@list.state.ak.us You subscribed as: samantha.carlisle@alaska.gov Unsubscribe at: https://list.state.ak.us/mailman/options/aogcc_public_notices/samantha.carlisle%40alaska.gov Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711 7 Hilcorp Alaska, LLC Taylor Wellman 11 Wells Manager — Milne Point Hllcom Al.ke, LLC Hilcorp Alaska, LLC 3800 Centerpoint Dr., Suite 1400 Anchorage, Alaska 99503 June 12, 2023 Chairman Brett W. Huber, Sr. Alaska Oil and Gas Conservation Commission 333 West 71h Avenue Anchorage, Alaska 99501 VIA EMAIL AND CERTIFIED MAIL Subject: Other Order 199 Docket Number: OTH-23-015 Failure to Notify of Changes to Approved Permit Milne Pt Unit 1-27 (PTD 2210130) Dear Chairman Huber, On June 2, 2023, Hilcorp Alaska, LLC received the above referenced Other Order 199 (the "Order"). Hilcorp recognizes both the seriousness of this violation and AOGCC's concern this type of violation is not repeated. In addition to our full cooperation with the AOGCC on this matter, we have undertaken changes in our process and within our organization to prevent recurrence of these violations, including the following measures: All Well Completion or Recompletion Report and Logs (10-407) Form submissions shall be approved internally by both the applicable Drilling Manager and the Operations/Wells Manager for operations at Prudhoe Bay Unit, Milne Point Unit, Northstar Unit, Duck Island Unit, Liberty Unit and Point Thomson Unit. This provides an additional layer of approval compared with the previous approach (submissions were previously only approved by the applicable Drilling Manager). This additional approval will increase management oversight and collaboration between drilling and completion teams and help ensure Hilcorp complies with future PTD approval conditions. In between the April 2021 incident referenced in the Order and prior to discovery of the incident, Hilcorp made several changes to the technical staff structure for the Milne Point Unit to ensure future safe, compliant, and focused operations, which includes the following: 0 3 additional dedicated engineers 0 1 additional Wells Manager Since the incident in 2021, the asset team (that included Milne Point Unit, Duck Island Unit, Liberty Unit and Northstar Unit) has been further split within Hilcorp to create a stand-alone Milne Point Unit team. This has increased the focus of personnel dedicated to Milne Operations. Conducting annual reviews of staffing levels with a prospective view of planned operations and activity. To the extent certain teams require additional staffing, Hilcorp management is committed to sourcing and utilizing qualified individuals to help ensure compliance. Hilcorp would like to further emphasize that it remains committed to the safe and productive development of resources in the State of Alaska. Hilcorp notes that the violation referenced in the Order is Hilcorp's only violation at Milne Point Unit since 2020 and did not result in any injury to the public, nor did it provide any material benefits to Hilcorp. That said, Hilcorp has taken several measures to address this specific incident and ensure similar incidents are not repeated. It is also worth noting that from 2021 through 2023, Hilcorp has drilled and completed more wells than any other operator on the North Slope of Alaska. This increased activity is further illustrated by over 120 sundry applications for well work in 2020, with a projected increase of 300 applications in 2023. Since 2020, Hilcorp has received approval for and executed approximately 105 Permit to Drills without any similar violations across the North Slope fields. However, Hilcorp recognizes that as it continues to grow and develop resources in the State of Alaska, it bears a responsibility to the State and its people, and that safety and regulatory compliance must remain top priorities for the company. These priorities align with one of Hilcorp's Core Values of "Getting Better Every Day", and its organizational emphasis on personal accountability and stewardship. Such emphasis includes increased operational awareness, prompt recognition of identified deficiencies, immediate response and action and coordination with all appropriate regulatory parties. Hilcorp is committed to transparent dialogue with the AOGCC. We look forward to discussing this response with you at an in -person meeting. We take great pride in our role in the development of Alaska's natural resources and remain committed to working with the AOGCC and other State agencies in such endeavors. Sincerely, Taylor Wellman Wells Manager— Milne Point Hilcorp Alaska, LLC (907)777-8449 Cc: Mel Rixse 6 Page 1 of 6 Non-Compliance History Hilcorp Alaska, LLC Updated 6/1/2023 Date Non-Compliance Location AOGCC Action 1 Comments April 2012 Missing SVS tests; Failure to notify AOGCC for test witness Various locations; Westside CI No action taken; some of testing was Chevron responsibility Numerous efforts by AOGCC to obtain SVS test results for IRU, PCU, LRU, Stump Lake; some missing SVS tests between 5/2011 and 2/2012; some failure to notify AOGCC for opportunity to witness tests 5/8/2012 Missing Kill Line Valve Swanson River 21-22 (Aurora Rig #1) NOV 4/18/12 BOPE test; inspector observed missing kill line valve at kill line inlet to stack (2 required); AOGCC closed out 5/25/12 9/17/2012 Choke Manifold Valves cheated closed during BOPE test Swanson River 21-27 (Aurora Rig #1) Corrective actions Rig crew performing choke manifold test greased and had to cheat choke manifold valves closed to pass pressure test 10/2/2012 Notice of Meter Calibrations Deep Creek Unit Happy Valley Corrective actions AOGCC has not received notice of meter calibration for Happy Valley custody transfer meter for at least as long as Hilcorp has been responsible; schedule provided 10/9/12 10/18/2012 Incorrect BOPE Test Pressure Soldotna Ck 44-33 (Doyon Rig #1) Enforcement – Other Order 80 When finally tested BOPE after use (10/18/12), tested to wrong pressure (4000psi instead of 5000psi) 10/23/2012 Failure to notify of changes to approved permit Soldotna Ck 44-33 (Doyon Rig #1) Enforcement – Other Order 80 (4/10/2013) Hilcorp failed to follow well drilling procedures approved in PTD by AOGCC; failed to notify AOGCC of changes to well plan; failed to maintain well in overbalanced condition; lack mgt of change Well control; Failure to test BOPE after use Hilcorp failed to test BOPE used in well control operations prior to first wellbore entry following use 10/26/2012 Failure to Test BOPE within 7 days Granite Pt 32-13RD (Crane workover) Denied request for delaying BOPE test Test due 10/26/12, started running completion 1500hrs on 10/26 without making any attempt to get test extension (working daylight hours only); landed pipe high, had to trip pipe; request extension 10/27/12 1 NOV – Notice of Violation; no financial penalty; corrective actions only Page 2 of 6 Date Non-Compliance Location AOGCC Action 1 Comments 10/31/2012 Improper gauge on IA Trading Bay Unit D-45 No action Hilcorp self-reported that gauge was pegged out; 2000psi alarm set, 1000psi gauge; well SI by Hilcorp 11/29/2012 Missing well control equipment Happy Valley B-16 (Aurora Rig #1) NOV Missing top drive valve(s) on 10/10/12 and again 11/18/12; Hilcorp response rec’d 12/11/12 11/29/2012 Incorrect BOPE test pressure Granite Point #50 (Schlumberger CT #2) NOV Sundry 312-439 required 4500psi BOPE test; Hilcorp tested to 3500psi; Hilcorp response 12/12/12; closed out 12/18/12 12/6/2012 Conduct of operations Trading Bay Unit G-32 (Williams Rig #404) NOV Violation found 11/7/12 during rig inspection/BOPE test witness – hazardous conditions; wellbore fluids on deck; equipment placement; lack of winterization; Hilcorp response 12/21/12; closed out 6/26/15 12/16/2012 Winterization; Conduct of Operations Trading Bay Unit G-32 (Williams Rig #404) Rig ops shut down pending resolution of winterization issues, and witnessed BOPE test Inspector unable to test BOPE 12/15/12 due to fluids covering stack well cellar (similar to issues noted in 12/6/12 NOV); returned 12/16/12 to test BOPE – unable to test BOPE (frozen choke manifold, top drive valves, floor safety valves, choke and kill lines along with other components not in heated enclosure) Rig operations allowed to restart 12/31/12 12/16/2012 Commence production w/o approved LACT meter Nikolaevsk Unit - Red Pad Corrective actions 12/18/12 – Hilcorp contacts AOGCC with notice of SVS testing; AOGCC determined by questioning status that well commenced production 12/16/12 without LACT meter approval; application for LACT meter received 1/9/12 4/11/2013 Defeated SVS Sterling Unit 43-09X NOV SVS found defeated 3/15/13 during AOGCC inspection; well was SI without testing; Hilcorp response 4/25/13; closed out 9/14/14 9/30/2013 Defeated SVS Missing Annulus Gauges Swanson River Field KGSF #1 SCU 12A-04; SCU 14-34; SCU 31-08 NOV KGSF #1 – SVS found defeated during 9/2/13 AOGCC inspection; 3 SCU wells - missing outer annulus pressure gauges; 8/31/13 inspection; Hilcorp response 9/10/13; closed out 11/15/13 1/14/2014 Defeated SVS Missing Annulus Gauges Swanson River Field SCU 12A-04; SCU 24A-09; SCU 41A-08 NOV SVS on 3 rod pump wells found defeated during 12/9/13 AOGCC inspection; SCU 24A-09 without the required pressure gauge to monitor outer annulus; Hilcorp response 1/30/14; closed out 10/1/14 Page 3 of 6 Date Non-Compliance Location AOGCC Action 1 Comments 4/21/2014 Defeated SVS Ninilchik Unit FC-5; Ninilchik Unit SD-3 Corrective actions SSSV defeated on FC-5 4/15/14 – passed retest 4/16/14; LPS blocked on SD-3 4/16/14 – passed retest 4/16/14; Hilcorp reported on 4/21/14 8/29/2014 Failure to Test BOPE Trading Bay Unit G-11 (Moncla Rig #301) NOV Rig exceeded allowed 7days between BOPE tests without AOGCC approval; Hilcorp response 9/9/14; closed out 9/10/14 December 2014 Workover Safety Concerns Various CI sites Mandatory Meeting List of concerns provided to Hilcorp addressing suitability of equipment and procedures; unsafe working conditions associated with rig workovers; onshore and offshore Cook Inlet 2/4/2015 Defeated SVS Northstar NS-15 NOV SSV found defeated during 1/23/15 AOGCC test witness; Hilcorp response 2/18/15; closed out 3/2/15 4/22/2015 Failure to Obtain Approval for Continued Production Kenai Gas Field KDU 1 NOV Operating without required competent tubing and packer; no AOGCC approval as required by 20 AAC 25.200; well SI; Hilcorp response 10/16/15; closed out 12/14/15 9/4/2015 Rig Operations with Failed Gas Detection System Milne Point Unit F-96 (Hilcorp Rig ASR1) Enforcement – Other Order 111 (9/30/2016) Notice of Proposed Enforcement sent 11/25/15; informal review 2/18/16; Final Decision 9/30/16 9/25/2015 Failure to notify of changes to permit Milne Point Unit J-08A (Hilcorp Rig ASR1) Enforcement – Other Order 116 (3/3/2017) Notice of Proposed Enforcement sent 11/12/15; informal review 2/18/16; Final Decision to include MPU J-01A and MPU J-09A proposed actions (same violations); Final Decision 3/3/17 10/1/2015 Workover Operations Various CI and North Slope sites Operations shut down; corrective actions AOGCC Commissioners ordered the suspension of all Hilcorp workover rig operations until they can conduct such operations using good oilfield practices and can stick to the steps and procedures in approved Sundry applications; 10/26/15 mtg to discuss conditions for restart of workover rig operations; email approval to restart sent 10/29/15 11/12/2015 Failure to test BOPE after use Milne Point Unit I-03 (Nordic Rig #3) Enforcement – Other Order 109 (5/3/2016) Notice of Proposed Enforcement sent11/16/15; informal review 2/18/16; Final Decision 5/3/16 11/12/2015 Failure to notify of changes to permit Milne Point Unit J-01A (Hilcorp Rig ASR1) Enforcement – Other Order 117 (3/21/2017) Notice of Proposed Enforcement sent 11/16/15; informal review 2/18/16; combined with MPU J-08A enforcement; Final Decision 3/1/17 Page 4 of 6 Date Non-Compliance Location AOGCC Action 1 Comments 11/12/2015 Failure to notify of changes to permit Milne Point Unit J-09A (Nordic Rig #3) Enforcement – Other Order 118 (3/21/2017) Notice of Proposed Enforcement sent 11/16/15; informal review 2/18/16; combined with MPU J-08A enforcement; Final Decision 3/21/17 11/24/2015 Failure to protect SVS Beaver Ck Unit 24; Beaver Ck Unit 25 NOV Frozen SVS; no wellhouse/insulation protecting the SVS; corrective actions addressed in Hilcorp letter 12/14/15; closed out 4/12/16 12/16/2015 Failure to submit required reports Ninilchik Unit Bartolowits Pad Enforcement – Other Order 113 (10/20/2016) Notice of Proposed Enforcement sent 12/16/15; informal review 1/21/16; additional violation identified; Final Decision 10/20/16 12/15/2015 Missing OA valves Nikolaevsk Unit Red #1 Deep Ck Unit Happy Valley B-14, B-15 NOV Sent 12/21/15; closed out 7/27/17 12/29/2015 Failure to provide Well Log Data Swanson River Field SCU 44-05 Notice of Proposed Enforcement Notice sent to Operator 12/30/15; Hilcorp response 1/13/16; informal review 4/5/16; Final Decision postponed 5/16/2016 Missed SVS Test Endicott 3-37 Corrective actions Well placed on production 5/16/16; test due 5/21/16; notified AOGCC 6/29/16; tested 6/29/16 (no witness); tested 7/1/16 (AOGCC witness) 8/26/2016 Defeated SVS Failure to install SSSV Endicott 3-09A Endicott 2-56A NOV AOGCC Inspector found control line blocked at SVS panel; 9/19/16 mtg revealed 2nd SVS violation (failure to install SSSV in Endicott 2-56A; Hilcorp response 10/3/16; closed out 2/27/17 5/15/2017 Misinjection Kenai Unit 12-17 NOV Unauthorized injection of pigging wastes; sent 12/19/17; closed out 3/28/18 11/1/2017 Defeated SVS Swanson River Unit 242- 16 NOV Sent 11/21/17; closed out 12/11/17 11/29/2017 Failure to Submit BOPE Test Report Granite Pt State 11-24RD (Kuukpik Rig # 5) NOV Test report required within 5 days (due 10/24/17); not submitted until NOV received by Hilcorp; sent 11/29/17; closed out 12/13/17 3/16/2018 Failure to Test BOPE Trading Bay Unit K- 13RD2 (Hilcorp Rig # 404) NOV VBR not tested on smallest and largest OD pipe in work string; sent 3/19/18; closed out 4/9/18 3/30/2018 Failure to Comply with Information Request Hilcorp-operated wells NOV Request for abandonment costs; sent 3/30/18; verbally closed out after receiving requested information Page 5 of 6 Date Non-Compliance Location AOGCC Action 1 Comments 10/25/2018 Failure to Submit BOPE Test Report Endicott 1-29 (Hilcorp Rig ASR-1) NOV Test report required within 5 days (due 10/24/18); not submitted until AOGCC inquiry 10/26/18; sent 10/31/18; closed out 11/20/18 9/20/2018 Failure to Submit Well Information Trading Bay Unit M-22 NOV Sent 11/1/18; closed out 11/8/18 4/8/2019 Failure to Submit Performance Report Granite Point Unit; Trading Bay Unit Enforcement – Other Order 153 (6/12/2019) Violation of meter approval letter Conditions of Approval; Notice of Proposed Enforcement issued 7/7/19; Final Decision 6/12/19 5/1/2019 Failure to Submit BOPE Test Report Trading Bay Unit G-21RD (Hilcorp Rig 404) Corrective actions Test report required within 5 days (due 5/6/19); not submitted until AOGCC inquiry 5/7/19 10/16/2019 Defeated SVS Milne Point Unit J-26 NOV Sent 10/16/19; closed out 11/5/19 2/7/2020 Failure to Follow Good Oilfield Practices During P&A Wolf Lake #2 NOV Wellbore fluids released during abandonment operations; AOGCC notified 2/20/2020 by USFWS and ADEC; Sent 3/10/2020; closeout pending implementation of corrective actions 3/2/2020 Failure to Submit Performance Report Beaver Creek Unit Enforcement – Other Order 170 (5/14/2020) Violation of meter approval letter Conditions of Approval; Notice of Proposed Enforcement issued 3/2/2020; Final Decision 5/14/2020 4/21/2020 Failure to Get Approval for SVS Changes and Alternate Well Testing Duck Island Unit 2-48 NOV Sent 4/21/2020; closed out 5/27/2020 12/8/2020 Diverter Test Failure Hilcorp Rig 169; Soldotna Creek Unit 42-05Z NOV Sent 12/18/2020; inspector witnessed a passing diverter test; closed out 7/14/2021. 12/20/2020 Diverter Test Failure Doyon 14; Milne Point Unit J-29 NOV Sent 12/28/2020; passing inspection of installation on new well 1/12/2021; closed out 1/15/2021 12/15/2020 Failure to Install Subsurface Safety Valve Ninilchik Unit Paxton-10 NOV Sent 2/23/2021; Paxton-10 commenced production 12/1/2020; SSSV required by 12/15/2020; violation discovered 2/5/2021; close out pending successful installation and testing of SSSV in Paxton-10. 10/4/2021 Defeated SVS Prudhoe Bay Unit H-24A NOV Sent 10/04/21; see Enforcement – Other Order 188. 10/26/21 Defeated SVS; failure to respond Prudhoe Bay Unit H-24A Enforcement – Other Order 188 (11/30/21) Notice sent to Operator 10/26/21; Hilcorp response 11/8/21; Final Decision 11/30/21 Page 6 of 6 Date Non-Compliance Location AOGCC Action 1 Comments 11/1/2021 Failure to provide evidence of repairs nor the results of a passing retest Prudhoe Bay Unit S-15 NOV Sent 11/1/2021; rig shut down 11/12/2021 for winter; accumulator and other upgrades; Hilcorp authorized to use Thunderbird rig beginning April 15, 2022 11/12/2021 Failure to comply with permit conditions Swanson River Unit 241- 33B Enforcement – Other Order 189 Notice sent to Operator 11/12/21; Hilcorp response 11/24/2021; Final Decision 12/29/2021 11/16/2021 Failure to function pressure test N Cook Inlet Unit B-02 Enforcement – Other Order 190 Notice sent to Operator 11/16/21; Hilcorp response 11/29/2021; Final Decision 12/29/2021 12/3/2021 Conduct of operations Milne Point Unit S-44 Suspend certain service coil operations Email sent 12/3/21 suspending approved well work sundries involving the use of service coil tubing unit and crane to pick up extended length perforating bottom hole assemblies following an incident Hilcorp response 12/3/21 acknowledging AOGCC decision 12/22/2021 Emergency Order All Hilcorp Service Coil Operations in Alaska Cease Service Coil Operations Information request due 12/29/2021 Service Coil Tubing operations approved to restart 1/7/2022 3/7/2022 Conduct of operations - Spill Trading Bay Unit M-35 NOV Sent 6/8/2022; Hilcorp response 9/13/2022; Closeout 10/6/2022 4/12/2022 Defeated SVS Prudhoe Bay Unit V-234 NOV Identified during inspection; corrected immediately Hilcorp response 6/2/2022; Closeout 6/22/2022 5/23/2022 Late Production, Injection, Gas Disposition Reporting Duck Island Unit; Milne Point Unit, Northstar Unit, West Fork Field NOV Sent 6/2/2022 7/29/2022 Late Suspended Well Inspections Milne Point Unit S-24, S- 32, S-35 NOV Sent 8/17/2022 5/4/2023 Failure to Notify of Changes to Approved Permit Milne Point Unit I-27 Enforcement – Other Order 199 Notice to Hilcorp 5/4/2023; Hilcorp paid penalty 5/17/2023 and responded with corrective actions 5/19/2-23; Final Decision 5/31/2023 5 4 3 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov May 04, 2023 CERTIFIED MAIL – RETURN RECEIPT REQUESTED 7018 0680 0002 2052 9488 Luke Saugier Senior Vice President Hilcorp Alaska LLC P.O. Box 244027 Anchorage, AK 99524-4027 Re: Docket Number: OTH-23-015 Failure to Notify of Changes to Approved Permit Milne Point Unit I-27 (PTD 2210130) Dear Mr. Saugier: Pursuant to 20 AAC 25.535, the Alaska Oil and Gas Conservation Commission (AOGCC) hereby notifies Hilcorp Alaska LLC (Hilcorp) of a proposed enforcement action. Nature of the Apparent Violation or Noncompliance (20 AAC 25.535(b)(1)). Hilcorp has violated the provisions of 20 AAC 25.507 (“Change of an approved program”) while performing completion operations at Milne Point Unit (MPU) I-27. Basis for Finding the Violation or Noncompliance (20 AAC 25.535(b)(2)). Development well MPU I-27 was drilled in April 2021. The Permit-to-Drill approved by AOGCC on February 8, 2021, included installation of an electrical submersible pump completion for artificial lift. The well was completed on April 29, 2021. Hilcorp notified AOGCC on March 18, 2023, that MPU I-27 exceeded the maximum allowable casing-casing annulus pressure, referencing the well as a jet pump producer. The casing-casing annulus pressure was equalized with the power fluid pressure (3200 psi) in the tubing-casing annulus. On March 20, 2023, Hilcorp submitted and received approval of an Application for Sundry Well Operations to repair MPU I- 27. Docket No. OTH-23-015 Notice of Proposed Enforcement May 4, 2023 Page 2 of 3 Per 20 AAC 25.507 an operator may not undertake a change to an approved program or activity without AOGCC approval. Paragraph (a) of 20 AAC 25.507 further describes the information that must be submitted to AOGCC. To make a change, the well’s current condition and proposed change must be provided to AOGCC for review and approval. Investigation by AOGCC included a review of well records and contacting Hilcorp for correspondence regarding the artificial lift completion method authorized for MPU I-27. The investigation concluded that Hilcorp failed to obtain approval for installing a jet pump instead of the approved electrical submersible pump artificial lift completion. Proposed Action (20 AAC 25.535(b)(3)). For violating 20 AAC 25.507 the AOGCC intends to impose a civil penalty on Hilcorp under AS 31.05.150(a) in the amount of $267,500 for installing a jet pump completion instead of the electrical submersible pump completion in MPU I-27.1 In addition to the imposed civil penalty, AOGCC intends to require Hilcorp to provide a detailed written explanation that describes how Hilcorp intends to prevent recurrence of this violation. Rights and Liabilities (20 AAC 25.535(b)(4)) Within 15 days after receipt of this notification – unless the AOGCC, in its discretion, grants an extension for good cause shown – Hilcorp may file with the AOGCC a written response that concurs in whole or in part with the proposed action described herein, requests informal review, or requests a hearing under 20 AAC 25.540. If a timely response is not filed, the proposed action will be deemed accepted by default. If informal review is requested, the AOGCC will provide Hilcorp an opportunity to submit documentary material and make a written or oral statement. If Hilcorp disagrees with the AOGCC’s proposed decision or order after that review, it may file a written request for a hearing within 10 days after the proposed decision or order is issued. If such a request is not filed within that 10-day period, the proposed decision or order will become final on the 11th day after it was issued. If such a request is timely filed, the AOGCC will hold its decision in abeyance and schedule a hearing. If Hilcorp does not concur in the proposed action described herein, and the AOGCC finds that Hilcorp violated a provision of AS 31.05, 20 AAC 25, or an AOGCC order, permit or other approval, then the AOGCC may take any action authorized by the applicable law including ordering one or more of the following: (i) corrective action; (ii) suspension or revocation of a permit or other approval; and (iii) imposition of penalties under AS 31.05.150. In taking action after an informal review or hearing, the AOGCC is not limited to ordering the proposed action described herein, as long as Hilcorp received reasonable notice and opportunity to be heard with 1 AS 31.05.150(g) requires AOGCC to consider nine criteria in setting the amount of a civil penalty. The proposed amount is an $80,000 initial penalty plus $7500 per day from the date the jet pump was installed until receipt of the Well Completion Report, Form 10-407. The AOGCC notes, however, for Hilcorp’s awareness, that submission of Form 10-407 to the AOGCC does not constitute “commission approval” as required by 20 AAAC 25.507. Changes to approved programs are only approved upon operator submission and commission approval of Form 10-403.” Docket No. OTH-23-015 Notice of Proposed Enforcement May 4, 2023 Page 3 of 3 respect to the AOGCC’s action. Any action described herein or taken after an informal review or hearing does not limit the action the AOGCC may take under AS 31.05.160. Sincerely, Brett W. Huber, Sr. Jessie L. Chmielowski Chair, Commissioner Commissioner cc: Phoebe Brooks AOGCC Inspectors Mel Rixse Aras Worthington, Hilcorp (aras.worthington@hilcorp.com) Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2023.05.04 09:14:33 -08'00' Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2023.05.04 09:57:33 -08'00' 2 1 Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov April 26, 2023 Certified Mail Return Receipt Requested 7018 0680 0002 2052 9471 Mr. David Haakinson Operations Manager, Milne Point Unit Hilcorp Alaska LLC P.O. Box 112212 Anchorage, AK 99511-2212 Re: Docket Number: OTH-23-015 Compliance with Permit-to-Drill Milne Pt Unit I-27 (PTD 2210130) Request for Information Dear Mr. Haakinson: Hilcorp Alaska LLC (Hilcorp) drilled, completed, and initiated production from Milne Point Unit (MPU) I-27 in April 2021. The Alaska Oil and Gas Conservation Commission (AOGCC) approved the Permit-to-Drill for the proposed well on February 8, 2021. By email dated March 20, 2023, Hilcorp notified AOGCC that MPU I-27 exceeded the maximum allowable casing- casing annulus pressure, referencing the well as a jet pump completion. The AOGCC is reviewing whether the completion operations at MPU I-27 comported with the requirements of the approved Permit-to-Drill. Within 7 days of receipt of this letter, Hilcorp is requested to provide copies of correspondence and the approval supporting the well completion change from an electrical submersible pump to a jet pump completion in MPU I-27. This information request is made pursuant to 20 AAC 25.300. Questions regarding this notice should be directed to Mel Rixse at (907) 793-1231 (email: mel.rixse@alaska.gov). Sincerely, Brett W. Huber, Sr. Chair, Commissioner cc: Aras Worthington (aras.worthington@hilcorp,com) Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2023.04.26 14:18:28 -08'00'