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Home My WebLink AboutO 209Other Order 209 Docket Number: OTH-23-026 1. September 20, 2023 Hilcorp incident summary and timeline 2. September 28, 2023 Hilcorp update to prevent reoccurrence 3. December 1, 2023 AOGCC notice of proposed enforcement 4. --------------------- Email chain regarding informal review 5. December 14, 2023 Email regarding written response extension 6. January 18, 2024 Hilcorp reconsideration request 7. February 9, 2024 Hilcorp civil penalty payment STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage Alaska 99501 Re: Failure to complete required Mechanical Integrity Test (MIT), Milne Point Unit S-33A (PTD 2061720) well, Area Injection Order 10B ) ) ) ) ) ) ) ) Docket Number: OTH-23-026 Other Order 209 Milne Point Unit (MPU) Milne Point Field Schrader Bluff Oil Pool February 8, 2024 DECISION AND ORDER On December 1, 2023, the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Proposed Enforcement Action (Notice) to Hilcorp North Slope, LLC (Hilcorp) regarding the S-33A well. The Notice proposed a $303,500 civil penalty under AS 31.05.150(a). Hilcorp timely requested an informal review. That review was held December 11, 2023, and January 16, 2024. Hilcorp also submitted information on January 4, 2024, and a written response dated January 18, 2024, which AOGCC has considered as part of its informal review process. This decision and order now follow. SUMMARY OF PROPOSED ENFORCEMENT ACTION: The Notice identified that Hilcorp violated the provisions of Rule 4 of Area Injection Order 10B (AIO 10B) (“Demonstration of Tubing/Casing Annulus Mechanical Integrity”) for the S-33A well. AIO 10B was approved April 23, 2002. The order authorizes the underground injection of fluids for enhanced oil recovery in the Milne Point Field, Schrader Bluff Oil Pool. The rules require MITs on MPU injection wells. Rule 4 of AIO 10B states “A schedule must be developed and coordinated with the Commission that ensures that the tubing-casing annulus for each injection well is pressure tested prior to initiating initial injection, following well workovers affecting mechanical integrity, and at least once every four years thereafter.” AOGCC Industry Guidance Bulletin 10-02B dated August 9, 2017, allowed for efficiencies in testing and witnessing by allowing an MIT to be performed anytime during the anniversary month to satisfy the MIT due date. On September 16, 2023, Hilcorp contacted the AOGCC by email to report that S-33A was injecting after Hilcorp discovered it had failed to perform the required four-year MIT that was due on or before March 2023. Hilcorp ceased injection and shut in the well. Other Order 209 February 8, 2024 Page 2 of 4 The last AOGCC-witnessed MIT occurred March 16, 2019. Therefore, the MIT was required on or before March 2023. Though out of compliance, the S-33A well continued to inject for 169 days (April 1, 2023, to September 16, 2023). Hilcorp’s failure to demonstrate the mechanical integrity of the S-33A injection well within the required four-year cycle violated AIO 10B. Violating an AOGCC order, like AIO 10B, makes Hilcorp liable for civil penalties pursuant to AS 31.05.150(a). The Notice proposed civil penalties of $303,500 as follows.1 - $50,000 - initial violation failure to perform the required MIT in compliance with testing protocols specified in Rule 4 of AIO 10B; - $253,500 - $1,500 for each day of the 169 days the well was operable/injecting with an overdue MIT. In addition to the imposed civil penalty, the AOGCC has historically required Hilcorp to provide a detailed written explanation as to how it intends to prevent recurrence of this violation. The AOGCC has also historically required Hilcorp to demonstrate to the AOGCC’s satisfaction a more robust regulatory compliance tracking system that addresses all AOGCC-mandated obligations. For this S-33A violation, Hilcorp has completed an internal investigation (emailed to AOGCC dated September 20, 2023, and updated September 28, 2023) that included a root cause analysis and actions to prevent recurrence. Thus, the AOGCC will not require an additional written explanation from Hilcorp. It is the expectation with every enforcement action that Hilcorp identify, implement, and continue to assess the effectiveness of compliance improvement initiatives. INFORMAL REVIEW: Hilcorp met with AOGCC staff on December 11, 2023, and January 16, 2024, to review and discuss the Notice and have opportunity to update the status and results of its internal investigation. Hilcorp also provided information to AOGCC on January 4, 2024, and a written statement dated January 18, 2024. Hilcorp did not dispute the violations alleged in the Notice. Hilcorp questioned the penalty amount, suggesting the penalty amount be reduced. Hilcorp also specified that its number of non-compliance events measured against proxy data for Hilcorp activity levels shows a downward trend of incidents since 2012. While it is always AOGCC’s goal to have zero violations, and consequently zero repeat violations, AOGCC does acknowledge the overall downward trend in Hilcorp’s violations as Hilcorp noted during the informal review. It is encouraging to see that Hilcorp is monitoring its compliance history and seeing improving performance in this area. Hilcorp has initiated continued engagement with AOGCC through a data request for historical enforcement and violation records and AOGCC is providing the requested information, where available. 1 AS 31.05.150(a) provides for not more than $100,000 for the initial violation and not more than $10,000 for each day thereafter on which the violation continues. Other Order 209 February 8, 2024 Page 3 of 4 The factors in AS 31.05.150(g)2 have been considered in the determination of penalties for the violation. The penalty does reflect amounts based on per-day assessments. Violations relating to Underground Injection Control Class II well integrity practices warrant the imposition of civil penalties. The AOGCC issues injection orders, drilling and sundry permits for enhanced oil recovery projects with specific rules and conditions of approval to ensure injection activities are done safely, in a manner that protects the environment, and won’t cause waste. Hilcorp’s failure to comply with the AOGCC Order raises the potential for similar behavior with more serious consequences. Consideration of the civil penalty includes Hilcorp’s history of compliance/noncompliance and the need to deter similar behavior(s). Other considerations include the existing MPU aquifer exemption, no injury to the public or the environment, and Hilcorp’s notification to the AOGCC once Hilcorp determined the well was out of compliance. The effort made by Hilcorp to correct the violation and prevent future violations and Hilcorp’s cooperation with the investigation were also considered in the setting of the penalty amount. AOGCC tracks and periodically audits for compliance. Nothing above should imply that AOGCC is partially responsible for Hilcorp’s violation, or infer that the penalty amount assessed for days in non- compliance should be reduced for action/inaction on AOGCC’s part. Hilcorp provided expenses of materials and labor implementing measures designed to prevent re- occurrence of this violation in the amount of $43,023. AOGCC accepts these expenses and reduces the civil penalty by $43,023. FINDINGS AND CONCLUSIONS: Hilcorp did not dispute the alleged violation in the Notice. The AOGCC finds that Hilcorp committed the violation as initially alleged in the Notice and restated in the “Summary of Proposed Enforcement Action” above. Hilcorp has provided information that warrants reducing the proposed penalty amount by $43,023. NOW THEREFORE IT IS ORDERED THAT: Hilcorp is assessed a civil penalty in the amount of $260,477 for the violation detailed within this Order. If this Order is not appealed, the fine must be paid within 30 days of issuance. If appealed, the fine will be held in abeyance until the appeal process is complete. In addition to the civil penalty, Hilcorp is required to improve its regulatory compliance by implementing the corrective actions as detailed in the Hilcorp internal investigation reports as emailed to the AOGCC dated September 20, 2023, and updated September 28, 2023, that included a root cause analysis and actions to prevent recurrence. As an Operator involved in an enforcement action, Hilcorp is required to preserve documents concerning the above action until after resolution of the proceeding. 2 AS 31.05.150(g) requires AOGCC to consider nine criteria in setting the amount of a civil penalty. Other Order 209 February 8, 2024 Page 4 of 4 DONE at Anchorage, Alaska and Dated February 8, 2024. Brett W. Huber, Sr. Jessie L. Chmielowski Chair, Commissioner Commissioner cc: James Robinson, US Environmental Protection Agency, Region 10 Jim Regg, AOGCC Supervisor, Inspections AOGCC Inspectors RECONSIDERATION AND APPEAL NOTICE Pursuant to 20 AAC 25.535(d), this order becomes final 11 days after it is issued unless within 10 days after it is issued the person files a written request for a hearing, in which case the proposed decision or order is of no effect. If the person requests a hearing, the commission will schedule a hearing under 20 AAC 25.540. As provided in AS 31.05.080(a), within 20 days after this order becomes final as discussed above, 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. Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2024.02.08 09:24:59 -09'00' Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2024.02.08 13:30:58 -05'00' From:Carlisle, Samantha J (OGC) To:AOGCC_Public_Notices Subject:[AOGCC_Public_Notices] Other Order 209 (Hilcorp) Date:Thursday, February 8, 2024 10:24:34 AM Attachments:other 209.pdf Failure to complete required Mechanical Integrity Test (MIT), Milne Point Unit S-33A (PTD 2061720) well, Area Injection Order 10B Samantha Coldiron 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 Count Location Asset Team Date Year Well count% of well counNon-Compliance Notice of Violation Notice of Enforcement Docket AOGCC Action Comments SVS SVS AnnualInjector ComplianceInj Compliance AnnualMetering/ MeasuringMetering/ Measuring AnnualReportingReporting AnnualRigs Rig Annual BOPEBOP AnnualSundry/ PTDSundry/ PTD AnnualOther Other Annual Total13Nikolaevsk Unit - Red PadKenai/ CIO12/16/2012 2012 332 6.93%Commence production w/o approved LACTmeterCorrective actions12/18/12 — Hilcorp contacts AOGCC with notice of SVS testing; AOGCCdetermined by questioning status that well commenced production 12/16/12without LACT meter approval; application for LACT meter received 1/9/121012088 1 32315Swanson River Field: SCU 12A-04; SCU 14-34; SCU 31-08KGSF #1Kenai/ CIO9/30/2013 2013 332 0.60%Defeated SVSMissing Annulus GaugesYNOVKGSF #1 — SVS found defeated during 9/2/13 AOGCC inspection; 3 SCUwells - missing outer annulus pressure gauges; 8/31/13 inspection; Hilcorp resonse 9/10/13; closed out 11/15/1312 0 0 0 0 0 0 0 219Various CI sitesKenai/ CIO12/1/2014 2014 766 1.04% Workover Safety ConcernsMandatory MeetingList of concerns provided to Hilcorp addressing suitability of equipment andprocedures; unsafe working conditions associated with rig workovers;onshoreand offshore Cook Inlet4000121 011831Swanson River Field SCU 44-05Kenai/ CIO12/29/2015 2015 766 1.83% Failure to provide Well Log DataNotice of Proposed EnforcementNotice sent to Operator 12/30/15; Hilcorp response1/13/16; informal review 4/5/16; Final Decision postponed2001321 3 31433Endicott 3-09AEndicott 2-56AEndicott8/26/2016 2016 766 0.26%Defeated SVSFailure to install SSSVYNOVAOGCC Inspector found control line blocked at SVS panel; 9/19/16 mtgrevealed2ndSVS violation (failure to install SSSV in Endicott 2-56A; Hilcorpres onse 10/3/16; closed out 2/27/1712 0 0 0 0 0 0 0 236Granite Pt State 11-24RD(Kuukpik Rig # 5)Kenai/ CIO11/29/2017 2017 766 0.52%Failure to SubmitBOPE Test ReportYNOVTest report required within 5 days (due 10/24/17); not submitted until NOVreceived by Hilcorp; sent 11/29/17; closed out 12/13/1711011011 0 0440Trading Bay Unit M-22Kenai/ CIO9/20/2018 2018 766 0.65% Failure to Submit Well Information YNOV Sent 1 1/1/18; closed out 11/8/180001202 0 1543Milne Point Unit J-26MPU10/16/2019 2019 766 0.65% Defeated SVS YNOV Sent 10/16/19; closed out 11/5/1911 0 1 2 0 1 0 0 549Ninilchik Unit Paxton-I OKenai/ CIO12/15/2020 2020 2531 0.28% Failure to Install Subsurface Safety Valve YNOVSent 2/23/2021; Paxton-IO commenced production 12/1/2020; SSSV required by 12/15/2020; violation discovered 2/5/2021; close out pending successful installation and testin of SSSV in Paxton-10.12 0 1 1 2 0 0 1 756All Hilcorp Service Coil Operations in AlaskaAll12/22/2021 2021 2531 0.32% Emergency OrderCease Service: Coil OperationsInformation request due 12/29/202. Service Coil Tubing operations approved to restart 1/7/2022200021 112860Milne Point Unit S-24,S32, s-35MPU7/29/2022 2022 2531 0.16% Late Suspended Well Inspections YNOV Sent 8/17/20221001200 0 1464Milne Point Unit S-33MPU12/1/2023 2023 2531 0.16% Failure to PT injector Y OTH-23-026 Enforcement- Pending01 3 0 0 0 0 1 0 40%1%2%3%4%5%6%7%8%05101520252012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Non‐compliance event/ Total wells operated Number of AOGCC documented non‐complience eventsOther AnnualSundry/ PTD AnnualBOP AnnualRig AnnualReporting AnnualMetering/ Measuring AnnualInj Compliance AnnualSVS Annual% of well count 7 M Hilcorp Alaska LLC P.O.Box 61229 Houston TX 77208-1229 Owner: 40012563 Check Date: 1 02/13/2024 Check Number: 1 42032133 SAP Dac nta tnv. lists Net Amount 1900118449 02/09/2024 OTH23026 Im $260,477.00 THIS CHECK IS PRINTED ON CHEMICALLY REACTIVE PAPERTHAT HAS VISIBLE FIBERS AND A WATERMARK —HOLD TO LIGHTTO VIEW I Hilcorp Alaska LLC P.O.Box 61229 Houston TX 77208-1229 PAY TO THE ORDER OF Void After 90 Days Check No Check Date Check Amount 42032133 102/13/2024 * * * * $260,477.00 Two Hundred Sixty Thousand Four Hundred Seventy -Seven Dollars And Zero Cents STATE OF ALASKA AOGCC 333 WEST 7TH AVE ANCHORAGE AK 99501-3539 Authorized Signature 0420321331" 1:1L3Li05136l: 0444404748u• 6 Hilcorp Alaska, LLC Taylor Wellman, Milne Point Wells Manager 3800 Centerpoint Dr, Suite 1400 Anchorage, Alaska 99503 01/18/2024 Chairman Brett Huber, Sr Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, Alaska 99501 Subject: Reconsideration Request OTH-23-026: Notice of Proposed Enforcement Action. Dear Chairman Huber, Based on information provided by Hilcorp on 1/4/2024 and discussed with AOGCC staff on 1/16/2024 in an informal review of OTH-23-018 and OTH-23-026, Hilcorp requests reconsideration of the following statements in OTH-23-026: Notice of Proposed Enforcement Action due to Failure to complete required Mechanical Integrity Test (MIT) on Milne Point Unit well S-33A: “Repeat violations call into question the effectiveness of Hilcorp’s efforts to improve its regulatory compliance.” Hilcorp respectfully disagrees with this statement based on analysis of AOGCC compiled data. The number of non-compliance events measured against proxy data for Hilcorp activity levels shows a downward trend of incidents since 2012. Additionally, Hilcorp notes that the number of compliance events is currently at an annual all-time low. Hilcorp strives for continued reduction of non-compliance events and conducts timely investigations of incidents and implementations of substantive actions to prevent recurrence. “Of those enforcement actions, notably Docket OTH-21-039 – where the PBU W-44 well missed its MIT in June 2021 – was substantially similar to this S-33A violation.” Hilcorp contends that the PBU W-44 missed MIT was fundamentally different than the MPU S-33A violation. PBU W-44 was due for a 4-year online AOGCC witnessed MIT-IA by the end of July 2021, not June 2021 as stated. W-44 was online from July 8th-16th, but the well was not pressure tested during this period due to a lack of stabilized injection rate that is required for an acceptable MIT. W-44 was shut-in on 7/16/21 due to maintenance on the pad. At the end of July, W-44 remained offline, with work planned in the first few days of August to bring the well back online. W-44 remained Operable (offline) during this period from 8/1-8/4, after which the well was placed on injection and continually tracked in multiple systems as requiring an AOGCC MIT once injection stabilized. Stabilized injection was achieved and a passing MIT- IA was witnessed by Inspector Jeff Jones on 8/8/2021. W-44 had not missed its required MIT as stated in OTH-23-026 and was at no time in violation of the requirements in AIO 3C. However, Hilcorp staff did fail to notify the AOGCC of the short-term shut-in status (per Industry Guidance Bulletin 10-02B) of W-44 at the end of July 2021. Hilcorp contends that the W-44 reporting error is not “…substantially similar to this S-33A violation”, and the statement of MPS-33A being a repeat violation to W-44 is inaccurate. Hilcorp requests reconsideration of the proposed civil penalty based on factors (6) and (8) in AS 31.05.150(g): (6) the history of compliance or noncompliance by the person committing the violation with the provisions of this chapter, the regulations adopted under this chapter, and the orders, stipulations, or terms of permits issued by the commission; If the AOGCCs original understanding of the PBU W-44 incident influenced the severity of the proposed civil penalties under OTH-23-026, Hilcorp requests reconsideration of the civil penalty size taking into account the W-44 clarifications provided above. (8) the effort made by the person committing the violation to correct the violation and prevent future violations As outlined in Hilcorp’s letter dated 09/20/2023, the following actions to prevent future violations of this nature were provided and have been implemented. x An audit of automation conditional parameters was completed for all wells at MPU. Only dual-string injectors were found to have a flow rate conditional parameter for SCADA viewing. x All dual string injectors now have individual tubing string status switches added to remove the minimum flow condition. All drill sites at MPU are now consistent with their online/offline logic for SCADA view. x Upon due date of all scheduled integrity testing, wells will be visually inspected for operational status by secondary verification to protect for the possibility of automation errors. This verification will be completed by the drill site operator. A physical lock has been placed on the wing valve of all non- operable wells. x An audit of current non-operable injection wells at MPU for mis-injection was completed. No anomalies were found. x An automated report of ‘Not Operable’ wells with online status or flow indication to the Well Integrity Engineer and Operations has been developed for MPU. x A Lessons Learned Bulletin about incident to be distributed across the Hilcorp Alaska assets with an action item assigned to field operations to review automation logic for one-off considerations. Attached below is a summary table of the total costs that Hilcorp undertook directly following the investigation and implementation of measures to prevent future violations of this nature. A more detailed breakdown of costs can be provided upon request. Materials / Equipment (15 pressure switches, 40 valves, 150 manual locks and associated equipment for installation) $35,443 Labor (130+ manhours) $7,580 Total $43,023 If you have any questions, please call me at 907-777-8449. Sincerely, Taylor Wellman Milne Point Wells Manager Digitally signed by Taylor Wellman (2143) DN: cn=Taylor Wellman (2143) Date: 2024.01.18 13:50:01 - 09'00' Taylor Wellman (2143) 5 CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:Wallace, Chris D (OGC) To:Taylor Wellman Cc:Carlisle, Samantha J (OGC) Subject:RE: OTH-23-026 Informal Review Date:Thursday, December 14, 2023 3:31:39 PM Taylor, Yes January 5th 2024 was agreed. Thanks Chris From: Taylor Wellman <twellman@hilcorp.com> Sent: Thursday, December 14, 2023 3:11 PM To: Wallace, Chris D (OGC) <chris.wallace@alaska.gov> Cc: Carlisle, Samantha J (OGC) <samantha.carlisle@alaska.gov> Subject: OTH-23-026 Informal Review Mr. Wallace, Hilcorp appreciated the Informal Review held on 12/11/2023 between AOGCC Staff and Hilcorp regarding OTH-23-026 Notice of Proposed Enforcement Action Failure to complete required Mechanical Integrity Test (MIT) on Milne Point Unit S-33A (PTD 2061720) well. Hilcorp would like to confirm the agreed extension of the timeline for a written response to be provided by Hilcorp to the AOGCC no later than the end of business on 01/05/2024. Thank you, Taylor Taylor Wellman Hilcorp Alaska, LLC: Wells Manager – Milne Point Office: (907) 777-8449 Cell: (907) 947-9533 Email: twellman@hilcorp.com The information contained in this email message is confidential and may be legally privileged and is intended only for the use of theindividual or entity named above. If you are not an intended recipient or if you have received this message in error, you are herebynotified that any dissemination, distribution, or copy of this email is strictly prohibited. If you have received this email in error, pleaseimmediately notify us by return email or telephone if the sender's phone number is listed above, then promptly and permanently delete this message. While all reasonable care has been taken to avoid the transmission of viruses, it is the responsibility of the recipient to ensure that theonward transmission, opening, or use of this message and any attachments will not adversely affect its systems or data. No responsibilityis accepted by the company in this regard and the recipient should carry out such virus and other checks as it considers appropriate. 4 CAUTION: External sender. DO NOT open links or attachments from UNKNOWN senders. From:Taylor Wellman To:Carlisle, Samantha J (OGC) Cc:David Haakinson; Oliver Sternicki Subject:RE: [EXTERNAL] Hilcorp MP S-33 NOE missed MIT Date:Wednesday, December 6, 2023 8:45:15 AM That works for Hilcorp. Currently we are planning on having 3 of us attend. Thank you Samantha. -Taylor Taylor Wellman Hilcorp Alaska, LLC: Wells Manager – Milne Point Office: (907) 777-8449 Cell: (907) 947-9533 Email: twellman@hilcorp.com From: Carlisle, Samantha J (OGC) <samantha.carlisle@alaska.gov> Sent: Wednesday, December 6, 2023 8:14 AM To: Taylor Wellman <twellman@hilcorp.com> Cc: David Haakinson <dhaakinson@hilcorp.com>; Oliver Sternicki <Oliver.Sternicki@hilcorp.com> Subject: RE: [EXTERNAL] Hilcorp MP S-33 NOE missed MIT Good morning Taylor, I am looking at Monday December 11 at 1pm, does this work for Hilcorp? Thank you, Samantha Carlisle Special Assistant (907) 793-1223 From: Taylor Wellman <twellman@hilcorp.com> Sent: Tuesday, December 5, 2023 3:04 PM To: Huber, Brett W (OGC) <brett.huber@alaska.gov>; Rixse, Melvin G (OGC) <melvin.rixse@alaska.gov>; Boman, Wade C (OGC) <wade.boman@alaska.gov>; Roby, David S (OGC) <dave.roby@alaska.gov>; Regg, James B (OGC) <jim.regg@alaska.gov>; Wallace, Chris D (OGC) <chris.wallace@alaska.gov>; Carlisle, Samantha J (OGC) <samantha.carlisle@alaska.gov> Cc: David Haakinson <dhaakinson@hilcorp.com>; Oliver Sternicki <Oliver.Sternicki@hilcorp.com> Subject: RE: [EXTERNAL] Hilcorp MP S-33 NOE missed MIT CAUTION: External sender. DO NOT open links or attachments from UNKNOWN senders. CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. Chairman Huber, Hilcorp requests the opportunity to hold an informal review of the attached NOE. Please advise us of when would be a convenient time to hold the review. Thank you, Taylor Taylor Wellman Hilcorp Alaska, LLC: Wells Manager – Milne Point Office: (907) 777-8449 Cell: (907) 947-9533 Email: twellman@hilcorp.com From: Carlisle, Samantha J (OGC) <samantha.carlisle@alaska.gov> Sent: Friday, December 1, 2023 1:39 PM To: David Haakinson <dhaakinson@hilcorp.com> Cc: Aras Worthington <Aras.Worthington@hilcorp.com> Subject: [EXTERNAL] Hilcorp MP S-33 NOE missed MIT Please see attached, a certified hard copy will follow in the mail. Docket Number: OTH-23-026 Notice of Proposed Enforcement Action Failure to complete required Mechanical Integrity Test (MIT) Milne Point Unit S-33A (PTD 2061720) well Area Injection Order 10B Milne Point Unit (MPU), Milne Point Field, Schrader Bluff Oil Pool Thank you, Samantha Carlisle Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 The information contained in this email message is confidential and may be legally privileged and is intended only for the use of theindividual or entity named above. If you are not an intended recipient or if you have received this message in error, you are herebynotified that any dissemination, distribution, or copy of this email is strictly prohibited. If you have received this email in error, please immediately notify us by return email or telephone if the sender's phone number is listed above, then promptly and permanently delete this message. While all reasonable care has been taken to avoid the transmission of viruses, it is the responsibility of the recipient to ensure that theonward transmission, opening, or use of this message and any attachments will not adversely affect its systems or data. No responsibilityis accepted by the company in this regard and the recipient should carry out such virus and other checks as it considers appropriate. The information contained in this email message is confidential and may be legally privileged and is intended only for the use of theindividual or entity named above. If you are not an intended recipient or if you have received this message in error, you are herebynotified that any dissemination, distribution, or copy of this email is strictly prohibited. If you have received this email in error, pleaseimmediately notify us by return email or telephone if the sender's phone number is listed above, then promptly and permanently deletethis message. While all reasonable care has been taken to avoid the transmission of viruses, it is the responsibility of the recipient to ensure that the onward transmission, opening, or use of this message and any attachments will not adversely affect its systems or data. No responsibility is accepted by the company in this regard and the recipient should carry out such virus and other checks as it considers appropriate. 3 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.aogcc.alaska.gov December 1, 2023 CERTIFIED MAIL RETURN RECEIPT REQUESTED 7017 2400 0000 5648 0985 Mr. David Haakinson Operations Manager, Milne Point Hilcorp Alaska, LLC 3800 Centerpoint Dr., Suite 1400 Anchorage, AK 99503 Re: Docket Number: OTH-23-026 Notice of Proposed Enforcement Action Failure to complete required Mechanical Integrity Test (MIT) Milne Point Unit S-33A (PTD 2061720) well Area Injection Order 10B Milne Point Unit (MPU), Milne Point Field, Schrader Bluff Oil Pool Dear Mr. Haakinson: 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 violated the provisions of Rule 4 of Area Injection Order 10B (AIO 10B) (“Demonstration of Tubing/Casing Annulus Mechanical Integrity”) for the S-33A well. Basis for Finding the Violation or Noncompliance (20 AAC 25.535(b)(2)). AIO 10B was approved April 23, 2002. The order authorizes the underground injection of fluids for enhanced oil recovery in the Milne Point Field, Schrader Bluff Oil Pool. The rules require MITs on MPU injection wells. Rule 4 of AIO 10B states “A schedule must be developed and coordinated with the Commission that ensures that the tubing-casing annulus for each injection well is pressure tested prior to initiating initial injection, following well workovers affecting mechanical integrity, and at least once every four years thereafter.” Docket Number: OTH-23-026 Notice of Proposed Enforcement Action December 1, 2023 Page 2 of 3 AOGCC Industry Guidance Bulletin 10-02B dated August 9, 2017, allowed for efficiencies in testing and witnessing by allowing an MIT to be performed anytime during the anniversary month to satisfy the MIT due date. On September 16, 2023, Hilcorp contacted the AOGCC by email to report that S-33A was injecting after Hilcorp discovered it had failed to perform the required four-year MIT that was due on or before March 2023. Hilcorp ceased injection and shut in the well. The last AOGCC-witnessed MIT occurred March 16, 2019. Therefore, the MIT was required on or before March 2023. Though out of compliance, the S-33A well continued to inject for 169 days (April 1, 2023, to September 16, 2023). Hilcorp’s failure to demonstrate the mechanical integrity of the S-33A injection well within the required four-year cycle violated AIO 10B. Violating an AOGCC order, like AIO 10B, makes Hilcorp liable for civil penalties pursuant to AS 31.05.150(a). Proposed Action (20 AAC 25.535(b)(3). The MIT violation at Milne Point is not isolated and demonstrates Hilcorp’s ongoing compliance problems. 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, notably Docket OTH-21-039 – where the PBU W-44 well missed its MIT in June 2021 - was substantially similar to this S-33A violation. Repeat violations call into question the effectiveness of Hilcorp’s efforts to improve its regulatory compliance. For these violations, the AOGCC intends to impose civil penalties on Hilcorp as follows.1 - $50,000 – initial violation failure to perform the required MIT in compliance with testing protocols specified in Rule 4 of AIO 10B; - $253,500 - $1,500 for each day of the 169 days the well was operable/injecting with an overdue MIT. In addition to the imposed civil penalty, the AOGCC has historically required Hilcorp to provide a detailed written explanation as to how it intends to prevent recurrence of this violation. The AOGCC has also historically required Hilcorp to demonstrate to the AOGCC’s satisfaction a more robust regulatory compliance tracking system that addresses all AOGCC-mandated obligations. For this S- 33A violation, Hilcorp has completed an internal investigation (emailed to AOGCC dated September 20, 2023, and updated September 28, 2023) that included a root cause analysis and actions to prevent recurrence. 1 AS 31.05.150(a) provides for not more than $100,000 for the initial violation and not more than $10,000 for each day thereafter on which the violation continues. Docket Number: OTH-23-026 Notice of Proposed Enforcement Action December 1, 2023 Page 3 of 3 The total proposed civil penalty is $303,500. Violations relating to Underground Injection Control Class II well integrity practices warrant the imposition of civil penalties. Hilcorp’s repeated failure to comply with fundamental wellbore MIT requirements raises the potential for similar behavior with more serious consequences. Hilcorp’s repeated failure to comply with AOGCC rules and regulations warrant increased civil penalties to deter similar behavior. The factors in AS 31.05.150(g) were considered in determining the appropriate penalty. Mitigating circumstances include the existing MPU aquifer exemption, no injury to the public or the environment, and Hilcorp’s notification to the AOGCC once Hilcorp determined the well was out of compliance. 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 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. Chair, Commissioner cc: James Robinson, US Environmental Protection Agency, Region 10 Jim Regg, AOGCC Supervisor, Inspections AOGCC Inspectors Brett W. Huber, Sr. Digitally signed by Brett W. Huber, Sr. Date: 2023.12.01 12:56:06 -09'00' 2 CAUTION: This email originated from outside the State of Alaska mail system. Do not click links or open attachments unless you recognize the sender and know the content is safe. From:David Haakinson To:Wallace, Chris D (OGC); Regg, James B (OGC) Cc:Ryan Thompson Subject:Re: MP S-33A (PTD# 206-172) Injection without current MIT-IA Follow-Up Date:Thursday, September 28, 2023 10:17:52 AM Attachments:MP S-33A (PTD# 206-172) Injection without current MIT-IA_Signed DH 9-20-2023.pdf Chris and Jim, This is an update of our progression of actions to prevent recurrence. We are taking this incident seriously and advancing actions ahead of schedule. An audit of automation conditional parameters was completed for all wells at MPU. Only dual- string injectors were found to have a flow rate conditional parameter for SCADA viewing. Completed. All dual string injectors will have individual tubing string status switches added to remove the minimum flow condition. All drill sites at MPU will then be consistent with their online/offline logic for SCADA view. This will be completed by 10/31/2023. Completed. All online injectors completed from 9-23 - 9/26. Thirteen offline injectors completed as of today (9/28). Two dual injectors are disconnected and will have locks placed on the wells. Upon due date of all scheduled integrity testing, wells will be visually inspected for operational status by secondary verification to protect for the possibility of automation errors. This verification will be completed by the drill site operator. A physical lock is to be placed on the wing valve of non- operable wells by 10/31/2023. Remaining locks arrived at MPU yesterday and will be installed by 10/1. An audit of current non-operable injection wells at MPU for mis-injection was completed. No anomalies were found. Completed at time of writing. Although it would not prevent recurrence, an automated report of ‘Not Operable’ wells with online status or flow indication to the Well Integrity Engineer and Operations would have found this incident sooner. This report exists for Prudhoe Bay and has been assigned to Hilcorp’s IT department to be completed for Milne Point by 12/31/2023. IT has moved this up in their priority list and is scheduled to begin work in November. A Lessons Learned Bulletin about incident to be distributed across the Hilcorp Alaska assets with an action item assigned to field operations to review automation logic for one-off considerations. Initial write-up is complete and under review. Plan to send out to organization on 10/2. Please let me know if you have any questions. David Haakinson Operations Manager | Milne Point | Hilcorp Alaska, LLC Office: (907) 777-8343 | Cell: (307) 660-4999 dhaakinson@hilcorp.com The information contained in this email message is confidential and may be legally privileged and is intended only for the use of theindividual or entity named above. 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No responsibility is accepted by the company in this regard and the recipient should carry out such virus and other checks as it considers appropriate. 1 Hilcorp Alaska, LLC David Haakinson, Milne Point Operations Manager 3800 Centerpoint Dr, Suite 400 Anchorage, Alaska 99503 9/20/2023 Chairman Brett Huber Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, Alaska 99501 Subject: Injection without current MIT-IA on well S-33A (PTD# 206-172), Hilcorp Alaska, LLC. Dear Chairman Huber, Please see below for information regarding the S-33A (PTD# 206-172) injection past MIT-IA due-date incident: Event Summary: Milne Point injector S-33A was sidetracked and completed in the Schrader Bluff OA and OB sands in 2007. S-33A has had a stable history as a water injector with minimal well intervention and no integrity concerns. The well was scheduled for a four-year MIT-IA update on 3/31/2023 but was documented as shut-in at the time of renewal. On 9/16/2023, a pad operator found an error on the SCADA online/offline status and it was determined that MPU S-33A had been on injection all along, with the last intervention on the well documented as 8/2/2022 for a choke change. The well was immediately shut in and a self-report notification was made to the AOGCC on 9/16/2023. An investigation into the incident was initiated with the findings and actions to prevent reoccurrence documented below. Investigation Details: Recent timeline of events leading to discovery and root cause of the missed MIT-IA o 03/16/2019: State Witnessed MIT-IA to 1648 psi passed. o 03/01-03/31/2023: MPU S-33A online/offline status viewed in SCADA as shut-in. MIT-IA not scheduled. o 04/02/2023: Well Integrity Engineer changes S-33A well integrity status to ‘Not Operable’. o 04/02/2023: Email Notification to AOGCC from Well Integrity Engineer sent, notifying of shut-in status and classification change to ‘Not Operable’. o 04/02/2023: Email Notification from Well Integrity Engineer to Field Operations and Wellsite Supervisors of change in well integrity status to ‘Not Operable’. o 04/02/2023: ‘Out of Service’ Tag is placed on tree by Wellsite Supervisor. Valve position was not verified. Communication and verification by drill-site operator was not completed. o 09/16/2023: Injector is shut-in, notifications are made to Well Integrity Engineer and Operations Manager. o 09/16/2023: Self-report notification of injection with missed MIT-IA is made from Hilcorp to the AOGCC. o 09/16/2023: Investigation instigated on why MPU S-33A’s online/offline status showed in SCADA as shut in. o 09/17/2023: Based on initial findings, investigation was expanded to full field MPU for possible conditional parameters for SCADA offline status. Timeframe of injection past MIT-IA due date: 03/31-09/16/2023= 169 days Root cause of the incident: x Milne Point S-pad online/offline indication on SCADA for dual string injectors is based on satisfaction of two parameters: the injection pressure switch on the well shut down panel, and an injection flow rate greater than 100 BPD. x MPU S-33A’s injection pressure set-point was met, but the water flow rate was under 100 BPD during the review period, showing a shut-in condition in SCADA. x MPU S-33A’s well integrity status was properly changed to ‘Not Operable’on 04/02/2023. An ‘Out of Service’ tag was placed on the tree, but not on the well shut-down panel, SSV, or wing. Valve positioning was not checked by the Wellsite Supervisor. o MPU S-pad is unique as the only drill-site to have a separate wellhouse for divert shelters. Had the tagging been placed in a different location, a flag would have been raised to the drill-site operator that an ‘Out of Service’tag would have been placed on an open valve. o Communication between the wellsite supervisor and the pad operator at the time of hanging the tag was not completed. Contributing factors of the incident: x The well’s integrity testing is scheduled by the Wellsite Supervisor. The wells status showed as shut-in on SCADA at the time of review and was not secondarily verified by the drill-site or Field Lead Operator. x The automation logic has existed since S pad start-up in 2002. Injection rates have reduced, and the logic for online/offline status requiring 100 BPD of flow had not been reviewed or updated. x MPU S-33A’s well integrity status was properly changed to ‘Not Operable’. However, since the well status did not change for a shut-in or restoration to bring online; the standard operator practice to review the well integrity status prior to operational change was not completed. Actions to prevent recurrence: x An audit of automation conditional parameters was completed for all wells at MPU. Only dual-string injectors were found to have a flow rate conditional parameter for SCADA viewing. x All dual string injectors will have individual tubing string status switches added to remove the minimum flow condition. All drill sites at MPU will then be consistent with their online/offline logic for SCADA view. This will be completed by 10/31/2023. x Upon due date of all scheduled integrity testing, wells will be visually inspected for operational status by secondary verification to protect for the possibility of automation errors. This verification will be completed by the drill site operator. A physical lock is to be placed on the wing valve of non-operable wells by 10/31/2023. x An audit of current non-operable injection wells at MPU for mis-injection was completed. No anomalies were found. x Although it would not prevent recurrence, an automated report of ‘Not Operable’wells with online status or flow indication to the Well Integrity Engineer and Operations would have found this incident sooner. This report exists for Prudhoe Bay and has been assigned to Hilcorp’s IT department to be completed for Milne Point by 12/31/2023. x A Lessons Learned Bulletin about incident to be distributed across the Hilcorp Alaska assets with an action item assigned to field operations to review automation logic for one-off considerations. If you have any questions, please call me at 907-777-8343 or Ryan Thompson at 907-564-5005. Sincerely, David Haakinson Milne Point Operations Manager Digitally signed by David Haakinson (3533) DN: cn=David Haakinson (3533) Date: 2023.09.20 09:09:31 - 08'00' David Haakinson (3533)