State regulators hit Ahtna with $380K fine for gas well violations
(Editor's note: This story has been updated to inlcude new information in a June 1 statement from Ahtna Inc.)
An Ahtna Inc. subsidiary has racked up $380,000 in fines from the Alaska Oil and Gas Conservation Commission for allegedly ignoring mandates to monitor and report the conditions of a natural gas exploration well it drilled last year.
The commission issued the fine to Tolsona Oil and Gas Exploration LLC because the drilling company, among other things, repeatedly failed to provide data on the natural gas exploration well the company drilled last fall and was not responsive to efforts by commission officials to contact the company, according to a May 24 AOGCC order.
The fine order followed an April 11 Notice of Proposed Enforcement Action that claimed Tolsona failed to hold up its end of a deal after the commission granted the company’s request to suspend the well it had challenges drilling.
The Alaska Oil and Gas Conservation Commission is a technical state regulatory body responsible for oversight of subsurface oil and gas activity.
Late last September the wholly owned Ahtna Inc. subsidiary spudded the Tolsona-1 gas exploration well on state land about 11 miles west of Glennallen. An Ahtna press release announcing the start of the drilling work said the well’s target depth was about 4,000 feet.
The company statement also noted previous exploration wells in the region — Ahtna was a partner on one — hit high pressure water zones that hampered drilling.
However, the Alaska Native regional corporation had taken steps to mitigate pressure risks, including drilling a smaller pilot bore to 1,100 feet before setting concrete castings, according to the company.
Ahtna is the Alaska Native regional corporation for the upper Susitna and Copper River region.
A commercial-quality natural gas discovery in the Glennallen area could provide a lower cost and cleaner energy supply to not only the Copper River region but also the Interior.
It is seen as a potential long-term energy solution to the short-term Interior Energy Project, the state-owned Alaska Industrial Development and Export Authority’s effort to expand natural gas use around Fairbanks by trucking it north from the Matanuska-Susitna Borough.
According to the AOGCC, the Tolsona-1 well reached its total depth on Nov. 22, after 54 days of drilling.
Ahtna originally expected the drilling to take 26 days.
A Jan. 6 Ahtna release stated the well was ultimately drilled to 5,500 feet on Dec. 5 to overcome challenges from unexpected complexities in the area’s geology.
“We are proud that the Tolsona project delivered an outstanding safety record, provided employment and development opportunities for Ahtna shareholders and Alaskans, and that we were able to reach and evaluate the targeted zone,” Ahtna President Michelle Anderson said in the Jan. 6 release.
At that time Ahtna was preparing for detailed analysis of the well data, the company said.
According to the commission, the well was evaluated until Dec. 14, when the company applied to the commission to suspend the well. That application was approved the same day.
A day later, the company reported that pressure was building in the well casing annulus — the area between the inner tubing and outer casing — to nearly 900 pounds per square inch.
The pressure again built back to approximately 1,110 pounds per square inch after Tolsona bled it to zero, according to AOGCC documents.
As a result, the commission approved continued suspension of well operations and the installment of a second mechanical tubing plug. The commission additionally wanted Tolsona to monitor the well pressure and provide weekly reports until Jan. 20.
On Jan. 12, the commission approved Tolsona’s request to further install a back pressure valve in the well tubing at the end of the pressure reporting period. As a stipulation of installing the back pressure valve, Tolsona was required to provide monthly pressure reports to the AOGCC and give commission inspectors three days notice so they could witness the pressure readings.
Shortly thereafter the alleged problems began.
A March 6 AOGCC Notice of Violation issued to Tolsona Oil and Gas stated the company failed to report the well pressure on Jan. 20, but after a Jan. 23 follow-up by the commission, “Tolsona provided the data the same day with ‘apologies, we will not be late again.’”
However, according to the March 6 notice, after not receiving the Feb. 20 pressure report, the commission did not hear back from Tolsona via email after Feb. 28 and March 2 phone calls were not returned.
The commission subsequently sent an inspector to the drill pad March 3.
The notice states that once on site, the inspector discovered that the well pressures had not been recorded over the past month; a Tolsona representative that met with the inspector did not know if the back pressure valve had been installed; and the Tolsona employee had not been trained to properly record the wellhead pressures.
The April 11 AOGCC enforcement notice states that “Tolsona remains non-responsive and has failed to provide the required monthly well pressures for March 2017. Further, it alleges the company violated state regulations by not installing another pressure gauge on an outer well casing.
In a May 30 statement, Ahtna said its subsidiary has taken immediate action to comply with the May 24 order, claiming Tolsona responded to the March 6 notice by informing the commission it was working to install the required equipment on the well, including the pressure gauge.
Tolsona management did not receive the April 11 notice and “communication between Tolsona and AOGCC was unsuccessful until May 25,” according to Ahtna.
“Action taken has included scheduled installation of required equipment this week and improvements in chain of command protocols,” according to the Ahtna statement. “The well has been monitored and monthly well pressure reading reports have been provided on time by Tolsona to AOGCC since December 2016, with the exception of February’s report, which was submitted late but confirmed received.”
AOGCC commissioners said they could not comment on the matter to the Journal because it is still in adjudication.
On June 1, Ahtna issued a follow-up statement, saying the wellhead work needed to comply with the commission's orders was completed a day prior. That included installing a back pressure valve and a pressure gauge to monitor potential pressure on the outer well casing, according to Ahtna.
"The pressure reading on the (outer casing) after installation continues to be zero pounds per square inch. Tolsona appreciates and respects the mission of AOGCC to protect the public's interest in development of Alaska's resources," the June 1 statement reads. "Tolsona and AOGCC have worked cooperatively to address any issues."
It also notes that the area surrounding the well is undeveloped and the driling pad is secured by a gate preventing public access, presumably in response to the commission's assertion that the company's actions potentially put the public at risk.
The April 11 notice details the $380,000 proposed fine as $10,000 for failing to install the pressure gauge and another $10,000 for failing to submit the March 20 well pressure report. On top of that, the commission levied another $5,000 per day for each of the 50 days the gauge was not installed, from Feb. 20 to April 11, and $5,000 per day for each day the March 20 pressure report was past due.
“Tolsona’s failure to provide the monthly well pressure readings on a timely basis for three consecutive months, along with its failure to monitor required well pressures, demonstrates Tolsona’s disregard for regulator compliance,” the April 11 AOGCC fine notice summarizes.
That theme is continued in the most recent May 24 enforcement order, which contends Tolsona still had not responded to the commission’s March 6 notice.
“There is no dispute that the violations occurred and, as of the time of this order, remain ongoing. Prior to sending this notice, AOGCC made numerous attempts to obtain Tolsona’s compliance. Tolsona has in large part stonewalled the AOGCC’s efforts to obtain compliance, including ignoring the Notice of Proposed Enforcement Action,” the May 24 order concludes.
“Tolsona’s demonstrable disregard for regulatory compliance precludes any finding that it acted in good faith; any unmonitored over-pressured (wellbore) is deemed a serious violation which poses a serious and significant risk to public health and the environment. Although there was no injury to the public, the seriousness of the violation, in absence of any effort by Tolsona to correct the violation or prevent future violations and the need to deter such behavior weigh strongly in the penalty imposed.”
Elwood Brehmer can be reached at [email protected].