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Home My WebLink AboutO 189Other Order 189 Docket No: OTH-21-040 Swanson River Unit 241-33B 1. November 12, 2021 Notice of proposed enforcement action per 20 AAC 25.535 (b)(1) and 20 AAC 25.353 (b)(2) 2. November 24, 2021 Hilcorp’s response to Notice of Proposed Enforcement 3. December 9, 2021 Hilcorp’s civil penalty payment receipt 4. January 7, 2022 Hilcorp’s response to AOGCC Decision and Order ORDERS STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West Seventh Avenue Anchorage Alaska 99501 Re: Compliance with Permit to Drill 221- 053, Swanson River Unit 241-33B ) ) ) ) ) Other Order 189 Docket Number: OTH-21-040 December 29, 2021 DECISION AND ORDER On November 12, 2021 the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of Proposed Enforcement Action (Notice) to Hilcorp Alaska, LLC (Hilcorp) for failing to perform drilling operations in accordance with conditionally approved Permit to Drill (PTD) 221-053. The Notice proposed a specific corrective action and a $39,000 civil penalty under AS 31.05.150(a). Summary of Proposed Enforcement Action: The Notice proposed a civil penalty for violating three approval conditions while performing drilling operations. 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 August 27, 2021 the AOGCC conditionally approved PTD 221-053, authorizing Hilcorp to drill well Swanson River Unit (SRU) 241-33B. The well was spudded on September 9, 2021. Drilling and Completion operations permitted under this PTD ended on September 21, 2021. The conditions imposed in the approved PTD were: x Casing and liner lap test to 50% of burst – provide 24-hour notice for AOGCC to be able to witness the casing mechanical integrity test (MIT) and formation integrity test (FIT); x Review 7-5/8” leak off test (LOT) data and kick tolerance with AOGCC before drilling 6.75” hole section. AOGCC investigation indicates Hilcorp failed to comply with these conditions of approval as follows: x On September 12, 2021, Hilcorp conducted the 7-5/8” casing MIT to 3500 psi. AOGCC was not provided an opportunity to witness the MIT. x On September 13, 2021, a FIT was performed after drilling out the 7-5/8” casing shoe. AOGCC was not provided an opportunity to witness the FIT. x On September 13, 2021, after performing the FIT, Hilcorp commenced drilling the 6.75” hole section without providing AOGCC the FIT data and kick tolerance. o On September 17, 2021, Hilcorp reached the total depth of the 6-3/4” hole section. o Hilcorp did not provide the required FIT data until AOGCC requested it on September 22, 2021. Other Order 189 December 29, 2021 Page 2 of 3 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 clearly stated conditions on the PTD, the potential seriousness of 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. Mitigating circumstances include no injury to the public or the environment, and Hilcorp realized only minor benefits by failing to comply. Findings and Conclusions: Hilcorp neither requested informal review nor a public hearing regarding the notice of proposed enforcement. By letter dated November 24, 2021 Hilcorp stated that it will pay the proposed fine outlined in Docket Number OTH-21-040 and offered three actions to prevent recurrence: The steps we are taking to prevent recurrence include the following: x Advise company personnel on importance of adhering to conditions of approval on the permit to drill x Having discussions about upcoming steps in the drilling program on a daily basis with the rig personnel x Communicate to engineering staff the differences in processes between North Slope Permits and Cook Inlet Permits Hilcorp intends to prevent recurrence by having discussions with rig personnel daily about upcoming steps in the drilling program. It is unclear how the planned discussions will add to the daily communications already taking place at the time of these violations. Hilcorp’s 3 rd bulleted step for preventing recurrence, an inaccurate assessment of AOGCC’s application of approval conditions, is troubling. Differences between North Slope and Cook Inlet permit conditions are the result of AOGCC’s case-by-case reviews rather than solely geographic differences. Hilcorp’s compliance issues can only be addressed by reading the conditions of approval attached to each permit – regardless of where in the State of Alaska the permitted work occurs. In its November 24, 2021 letter Hilcorp attempted to minimize its compliance problems by stating “no written regulations were broken during the drilling of this well” (SRU 241-33B) and also provided additional context for the violations noted by AOGCC. Hilcorp’s claim that it was “overly transparent” in communicating with AOGCC during the drilling operations, is rebutted by its acknowledgement that it did not comply with the test notification requirements of AOGCC Industry Guidance Bulletin 10-01A, “Test Witness Notification”. Clearly written conditions of approval on the Permit to Drill, Form 10-401, and changes and directives attached to the work procedure by AOGCC, have the full force of regulation. The AOGCC finds that Hilcorp failed to comply with conditions attached to PTD 221-053. 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. Other Order 189 December 29, 2021 Page 3 of 3 The AOGCC also finds that the steps listed in Hilcorp’s November 24, 2021 response to the notice of violation are unlikely to prevent recurrence of this type of violation unless they are systematically applied on every approved PTD and Sundry application. Hilcorp has not addressed how that will be managed. Now Therefore It Is Ordered That: Hilcorp is assessed a civil penalty in the amount of $39,000 for failing to comply with the approval conditions in PTD 221-053.Within 10 days of the date of AOGCC’s final decision, Hilcorp shall provide a detailed written explanation that describes 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. Done at Anchorage, Alaska and Dated December 29, 2021. Jeremy M. Price Jessie L. Chmielowski Chair, Commissioner Commissioner cc: AOGCC Inspectors Phoebe Brooks (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. Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2021.12.29 10:38:42 -08'00' Jeremy Price Digitally signed by Jeremy Price Date: 2021.12.29 13:09:18 -09'00' Bernie Karl K&K Recycling Inc. P.O. Box 58055 Fairbanks, AK 99711 Mailed 12/29/21 SJC 1 Carlisle, Samantha J (OGC) From:Carlisle, Samantha J (OGC) Sent:Wednesday, December 29, 2021 2:05 PM To:AOGCC_Public_Notices Subject:Other Order 189 (Hilcorp, Swanson River Unit) Attachments:other189.pdf Compliance with Permit to Drill 221-053, Swanson River Unit 241-33B Samantha Carlisle Executive Secretary III Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, AK 99501 (907) 793-1223 INDEXES By Samantha Carlisle at 11:27 am, Jan 07, 2022 w Hilcorp Alaska LLC P.O.Box 61529 Hnimtnn TY 779f)A_1r90 —ownerl. 40012563 Check Date: 12/03120211 Check Number- 42009207 og *****$39,000.00 Hw. 1900035051 11/2912021 122921 $0.00 $39,000.00 RECEtVIED DEL 0 j 2021 AOGCC THIS CHECK IS PRINTED ON CHEMICALLY REACTIVE PAPER THAT HAS VISIBLE FIBERS AND A WATERMARK —HOLD TO LIGHTTO VIEW AMEGY BANK Hilcorp Alaska LLC P.O.Box 61529 Houston TX 77208-1529 PAY TO T H -E ORDER or Void After 90 DavS Check No Check Date Check Amount 42009267 12/0312021 *****$39,000.00 Th-irty-Nine Thousand Dollars And Zero Cents STATE OF ALASKA AOGCC 333 WEST 7TH AVE ANCHORAGE AK 99501-35.39 Authorized Signature 11'42009207,14 1:113110SEID: 04444077413iis Hilcorp Alaska, LLC Monty M Myers 3800 Centerpoint Dr., Suite 1400 Anchorage, Alaska 99503 November 24, 2021 VIA EMAIL AND CERTIFIED MAIL Commissioner Jessie L. Chmielowski Alaska Oil and Gas Conservation Commission 333 West 7th Avenue Anchorage, Alaska 99501 Subject: Docket Number: OTH-21-040 Notice of Proposed Enforcement Compliance with Permit to Drill 221-053 (SRU 241-33B) Dear Commissioner Chmielowski, We will pay the fine outlined in Docket Number OTH-21-040. The steps we are taking to prevent recurrence include the following: x Advise company personnel on importance of adhering to conditions of approval on the permit to drill x Having discussions about upcoming steps in the drilling program on a daily basis with the rig personnel x Communicate to engineering staff the differences in processes between North Slope Permits and Cook Inlet Permits We wanted to provide some additional context for the situations outlined. While we did not specifically and in writing provide 24 hours advance written notice for some of the conditions on the permit, we did keep AOGCC staff abreast of developments on SRU 241-33B (PTD 221-053), including email and oral communications with AOGCC staff throughout the process. We highlight this fact to note that we were overly transparent with the AOGCC staff as to the current status of the well and to inform them of the specific task we were about to perform. Two of the violations proposed occurred within 24 hours of a previous notice that was submitted and waived by AOGCC. We would also like to highlight that no written regulations were broken during the drilling of this well. Sincerely, Monty Myers Drilling Manager By Samantha Carlisle at 3:27 pm, Nov 24, 2021 Digitally signed by Monty M Myers DN: cn=Monty M Myers, c=US, o=Hilcorp Alaska, LLC, ou=Technical Services - AK Drilling, email=mmyers@hilcorp.com Reason: I am approving this document Date: 2021.11.24 11:32:55 -09'00' Monty M Myers 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 November 12, 2021 CERTIFIED MAIL – RETURN RECEIPT REQUESTED 7018 0680 0002 2052 9464 Monty M. Myers Drilling Manager Hilcorp Alaska, LLC 3800 Centerpoint Drive, Suite 1400 Anchorage, AK 99503 Re: Docket Number: OTH-21-040 Notice of Proposed Enforcement Compliance with Permit to Drill 221-053 (SRU 241-33B) Dear Mr. Myers: 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 failed to comply with conditions of approval in the approved Permit to Drill (PTD) for well SRU 241-33B (PTD 221-053). Basis for Finding the Violation or Noncompliance (20 AAC 25.535(b)(2)). On August 27, 2021 the AOGCC conditionally approved PTD 221-053, authorizing Hilcorp to drill well SRU 241-33B. The well was spudded on September 9, 2021. Drilling and Completion operations permitted under this PTD ended on September 21, 2021. The conditions imposed in the approved PTD were: - Casing and liner lap test to 50% of burst – provide 24 hour notice for AOGCC to be able to witness the casing mechanical integrity test (MIT) and formation integrity test (FIT); - Review 7-5/8” leak off test (LOT) data and kick tolerance with AOGCC before drilling 6.75” hole section. AOGCC investigation indicates Hilcorp failed to comply with these conditions of approval as follows: - On September 12, 2021, Hilcorp conducted the 7-5/8” casing MIT to 3500 psi. AOGCC was not provided an opportunity to witness the MIT. - On September 13, 2021, a FIT was performed after drilling out the 7-5/8” casing shoe. AOGCC was not provided an opportunity to witness the FIT. - On September 13, 2021, after performing the FIT, Hilcorp commenced drilling the 6.75” hole section without providing AOGCC the FIT data and kick tolerance. - On September 17, 2021, Hilcorp reached the total depth of the 6-3/4” hole section. Docket Number: OTH-21-040 Notice of Proposed Enforcement November 12, 2021 Page 2 of 2 - Hilcorp did not provide the required FIT data until AOGCC requested it on September 22, 2021. Proposed Action (20 AAC 25.535(b)(3)). For failure to comply with the conditions of approved PTD 221-053, the AOGCC intends to impose a civil penalty on Hilcorp under AS 31.05.150(a) in the amount of $39,000 1 ($10,000 for each of the three conditions of approval that were violated plus $1,000 per day for the nine days in between performing the FIT and providing the data to AOGCC). 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 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, Jessie L. Chmielowski Commissioner cc: Phoebe Brooks James Regg Bryan McLellan 1 AS 31.05.150(g) requires AOGCC to consider nine criteria in setting the amount of a civil penalty. Jessie L. Chmielowski Digitally signed by Jessie L. Chmielowski Date: 2021.11.12 08:20:48 -10'00'