Alaska oil and gas regulators fine Hilcorp more than $50,000 for violations

The state agency that oversees Alaska oil production has upheld two fines against Hilcorp totaling $64,000, for violating requirements needed to prevent spills or leaks in fields in the Cook Inlet region in Southcentral Alaska.

The penalties, issued Dec. 29, come on the heels of a $10,000 fine issued against Hilcorp in late November for a violation at the giant Prudhoe Bay fields on the North Slope. The agency called that violation, involving a spill-prevention safety valve that was shut down during oil production, part of Hilcorp’s “substantial history of noncompliance.”

In the new orders, the Alaska Oil and Gas Conservation Commission continued to express concerns about Hilcorp’s record.

Hilcorp, based in Houston, Texas, operates Alaska’s largest oil field at Prudhoe Bay. Hilcorp is also the leading oil and gas producer in Cook Inlet in Southcentral Alaska.

Hilcorp said in a statement on Monday it is taking action to prevent similar violations.

“Hilcorp takes seriously AOGCC’s recent orders and is taking proactive measures to ensure similar incidents do not happen in the future, including better contractor management, revising procedures, and dedicating additional resources focused on well integrity,” said Luke Miller, a spokesman with Hilcorp in Alaska, in an emailed statement. “As Hilcorp has increased work activity in Alaska, we have also taken steps to improve our internal systems. We will continue to work closely with AOGCC to ensure compliant, safe and responsible operations.”

Hilcorp has been credited for helping stabilize production at aging oil fields, including at Prudhoe Bay, where it took over as operator from BP in 2020 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. Hilcorp has rewarded employees with large bonuses for boosting oil production and the value of the company.

In one of the newly issued orders, the three-member commission levied a $39,000 penalty against Hilcorp Alaska for violating three requirements associated with a well drilled in September at the Swanson River field.

After the company began drilling the well, it failed to provide the agency with a 24-hour notice so regulators could witness two tests designed to help ensure the safety of the well, according to the three-page order. One of the tests the agency was not able to witness involved the integrity of steel pipes placed inside the well.

Hilcorp also did not provide the agency with data about one of the tests, as required, until the agency requested it, the order says.

The agency’s concerns included “Hilcorp’s lack of good faith in its attempts to comply with the clearly stated conditions on the (drilling permit),” the potential seriousness of the violation, and the company’s “track record of regulatory non-compliance,” according to the order.

Hilcorp did not challenge the penalty, after the agency issued a notice in November. Hilcorp said it would work with its crews to prevent future violations. It said it would inform engineering staff about “differences in processes” involving North Slope and Cook Inlet permits, the order said.

The agency took issue with those proposed improvements. It said Hilcorp’s statement about different North Slope and Cook Inlet permitting conditions is “inaccurate” and “troubling.”

“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,” the order says.

Also on Dec. 29, the agency upheld a $25,000 proposed fine against Hilcorp, for failing to conduct a required test associated with blowout-prevention equipment, according to that three-page order. Such equipment is used to prevent an oil spill or gas leak.

That violation came at a well in the North Cook Inlet field, during work designed to extend the well’s operational life.

Hilcorp did not dispute the agency’s findings. It said it would communicate with workers to prevent future violations.

The commission noted that in both cases, the public and the environment were not harmed.

In the orders, the agency said Hilcorp must provide additional information about how it will prevent the violations from occurring again.

The agency had no comment on the fines, according to Grace Salazar, a spokeswoman with the agency.

The commission consists of Chairman Jeremy Price and member Jessie Chmielowski, both appointed in 2019 by Republican Gov. Mike Dunleavy, and member Dan Seamount, appointed in 2000 by former Democratic Gov. Tony Knowles.