Hilcorp Fined for Permit Violations

     Citing “aggressiveness” in its operations, the Alaska Oil and Gas Conservation Commission has handed down several orders to energy producer Hilcorp, and a $115,000 civil penalty.

     In its decision and order dated April 10, AOGCC says Hilcorp failed to notify the agency of changes to an approved permit and that the company failed to test blowout prevention equipment. All of this comes from work done last October in the Soldotna Creek Unit on the central Kenai Peninsula.

     The agency found that Hilcorp had started drilling at a depth 500 feet shallower than approved. That drilling happened in an over-pressurized zone which required closure of the  rig’s blow out prevention equipment, or BOPE. After changing out that equipment, drilling continued, but without a proper test of the BOPE.

     Hilcorp did notify the agency that it had used that equipment to control the flow of formation fluids, and that’s when it found out about the change in drilling depth.

     “This violation was self-reported because we strongly believe in operating safely and responsibly and we don’t take that lightly,” said Hilcorp spokesperson Lori Nelson.

     She said as part of the order handed down by the commission, new training measures are in place for Hilcorp’s contractors.

     “So what we’re doing is making sure we’re having that face-to-face interaction with those folks that are in the field, on the ground, in these types of situations, making sure that they are keenly aware of the regulations in place surrounding what they do,” she said.

     The agency’s three commissioners all signed off on the order. And they were nothing if not blunt in writing their findings. They said “the aggressiveness with which Hilcorp is moving forward with operations appears to be contributing to regulatory compliance issues.” They also noted 13 separate enforcement actions issued between April and December of last year. Nelson acknowledges that the company operates with a sense of urgency, but…

     “Urgency for us doesn’t mean get it done fast at any cost, it means get it done the right way, as quickly as possible. Being a new company, getting up to speed in some cases has been great, in other cases has presented challenges, but in every opportunity we’ve had, we’ve taken that and hopefully turned it around for a positive in the long run,” Nelson said.

     The order also called for more communication between Hilcorp and AOGCC, including a detailed description of its regulatory compliance program, a root cause analysis addressing the violations and evidence that staff involved with permitting be trained in the agency’s regulatory requirements.

     “We definitely take a different approach in that we are very open and transparent with regulators, stakeholders and the community. We hope that that will continue as our business continues to grow here in Alaska,” Nelson said.

     The initial penalty was $75,000, plus other smaller fines for failure to notify the agency of a change in well plans and failure to test blowout prevention equipment. In all, $115,000, which Nelson said has been paid in full.