Hilcorp fined after a valve designed to prevent an oil spill at Prudhoe Bay was shut down

The state agency that oversees oil production in Alaska issued a strongly worded penalty to the operator of the state’s largest oil field this week after a safety valve designed to prevent an oil spill at a Prudhoe Bay well was shut off.

An inspector with the Alaska Oil Gas Conservation Commission discovered the inoperable surface safety valve on Sept. 27, one week after the well in the western Prudhoe Bay area had returned to oil production, according to documents associated with the incident.

It’s unknown how long the valve had been shut off.

In its two-page order issued Tuesday, the agency fined Hilcorp Alaska $10,000 and said it has a “substantial history of noncompliance.” The agency said the company has provided inadequate details about the situation. It questioned whether the company’s corrective actions will be effective in preventing a similar incident in the future.

“While Hilcorp notes that it conducted an internal investigation, no details have been shared that would point to a root cause for the defeated critical well (safety valve system) and how long it was defeated before being discovered by an AOGCC inspector,” the order says.

A Hilcorp official said in an emailed statement Wednesday that it undertakes thousands of operations every year and safety and environmental protection are its top priorities.

“Upon learning of this specific incident, Hilcorp immediately began an investigation to determine a root cause,” said Luke Miller, Alaska government and public affairs manager. “We have implemented procedures in order to prevent this from happening in the future. We will continue to work closely with AOGCC to ensure compliant, safe and responsible operations.”

Commissioners could not comment on the matter, said Grace Salazar, a spokeswoman with the agency said.

Hilcorp, a privately owned company based in Houston, Texas known for its lean operations, has been credited for helping stabilize production at aging oil fields, including at Prudhoe Bay, where it took over as operator from BP last year in a $5.6 billion deal. But critics have said the company is prone to environmental accidents, like gas leaks in Cook Inlet in recent years.

The agency’s language about Hilcorp’s “substantial” noncompliance hearkens back to previous strongly worded commission orders against the company before its acquired the Prudhoe Bay oil fields. The incident is the first example of noncompliance recorded against Hilcorp by the agency this year, though it faced a batch of incidents last year, according to agency records.

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Company practices such as daily inspections should have caught the inoperable safety valve system, Hilcorp said in a one-page letter to the agency, signed by Stan Golis, an operations manager with Hilcorp Alaska.

An investigation found “a lack of attention” by two individuals, the day and night operators of the H Pad, the Nov. 2 letter said. The incident occurred at well H-24A.

The letter said disciplinary action was taken against both individuals, biennial safety valve system training is in place for pad operators, and the incident has been reviewed with Hilcorp’s operations team to raise awareness.

The order said Hilcorp did not request an informal review or hearing to address the alleged violations.

The incident is a “serious” one that should have been caught through normal procedures on the North Slope, said Mark Myers, a former Oil and Gas director for the state of Alaska and a former geologist with Arco Alaska when it operated on the North Slope in the late 1990s.

“This should be a wake-up call for Hilcorp,” he said.

The Alaska Oil and Gas Conservation Commission and Hilcorp should look closely at the company’s training, procedures and safety culture to prevent future problems, he said.

The safety valve system was shut off when a low-pressure detection device was “defeated,” according to the order. That prevented the automatic closure of the surface safety valve.

“Defeated” means the safety valve component was intentionally rendered inoperable when it should be operational, meaning it was not a mechanical failure, Salazar, the commission spokeswoman, said in an email.

Hilcorp said in its letter that an investigation found a switch associated with the safety valve system was in bypass mode, leading to the problem.

Hilcorp said the well was “offline” between Aug. 12, when well work was completed, and Sept. 20, when the well was placed into production.

In the order, the three-member commission questioned Hilcorp’s response and indicated Hilcorp had not provided the agency with enough information.

Hilcorp’s “claim that an internal investigation was performed is unsupported by any details, including a root cause analysis that identifies the cause for the defeated critical well (safety valve system),” the order says.

Commissioners Jessie Chmielowski and Dan Seamount signed the order. Chairman Jeremy Price is on personal leave this week, Salazar said.

The agency also “questions the effectiveness of Hilcorp’s reliance on disciplinary action against those involved with the (safety valve) maintenance as a means to prevent a recurrence of this violation, especially in light of corrective actions that Hilcorp claimed it would implement in response to previous (safety valve system) violations.”

“Further, Hilcorp has not adequately addressed AOGCC’s request for information about what has or will be done in the future to prevent its recurrence,” the agency said.

Hilcorp could have faced a larger fine after not responding to an initial notice from the agency in early October. But the agency waived the daily, $2,000 fee after Hilcorp said that it had not received the initial notice.