Regulator Fines Hilcorp Alaska in Latest of Over 60 Enforcement Actions

The Alaska Oil and Gas Conservation Commission (AOGCC) has imposed a $267,500 civil penalty on Hilcorp Alaska LLC for allegedly violating an approved drilling process, according to an official order from the regulator.

The commission levied the penalty after Hilcorp in February 2021 purportedly failed to give official notification of a change in equipment that was not approved in an earlier permit by the regulator. Hilcorp was conditionally approved to drill on the Milne Point oil field on Alaska’s North Slope in 2021, and the permit to drill (PTD) included an electrical submersible pump artificial lift completion. The commission order stated that Hilcorp installed a jet pump artificial lift completion without the regulator’s approval.

In assessing the penalty, the AOGCC said it considered Hilcorp’s “lack of good faith in its attempts to comply with the approved PTD” and that the company was aware that “the well completion was different than required without making any attempt to address the discrepancy”.

The commission also considered the company’s “track record of regulatory non-compliance” and “need to deter similar behavior in future operations”.

In the document, the AOGCC said it had issued more than 60 enforcement actions against Hilcorp. The enforcement actions include provisions for the company to identify and implement corrective actions that would prevent the recurrence of the violations or incidents. Of those enforcement actions, several were issued for changes to approved permits without prior approval, the commission said.

In a May 2023 letter sent to the AOGCC, Hilcorp offered four actions to prevent recurrence of the incident, which the commission said were insufficient and “lack detail”. Hilcorp’s proposed steps “appear to be narrowly focused to operations and regulatory personnel in Hilcorp Alaska and ignore the potential for similar events to occur at Hilcorp North Slope LLC operations, the regulator said. Further, the proposed steps “fail to identify management oversight shortcoming in assuring compliance with permit specifics”, as well as “fail to provide a corporate structure to avoid a similar repeat violation”. The commission said that these omissions “make it unlikely to prevent recurrence of this type of violation”.

In a statement obtained by Anchorage Daily News, Hilcorp spokesman Luke Miller said, “Upon learning of this specific incident, Hilcorp immediately began an investigation and took steps to improve our oversight and internal systems, including revising procedures, dedicating additional resources and strengthening training programs. An important part of Hilcorp’s culture is to get better every day, and we look forward to continuing to work closely with AOGCC to ensure compliant, safe and responsible operations”.

In March 2022, the USA Environmental Protection Agency fined Hilcorp $180,580 for Clean Air Act violations at 35 of its facilities in Alaska, located in Prudhoe Bay, Milne Point and Kenai Peninsula. The EPA said Hilcorp “failed to make timely repairs when leaks of methane and volatile organic compounds were found, failed to conduct leak inspection at a new facility, and failed to accurately report on leak inspection and repair activities from 2018 through 2020”.

According to the company website, Hilcorp was founded in 1989 and entered Alaska more than a decade ago. The company said it is the largest natural gas supplier in the state, with nearly one million gross acres and over 1,700 producing wells with an output of approximately 135,000 net barrels of oil equivalent per day.

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