Cook Inlet Energy fined for safety valve violations

The Alaska Oil and Gas Conservation Commission — the state regulatory oversight group for the hydrocarbon industry — has issued a $446,000 penalty to Cook Inlet Energy for safety valve violations in early 2014.

The final penalty order, issued Tuesday, is the conclusion of a three-year dispute between Cook Inlet Energy and the AOGCC over the original $806,000 fine.

Cook Inlet Energy began drilling its Sword No. 1 well on the Kustatan Peninsula (also known as West Forelands) of Cook Inlet’s western coastline in June 2013, and began producing oil from it in November of that year. In addition to the surface safety valve it requires of all wells, AOGCC also required Sword No. 1 to have a subsurface safety valve, with both valves successfully tested within five days of the well’s start.

According to AOGCC’s Tuesday order, a Dec. 11, 2013 inspection found the well’s surface safety valve not functioning, and its subsurface safety valve “did not appear to be installed.” Two days later, an AOGCC inspector witnessed a failed test of the surface valve. The document states that the well had nonetheless been producing since Nov. 17, 2013 and ultimately produced for 42 days — until Jan. 5, 2014 — with a “defeated” valve system. In a later penalty review, Cook Inlet Energy claimed the subsurface valve had been installed at the time of the December 2013 inspection and had been functioning since January 2014. On Feb. 16, 2014, an AOGCC inspector witnessed a test in which the subsurface safety valve failed to close, which required the well to be shut in unless the valve could be repaired within 48 hours. Cook Inlet Energy unsuccessfully attempted to get a waiver for this requirement while trying to repair the valve, while the well continued to produce without it until the well was shut in on March 7, 2014.

AOGCC and Cook Inlet Energy corresponded about the safety valve system through 2014, until AOGCC sent the company a notice of proposed enforcement action on Dec. 8, 2014 — noting that in addition to regulatory violations, Cook Inlet Energy had failed to provide requested information about the safety valve system. The notice proposed corrective actions, as well as a $860,000 civil penalty.

Cook Inlet Energy requested a hearing, which was held Feb. 17, 2015. In a letter to AOGCC Chair Cathy Foerster prior to the hearing, Cook Inlet Energy Production Manager David Kumar wrote that the well’s design makes the safety valves unnecessary — it’s a low energy well requiring a hydraulic jet pump to send fluid into the well in order to create flow, according to Kumar.

“In simple terms, if producing lines from Sword #1 were open to atmospheric pressure due to a catastrophic failure, there would be a lack of any natural flow to the surface on account of the low energy associated with the well,” he wrote.

Other safety features were installed in the well, Kumar wrote, as a remote shut-off for the jet pump.

“Given the nature of the unconventional way of producing Sword #1 coupled with the fact that safety valve systems are geared toward more conventional completions, CIE (Cook Inlet Energy) implemented several comparable safety systems in addition to the (safety valve system),” Kumar wrote. “These comparable safety systems are equally effective and add additional layers of protection to prevent an uncontrolled release of hydrocarbons to the surface.”

AOGCC’s order states these claims “have no merit” in the absence of the regulation-mandated safety valve system.

“CIE’s installation of an SVS (safety valve system), albeit a non-functional SVS, its eventual request for a waiver, and the fact Sword #1 now has a functional SVS establish CIE’s awareness of the regulatory requirements and seriously erode its claim that an alternative system was necessary,” states AOGCC’s Tuesday order.

Nonetheless, the February 2015 hearing led AOGCC to reduce the $806,000 penalty to $446,000 in an order issued May 1, 2015. Cook Inlet Energy appealed the new penalty ten days later, contesting none of AOGCC’s regulatory findings but claiming the penalty was excessive. A second appeal hearing was scheduled, then canceled at Cook Inlet Energy’s request because only two of the three AOGCC commission seats were filled at the time.

The hearing was rescheduled after Gov. Bill Walker appointed Hollis French, a former oil worker and former Democratic state senator representing Anchorage, to the vacant AOGCC seat designated for members of the public in July 2016. AOGCC’s order includes the commission’s reasons for upholding the $466,000 penalty at that hearing.

More in News

<span class="neFMT neFMT_PhotoCredit">Homer News file photo</span>
                                The 39-year-old current Homer Police Station at its location on upper Heath Street near Homer High School and above the Homer Volunteer Fire Department. At its Sept. 10 Homer City Council worksession, council members discussed what to do with the old building when the new station is built in 2020.
Council considers options for old police station

With plans proceeding to build a new Homer Police station at the… Continue reading

Repairs start on Anchor River Bridge

Repairs on the Anchor River Bridge, situated between the Kenai Peninsula Borough… Continue reading

The Holland America Line ship Amsterdam sits at port in Juneau on Tuesday, Sept. 11, 2018. The Amsterdam is one of eight ships that have received Notice of Violations for air opacity issued by the Alaska Department of Environmental Conservation. (Michael Penn | Juneau Empire)
Air violations issued to eight cruise ships

It’s the highest number of violations handed out in all but four years.

Council write-in campaign falters after eligibility issue

A brief Homer City Council write-in campaign that started last week ended… Continue reading

In this Thursday, May 18, 2017 file photo, packs of cigarettes are offered for sale at a convenience store in Helena, Mont. Tobacco companies have made claims about cigarettes since the 1950s, all later proven false. In some cases the introduction of these products, such as filtered and cigarettes, propped up cigarette sales and kept millions of Americans smoking. Although the adult smoking rate has fallen to an all-time low of 15 percent in 2017, smoking remains the nation’s leading preventable cause of death and illness, responsible for about one in five U.S. deaths. (AP Photo/Bobby Caina Calvan)
Kenai Peninsula Borough assembly unanimously votes down cigarette tax

A cigarette and tobacco products tax was voted down unanimously by the… Continue reading

Farmers Market: Market returns to locals

You just got to love this town. Last Saturday was a perfect… Continue reading

Homer area school announcements

Homer High School Today — Volleyball against KCHS, Alice Witte Gymnasium, 4… Continue reading

Chamber cancels candidate forums after GOP objects to venue; Seaton to hold own forum instead

A District 31 State Representative candidate event will happen Sept. 25 at… Continue reading

Ken Castner III answers a question at a city council and mayoral candidate forum Tuesday, Sept. 11, 2018 at Alice’s Champagne Palace in Homer, Alaska. Castner is running for Homer mayor. (Photo by Megan Pacer/Homer News)
David Lewis, Ken Caster III debate at mayoral forum

The two candidates vying to become Homer’s new mayor fielded questions about… Continue reading

Most Read