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Home My WebLink AboutO 1781. August 13, 2020 2. August 25, 2020 3. September 8, 2020 4. December 15, 2020 5. December 23, 2020 6. January 8, 2021 7. ------------------ 8. February 4, 2021 9. July 22, 2021 Other Order 178 Docket Number: OTH-20-045 Letter to Operator re: SSSV, KLl-1 Emails re: two -week extension AIX response (held in secure storage) AOGCC letter re: proposed enforcement action to AIX Emails re: 30-day extension AIX response to enforcement action emails AIX update on SSSV replacement and civil penalty payment AOGCC Follow Up Letter Specifying SSSV Installation Deadline ORDERS STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage Alaska 99501 Re: Disabled SSSV ) Other Order 178 KL1-1 (PTD2110430) ) Docket Number:OTH-20-045 Kenai Loop Gas Field ) January 25, 2021 DECISION AND ORDER On December 15, 2020 the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Proposed Enforcement Action (Notice) to AIX Energy LLC (AIX) for failing to maintain a functional subsurface safety valve (SSSV) in Kenai Loop Gas Field well KL1-1. The Notice proposed specific corrective actions and a $30,000 civil penalty under AS 31.05.150(a). Summary of Prouosed Enforcement Action: The Notice identified a violation by AIX of 20 AAC 25.265 at Kenai Loop well KLl-1. The Notice proposed a civil penalty of $30,000 for producing KLl-1 without the required functional SSSV. The Notice also proposed that AIX submit an Application for Sundry Approval, Form 10- 403, to bring KLl-1 into regulatory compliance and describe how it will prevent recurrence of this violation. Violation - Failure to Maintain a Functional Subsurface Safety Valve: AIX installed a subsurface safety valve in KLl-1 as required by 20 AAC 25.265(d) prior to commencing production from the well in January 2012. A SSSV waiver was granted by AOGCC as part of a February 2012 sundry approval to install a 4,000-foot capillary string inside the production tubing of KLl-1 to mitigate flow assurance issues from hydrate formation in the well, and installation of a lock -out ring across the SSSV to prevent its closure.' AOGCC Inspection in February 2020 confirmed the capillary string was no longer installed in the KL1-1 production tubing. By letter dated August 13, 2020, the AOGCC notified AIX it was reviewing whether the safety valve system in Kenai Loop KLl-1 comported with the requirements of 20 AAC 25.228, and specifically the requirement to make operational the SSSV when the capillary string was removed from the production tubing.2 Information gathered during AOGCC's review shows the capillary string was removed from KL14 on June 23, 2015.3 Removal of the capillary string from the production tubing voided the SSSV waiver. By letter dated January 8, 2021 AIX acknowledged receipt of the Notice and concurred in whole with the proposed action. On January 18, 2021 AIX provided additional information regarding the timing for procurement and installation of an SSSV in KL1-1. Mitieatin¢ Circumstances: The factors in AS 31.05.150(g) were considered in determining the appropriate penalty. AIX's lack of good faith in its attempts to comply with the imposed conditions, the potential seriousness ' Sundry 312-046 dated February 3, 2012 2 20 AAC 25.265(d)(4): "an onshore well in a location described under (2) of this subsection and equipped with an electric submersible pump, velocity string, or capillary string run within the tubing is not required to be equipped with a subsurface safety valve" ' AIX response dated September 8, 2020; Well Service Report for pulling the capillary string was included. Other Order 178 January 25, 2021 Page 2 of 3 of the violation, and need to deter similar behavior are the factors which most heavily influence AOGCC's decision and the penalty being assessed: - The failure to return the SSSV to operational service after removal of the capillary string from the tubing cannot be characterized as a good faith attempt to comply with the AOGCC's well safety valve system regulations. - 20 AAC 25.265(d) requires a well to be maintained with a functional SSSV when not equipped with an approved capillary string. - AIX failed to put the subsurface safety valve back in service or contact AOGCC engineering staff to obtain further instructions about the well's continued production as instructed by the AOGCC Inspector following witness of Safety Valve System tests at Kenai Loop pad in February 2020. Mitigating circumstances include the demonstrated good performance of the surface safety valve system equipment during testing which occurred at 6-month intervals since the start of production from KLl-I, AIX's compliance history at Kenai Loop, and no injury to the public. Further, AOGCC has not imposed per -day or per -month assessments for the violations, which has significantly reduced the penalty. Findines and Conclusions: The AOGCC finds that AIX violated 20 AAC 25.265 at Kenai Loop well KL1-1. Mitigating circumstances outlined above were considered in the Notice and the AOGCC assessment as to the appropriate civil penalty. AIX has neither disputed the findings in the Notice nor the penalty proposed by AOGCC. Now Therefore It Is Ordered That: AIX is assessed a civil penalty in the amount of $30,000 for violating 20 AAC 25.265(d) for producing Kenai Loop KLl-1 without a functional subsurface safety valve. If AIX chooses not to appeal this Order 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. Not later than February 25, 2021 AIX must submit an Application for Sundry Approvals, Form 10-403 for the well work necessary to make the subsurface safety valve in KLl-1 functional. In addition to the civil penalty and required well work, within 10 days of the date of AOGCC's final decision, AIX shall provide a detailed written explanation that describes how it intends to prevent recurrence of this violation. As an Operator involved in an enforcement action, AIX is required to preserve documents concerning the above action until after resolution of the proceeding. Done at Anchorage, Alaska and Dated January 25, 2021 JeremyM. °„'�„""4pne°a"""" 0I9ltslty sign by Jeuk L Jessie L. <bmie' _m q IWII Y neeb Daniel T. Ddnie T.5NIn0YM, Jr. Price <a�n ""°""' 9ale: E031.O1.n 10R9:96 Chmielowski -09tl0• Seamount, Jr. °a`e: aoz,.o,as Jeremy M. Price Jessie L. Chmielowski toMw Daniel T. Seamount, Jr. Chair, Commissioner Commissioner Commissioner cc: AOGCC Inspectors Phoebe Brooks (AOGCC) RECONSIDERATION AND APPEAL NOTICE Other Order 178 January 25, 2021 Page 3 of 3 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 maybe 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. Carlisle, Samantha J (CED) From: Carlisle, Samantha J (CED) Sent: Monday, January 25, 2021 10:55 AM To: AOGCC Public Notices Subject: Other Order 178 (Kenai Loop Gas Field) Attachments: other178.pdf Disabled SSSV KL1-1 (PTD 2110430) Kenai Loop Gas Field Samantha Carlisle I'X@C6tiVe. Sectetary III Alaska Oil and Gas Conservation Commission 333 West T" Avenue Anchorage, AK 99501 (907) 793-1 "3 i STANDALASKANS TOGETHER 6 FT APART CONFIDENTFA1 f1YN0TIfF.iliisc-mailmrssaeo,inrludini;w1%atta,hmcnts,iouto ills 111l1 -1 notion iron, the Vhska CTI nd(.asCon+,rvation Commission (A(-)(;(:('), $lade „I.Alaska and is for the sole use of the intended rmipiant(s). It vwi nnttain , owhdontial and jor pnvihan gad intonetion. Ih,: unauthoraCd irciew, use of di� lusurr of such infon iahnn moll violalm stah, of ledejal Lnrr. If eou are an nnintooded rectprent of thi, rt-mail, ploasc .tt,h Ic it, without nrst savutg or tonea,rdin? it, and, so that tho is AFvaro of the i ist l c ]n scudintl it ID pou, aoruaa SarmMdll Carlisle at 11)(17) 5u3 12 1 ui Sanrrnlha r <alish atas6e Vic. Bernie Karl Gordon Severson Richard Wagner K&K Recycling Inc. 3201 Westmar Cir. P.O. Box 60868 P.O. Box 58055 Anchorage, AK 99508-4336 Fairbanks, AK 99706 Fairbanks, AK 99711 George Vaught, Jr. P.O. Box 13557 Denver, CO 80201-3557 Darwin Waldsmith P.O. Box 39309 Ninilchik, AK 99639 FHE STATE "'ALASKA July 22, 2021 Ronald C. Nutt Chief Operating Officer AIX Energy, LLC 2441 High Timbers Drive, Suite 120 The Woodlands, TX 77380 Re: Docket Number: OTH-20-045 Disabled Subsurface Safety Valve KLI-1 (PTD 2110430) Kenai Loop Gas Field Dear Mr. Nutt: 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 On January 25, 2021, the Alaska Oil and Gas Conservation Commission (AOGCC) issued Other Order 178 (Order) which required the following: • A civil penalty in the amount of $30,000 for violating 20 AAC 25.265(d) for producing Kenai Loop KLl-1 without a functional subsurface safety valve (SSSV); • An Application for Sundry Approvals Form 10-403 for the well work necessary to make the subsurface safety valve in KLI-1 functional; and • A detailed written explanation that describes how AIX intends to prevent recurrence of this violation. AIX has met all the requirements of the Order, including submitting an Application for Sundry Approvals to perform a rig workover to replace the SSSV in well KL1-1. The Order did not include a date by which a functional SSSV must be installed in KLl-1. More than seven months have passed since the Order was issued, and the SSSV has not yet been made functional. This letter mandates a date by which the well must be shut-in if a functional SSSV is not installed. Findings: 1) On February 2, 2021, the AOGCC received AIX's detailed explanation of how it intends to prevent reoccurrence of its violation. 2) On February 4, 2021, AIX paid the $30,000 civil penalty. OTH-20-045 July 22, 2021 Page 2 of 2 3) On February 17, 2021, AIX submitted the required Sundry Application (Form 10-403) to perform a rig workover to replace the surface -controlled SSSV in KLI-1 (PTD-2110430). 4) On April 4, 2021, the AOGCC approved AIX's Sundry Application (Approval No. 321-086). 5) As of the date of this letter, well KL1-1 is operating without a SSSV. The AOGCC finds that a deadline for installing a functional SSSV in KL 1-1 must be imposed to protect public safety. NOW THEREFORE IT IS ORDERED THAT: Within 30 days of issuance of this letter, AIX must take one of the following actions in well KLl-1: Install a functional surface -controlled SSSV in accordance with 20 AAC 25.265. 2. Shut in the well and install a plug in the tubing until a functional SSSV is installed. In either of the above scenarios, the SSSV system that is installed must be tested in accordance with 20 AAC 25.265 within five days of return to production. DONE at Anchorage, Alaska, and dated July 22, 2021. Jeremy Digitally signed by Jeremy Price Price Data 2021.07.22 16:24:55-08'DO- Jeremy M. Price Chair, Commissioner cc: AOGCC Inspectors Dan Digitally signed by Dan Seamount Seamount wce: m21`" 1405F1-0800' Daniel T. Seamount, Jr Commissioner Jessie L. Digitally signed by Jessie L Chmiele.A. Chmielowski Date: 2021 0722 1501a2-09'00' Jessie L. Chmielowski Commissioner 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 Dan 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. Colombie, Jody J (CED) From: Wendy Sheasby <wsheasby@brantaep.com> Sent: Thursday, February 4, 2021 8:10 AM To: Cash Management, Treasury (DOR sponsored) Cc: Colombie, Jody J (CED); Paladijczuk, Trade L (CED) Subject: ACH payment notification - AOGCC Other Order 178, Docket Number OTH-20-045, payment of civil penalty Categories: Yellow Category Payer Name: AIX Energy LLC Wire Amount: $30,000.00 Settlement date: 2/5/2021 State Agency: AOGCC Tax Type: AOGCC Other Order 178, Docket Number OTH-20-045, payment of civil penalty AIX Energy LLC 2441 High Timbers Drive, Suite 120, The Woodlands, TX 77380 832-813-0900 Phone 832-585-0133 Facsimile February 4, 2021 Commissioner Jeremy M. Price, Chair Alaska Oil and gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Re: Docket Number: OTH-20-045 Subsurface Safety Valve KL 1-1(PTD 2110430) Kenai Loop Gas Field Commissioner Price, AIX Energy LLC (AIX) received the January 25, 2021 Decision and Order in Docket Number OTH-20-045 ("Order"). AIX has procured a replacement subsurface safety valve (SSSV) and will be submitting an Application for Sundry Approval for the well work necessary to replace the valve in KL 1-1. As requested in the Order, AIX provides the following discussion of the violation and analysis of how AIX intends to prevent a similar violation from occurring in the future. As discussed in our September 8, 2020 response to your August 13, 2020 request for information, AIX's failure to replace the SSV after it removed the capillary string from KL 1-1 in 2016 appears to have been an oversight based on AIX's prior receipt of a waiver from AOGCC to operate without a SSV. There is no indication in ADVs records that failure to replace the SSV after removing the capillary string was deliberate, and upon receiving notice of the issue from the Commission, AOGCC immediately took steps to prepare to address the violation. This is the only AOGCC violation of AOGCC requirements that AIX has committed since it began operating in Alaska in 2015. AIX prides itself on its record of compliance with AOGCC requirements and is confident that this violation was a one- off occurrence that will not happen again. AIX's internal regulatory compliance program tracks AOGCC requirements and notifies employees of those requirements prior to conducting operations in the field. AIX employees receive training on AOGCC regulatory requirements, and supervisors monitor all actions taken at the field to ensure compliance with Commission rules, regulations, and orders. Supervisors also conduct periodic compliance audits of field operations to confirm that no violations are occurring. Because of the SSV waiver that had been issued, compliance monitoring did not catch the failure to replace the SSV. However, AIX's otherwise stellar record of compliance with AOGCC requirements confirms that AIX's compliance program and processes have otherwise been effective at ensuring that AIX employees do not violate applicable requirements for the field. In response to this violation, AIX has conducted a supplemental training with employees on compliance monitoring and has completed a compliance audit to confirm that all operations and systems are in compliance with AOGCC rules, regulations, and orders. Please let us know if we can answer any questions or provide any additional information. AIX will continue to update the Commission on the status of the SSV replacement. �Regards, �> Ronald C. Nutt Chief Operating Officer AIX Energy LLC Carlisle, Samantha J (CED) From: Regg, James B (CED) Sent: Tuesday, February 2, 2021 9:29 AM To: Carlisle, Samantha J (CED) Subject: FW: Docket OTH-20-045 Meant to copy you; just an FYI so the record is clear about which safety valve was addressed by the enforcement Jim Regg Supervisor, Inspections AOGCC 333 W. 71h Ave, Suite 100 Anchorage, AK 99501 907-793-1236 From: Regg, James B (CED) Sent: Tuesday, February 2, 20219:20 AM To: Ronnie Nutt <rnutt@brantaep.com> Cc: Colombie, Jody 1 (CED) <jody.colombie@alaska.gov> Subject: RE: Docket OTH-20-045 For clarity, references to the "SSV" in your explanation letter should be "SSSV" (SSV is surface safety valve; SSSV is subsurface safety valve). Jim Regg Supervisor, Inspections AOGCC 333 W. 7'h Ave, Suite 100 Anchorage, AK 99501 907-793-1236 From: Ronnie Nutt <rnutt@brantaeo.com> Sent: Tuesday, February 2, 20218:53 AM To: Regg, James B (CED) <Iim.reRg@alaska.Qov>; Colombie, Jody J (CED) <iodv.colombie@alaska.eov>; AOGCC Permitting (CED sponsored) <aoacc.Perm ittine@alaska.gov> Subject: FW: Docket OTH-20-045 The subject line should read Docket OTH-20-045. My apologies for the confusion. Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com From: Ronnie Nutt Sent: Tuesday, February 2, 20218:45 AM To: Regg, James B (DOA) (iim.regg@alaska.gov) <iim.regg@alaska.gov>; Colombie, Jody 1 (DOA) <iody.colombie@alaska.gov>; aogcc.permitting@alaska.gov Cc: Randy Bates <rbates@bra ntaep.com>; Fred Tresca <fmttx@me.com>; Clayton King <ckingC@brantaep.com>; Wendy Sheasby <wsheasbv@bra ntaep.com>; Elena Romerdahl (ERomerdahl@perkinscoie.com) <ERome rdahl@perkinscoie.com> Subject: Docket OTH-178 Please find attached our analysis of the SSSV issues in the KL 1-1 as required. If you have any questions or need additional information, please let me know. Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com Carlisle, Samantha J (CED) From: Ronnie Nutt <rnutt@brantaep.com> Sent: Tuesday, February 2, 2021 8:53 AM To: Regg, James B (CED); Colombie, Jody J (CED); AOGCC Permitting (CED sponsored) Subject: FW: Docket OTH-20-045 Attachments: AOGCC SSSV Violation Prevention Analysis Letter_final-signed.pdf The subject line should read Docket OTH-20-045. My apologies for the confusion. Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com From: Ronnie Nutt Sent: Tuesday, February 2, 2021 8:45 AM To: Regg, James B (DOA) (jim.regg@alaska.gov) <jim.regg@alaska.gov>; Colombie, Jody J (DOA) <jody.colombie@alaska.gov>; aogcc.permitting@alaska.gov Cc: Randy Bates <rbates@brantaep.com>; Fred Tresca <fmttx@me.com>; Clayton King <cking@brantaep.com>; Wendy Sheasby <wsheasby@brantaep.com>; Elena Romerdahl (ERomerdahl@perkinscoie.com) <ERomerda hl@perkinscoie.com> Subject: Docket OTH-178 Please find attached our analysis of the SSSV issues in the KL 1-1 as required. If you have any questions or need additional information, please let me know. Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com Regg, James B (CED) From: Ronnie Nutt <rnutt@brantaep.com> Sent: Monday, January 18, 2021 10:08 AM To: Regg, James B (CED) Cc: Randy Bates; Clayton King; Fred Tresca; Elena Romerdahl (ERomerda hl @ perk! nscoie.com) Subject: RE: Kenai Loop KL1-1 SSSV Good Morning Jim, Since I sent my previous letter we have successfully procured one of the few remaining SSSV in inventory. We should have it on location, barring any transportation hang-ups, in 4-6 weeks. Seems like a long time, but if we hadn't got this one it was going to take 34 weeks to have one built and shipped. We have tentatively identified Hllcorp Rig No. 147 as our workover rig. I have not confirmed an availability yet. This is the only rig we are aware of that can do the work in the Cook Inlet area. As soon as our sundry and procedure is approved, I will reach out to Hllcorp and get on their schedule. I'm anticipating doing the required work in the March to April timeframe as soon as we can get our services schedule and the new valve on location. If you have any additional questions, please let me know or if you would like we can discuss over the phone. Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com From: Regg, James B (CED) <jim.regg@alaska.gov> Sent: Friday, January 15, 2021 7:43 PM To: Ronnie Nutt <rnutt@brantaep.com> Subject: Kenai Loop KL1-1 SSSV Thank you for your response dated January 8, 2021 regarding AOGCC's notice of proposed enforcement. In that response, you note challenges with procuring a replacement SSSV and that there isjust 1 rig working in the Cook Inlet area capable of performing the workover to replace the SSSV in KL1-1. AOGCC is requesting a tentative schedule for bringing the well back into compliance, and the identity of the rig capable of doing the work. Jim Regg Supervisor, Inspections Regg, James B (CED) From: Regg, James B (CED) Sent: Friday, January 15, 2021 4:43 PM 1, 1 III b �� 1 To: Ronnie Nutt Subject: Kenai Loop K1-1-1 SSSV Thank you for your response dated January 8, 2021 regarding AOGCC's notice of proposed enforcement. In that response, you note challenges with procuring a replacement SSSV and that there is just 1 rig working in the Cook Inlet area capable of performing the workover to replace the SSSV in KL1-1. AOGCC is requesting.a tentative schedule for ✓ bringing the well back into compliance, and the identity of the rig capable of doing the work. Jim Regg Supervisor, Inspections AOGCC 333 W. 7'h Ave, Suite 100 Anchorage, AK 99501 907-793-1236 2441 High Timbers Drive, Suite 120, The Woodlands, TX 77380 832-813-0900 Phone 832-585-0133 Facsimile January 8, 2021 Commissioner Jeremy M. Price, Chair Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Re: Docket Number: OTH-20-045 Subsurface Safety Valve KL 1-1 (PTD 2110430) Kenai Loop Gas Field Commissioner Price, RECEIVED JAN 12 2021 AOGCC AIX Energy LLC (AIX) is in receipt of your letter dated December 15, 2020 concerning the proposed enforcement action for the subsurface safety valve (SSSV) on the AIX operated KL 1-1 in the Kenai Loop Gas Field. AIX concurs in whole with the proposed action. AIX has already attempted to secure a replacement SSSV. Unfortunately, our efforts have not been successful due to a shortage of the product. The existing SSSV cannot be re -used once the valve is retrieved at surface. We will continue our efforts to secure a replacement SSSV. AIX has also started researching rig equipment to perform the service. Our initial research has shown there is only one rig in the Cook Inlet area that can perform the service. Once we are able to procure a replacement SSSV, we will need to contact the operator of the equipment (Hilcorp) and attempt to get on their schedule to perform this work. AIX will continue our efforts to secure a replacement SSSV and workover rig and can perform this work as soon as the logistics can be worked out but wanted to inform the Commission of its progress thus far. If you have any questions or comments, please let me know. Regards, Ronald C. Nutt Chief Operating Officer AIX Energy LLC Colombie, Jody J (CED) From: Colombie, Jody 1 (CED) Sent: Wednesday, December 30, 2020 11:20 AM To: Ronnie Nutt Cc: Carlisle, Samantha J (DOA) (samantha.carlisle@alaska.gov); 'Brooks, Phoebe' Subject: RE: Docket Number: OTH-20-045 Ronnie, The Commission has granted your request for an extension until January 15, 2021 Jody Colombie From: Ronnie Nutt <rnutt@brantaep.com> Sent: Wednesday, December 30, 2020 11:07 AM To: Colombie, Jody 1 (CED) <jody.colombie@alaska.gov> Subject: FW: Docket Number: OTH-20-045 Here you go. From: Ronnie Nutt Sent: Wednesday, December 23, 2020 7:19 AM To: Jeremy Price (samantha.carlisle@alaska.gov) <samantha.carlisle @alaska.aov>; Brooks, Phoebe L (DOA) (phoebe.brooks@alaska.aov) <phoebe.brooks@alaska.eov> Subject: Docket Number: OTH-20-045 Good Morning, We received your letter dated December 15, 2020 on Monday December 21, 2020 concerning the referenced docket number. Due to the holiday schedule and to provide adequate time to research and determine a solution, AIX is requesting a 30 day extension to allow us time to respond. Please let me know if this is acceptable. Regards, Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com Carlisle, Samantha J (CED) From: Ronnie Nutt <rnutt@brantaep.com> Sent: Wednesday, December 23, 2020 4:19 AM To: Carlisle, Samantha J (CED); Brooks, Phoebe L (CED) Subject: Docket Number: OTH-20-045 Good Morning, We received your letter dated December 15, 2020 on Monday December 21, 2020 concerning the referenced docket number. Due to the holiday schedule and to provide adequate time to research and determine a solution, AIX is requesting a 30 day extension to allow us time to respond. Please let me know if this is acceptable. Regards, Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaeo.com THE STATE °fALASKA GOVERNOR MIKE DUNLEAVY December 15, 2020 Certified Mail Return Receipt Requested 7015 0640 0003 5185 6991 Mr. Ronnie Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers, Suite 120 The Woodlands, Texas 77380 Re: Docket Number: OTH-20-045 Subsurface Safety Valve KL1-1 (PTD 2110430) Kenai Loop Gas Field Dear Mr. Nutt: Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 w .aogcc.alaska.gov Pursuant to 20 AAC 25.535, the Alaska Oil and Gas Conservation Commission (AOGCC) hereby notifies AIX Energy LLC (AIX) of a proposed enforcement action. Nature of the Apparent Violation or Noncompliance (20 AAC 25.535(b)(1)). AIX has violated the provisions of 20 AAC 25.265, "Well safety valve systems". Specifically, Kenai Loop Gas Field well KLl-1 produces without a functional subsurface safety valve (SSSV) as required by 20 AAC 25.265(d). Basis for Findine the Violation or Noncompliance (20 AAC 25.535(b)(2)). AOGCC review finds the following: KLI-1 requires a SSSV in accordance with 20 AAC 25.265(d); the down hole safety valve was installed January 2012 prior to commencing gas production A SSSV waiver was granted by AOGCC as part of a February 2012 sundry approval to install a 4,000-foot capillary string inside the production tubing of KL1-1 to mitigate flow assurance issues from hydrate formation in the well, and installation of a lock -out ring across the SSSV to prevent its closure.l Sundry 312-046 dated February 3, 2012 Docket Number: OTH-20-045 December 15, 2020 Page 2 of 3 - 20 AAC 25.265(d)(4) specifically authorizes waiver of subsurface safety valve requirement only if the well is equipped with an electric submersible pump, a velocity string or a capillary string. - AOGCC inspection in February 2020 confirmed the capillary string was no longer installed in the KLI-1 production tubing. - AOGCC inspection in August 2020 confirmed no action had been taken to address the disabled SSSV. - AIX was notified that AOGCC initiated a review to determine if the SVS in KL1-1 comported with the requirements of 20 AAC 25.265.3 - AIX response to AOGCC noted the capillary string was removed from KL1-1 on June 23, 2015 4 Removal of the capillary string from the production tubing voided the SSSV waiver. - Although the capillary string was removed in June 2015, safety valve system test reports submitted by AIX for tests from September 2016 through August 2020 incorrectly state the KL1-1 tubing is equipped with a "dyna-coil run for hydrate inhibitor" injection. Proposed Action (20 AAC 25.535(b)(3)). For violating provisions of the 20 AAC 25.265 for Kenai Loop gas field well safety valve systems, the AOGCC intends to impose a civil penalty on AIX under AS 31.05.150(a) in the amount of $30,000. In determining the amount of the penalty, AOGCC has considered the criteria in AS 31.05.150(g), with emphasis on the extent to which AIX was acting in good faith in attempting to comply, the extent to which AIX acted in a willful or knowing manner, the extent and seriousness and actual or potential threat to public health or the environment, injury to the public, the need to deter similar behavior by AIX and others similarly situated at the time of the violation or in the future, and AIX's history of compliance issues. In addition to the imposed civil penalty, AOGCC intends to require AIX to provide - a detailed written explanation that describes how it intends to prevent recurrence of this violation; and - an Application for Sundry Approvals, Form 10-403, for returning the SSSV to service in KLI-1. As an operator involved in an enforcement action you are required to preserve documents concerning the above actions until after resolution of the proceeding. Rights and Liabilities (20 AAC 25.535(b)(4)) Within 15 days after receipt of this notification — unless the AOGCC grants an extension for good cause shown — AIX 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 2 AOGCC Inspector told AIX to put the SSV back in service or contact AOGCC engineering staff to obtain further instructions about the well's continued production. ' August 13, 2020 4 AIX response dated September 8, 2020; Well Service Report for pulling the capillary string was included. Docket Number: OTH-20-045 December 15, 2020 Page 3 of 3 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 AIX an opportunity to submit documentary material and make a written or oral statement. If AIX 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 I It' 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 AIX does not concur in the proposed action described herein, and the AOGCC finds that AIX 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 AIX 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 other actions the AOGCC may take. Sincerely, Jeremy M. Price Chair, Commissioner cc: Phoebe Brooks a Pj�L--n t lrjtU MAIL' RECEIPT Domestic Mail n.,tf, n- I+t Pp CertifiW Mail Fee A $ rn 0R MR.i8Fees(checkbPx, eetlreeaz IT7 ❑Ralum Rereipt mapPoPy S aCMPPTefe) 0 ❑RaNm flecelpt (elecM1enlq S Q ❑CerlMetl Mall ResNCNE NINery S Post'r r3 ❑P4ult$ignalw, ReQuimtl $ Here El tlull$Ignetum ResNcteapjl ,$ C3 Pos age S `O $ Total Postage a $ Mr. Ronnie Nutt $ wTP Chief Operating Officer — rl 9iiaetariJilpt.A AIX Energy LLC 2441 High Timbers, Suite 120 ___ crtr, srata, ziP.. The Woodlands, Texas 77380 Confidential, held in secure storage Carlisle, Samantha J (CED) From: Regg, James B (CED) Sent: Tuesday, August 25, 2020 1:37 PM To: Ronnie Nutt Cc: Randy Bates; FRED TRESCA; Clayton King; Carlisle, Samantha 1 (CED) Subject: RE: Docket Number OTH-20-045, Subsurface Safety Valve, KL1-1, Kenai Loop Gas Field Thank you for the call this morning. A 2 week extension is granted — new due date is 9/8/2020 Jim Regg Supervisor, Inspections AOGCC 333 W.7th Ave, Suite 100 Anchorage, AK 99501 907-793-1236 CONFIDENTIALITY NOTICE: This e-mail message, including any attachments, contains information from the Alaska Oil and Gas conservation Commission (AOGCC), State of Alaska and is for the sole use of the intended recipient(s). It may contain confidential and/or privileged information. The unauthorized review, use or disclosure of such information may violate state or federal law. If you are an unintended recipient of this e-mail, please delete it, without first saving or forwarding it, and, so that the AOGCC is aware of the mistake in sending it to you, contact Jim Regg at 907- 793-1236 or lim.ree¢@alaska.zov. From: Ronnie Nutt <rnutt@brantaep.com> Sent: Tuesday, August 25, 2020 10:00 AM To: Regg, James B (CED) <jim.regg@alaska.gov> Cc: Randy Bates <rbates@brantaep.com>; FRED TRESCA <fmttx@me.com>; Clayton King <cking@brantaep.com> Subject: Docket Number OTH-20-045, Subsurface Safety Valve, KL1-1, Kenai Loop Gas Field Mr. Regg, I received a letter yesterday dated August 13, 2020 concerning the referenced subject matter. The letter request certain information be delivered by August 25, 2020. Due to receiving this letter on short notice I formally request a two week extension to supply the required information. Your approval would be greatly appreciated. Thanks Ronnie Ronald C. Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers Suite 120 The Woodlands, Texas 77380 281.863.9935 Office 713.562.3318 Cell rnutt@brantaep.com THE STATE °fALASKA GOVERNOR MIKE DUNLL'AVY August 13, 2020 Certified Mail Return Receipt Requested 7018 0680 0002 2052 7927 Mr. Ronnie Nutt Chief Operating Officer AIX Energy LLC 2441 High Timbers, Suite 120 The Woodlands, Texas 77380 Re: Docket Number: OTH-20-045 Subsurface Safety Valve KL1-1 (PTD 2110430) Kenai Loop Gas Field Dear Mr. Nutt: Alaska Oil and Gas Conservation Commission 333 West Seventh Avenue Anchorage, Alaska 99501-3572 Main: 907.279.1433 Fax: 907.276.7542 www.00gcc.alaska.gov Gas well KL 1-1 (PTD 2110430) in the Kenai Loop Gas Field currently operates under a subsurface safety valve waiver approved by the Alaska Oil and Gas Conservation Commission (AOGCC) in Sundry Approval 312-046 dated February 3, 2012. The approved well work includes installation of a 4,000-foot capillary string inside the production tubing to address flow assurance issues from hydrate formation in the well, and installation of a lock -out ring across the subsurface safety valve to prevent its closure. The AOGCC is reviewing whether the safety valve system in Kenai Loop KLI-1 comported with the requirements of 20 AAC 25.228, and specifically the requirement to make operational the subsurface safety valve if the capillary string is removed from the production tubing.1 An AOGCC Inspector witnessed safety valve system testing at the Kenai Loop pad on February 24, 2020 and August 10, 2020. During the February 2020 witnessed tests, the Inspector noted that the capillary string had been removed from the well and the subsurface safety valve remained inoperable. AIX Energy LLC (AIX) representatives performing safety valve system tests were instructed to put the subsurface safety valve back in service or contact AOGCC engineering staff to obtain further instructions about the well's continued production. AIX submitted a safety valve system test report for February 2020 that includes the following comment: "KLI-1 SSSV has a waiver. Due to Dyna-coil ran for hydrate inhibitor. SSSV is locked open." AOGCC well records 20 AAC 25.265(d)(4): "an onshore well in a location described under (2) of this subsection and equipped with an electric submersible pump, velocity string, or capillary string run within the tubing is not required to be equipped with a subsurface safety valve" Docket Number: OTH-20-045 August 13, 2020 Page 2 of 2 indicate neither action following the February 2020 test occurred, and that AIX may also have failed to submit an Application for Sundry Approvals (Form 10-403) for the removal of the capillary string. On August 10, 2020, an AOGCC Inspector observed KLl-1 operating without a functional subsurface safety valve and no capillary string in the tubing. Not later than August 25, 2020, AIX is requested to provide the following: - Well Service Record showing when the capillary string was removed from the tubing; - Document showing AOGCC approval to remove the capillary string from KLl-1. This request is made pursuant to 20 AAC 25.300. Failure to comply with this request is itself a regulatory violation. The AOGCC reserves the right to purse an enforcement action in this matter according to 20 AAC 25.535. Should you have any questions about the information request, please contact Jim Regg at (907) 793-1236. Sincerely, U � 4�— Jeremy M. Price Chair, Commissioner