State regulators fine Hilcorp $30,000 for meter-related violations on Kenai Peninsula

Hilcorp’s Innovation drilling rig on the North Slope. (Photo courtesy of Hilcorp)

State regulators have fined Hilcorp Alaska $30,000 for meter-related violations at an oil and gas field on the Kenai Peninsula. They cited the company’s history of violations as a factor behind the penalty.

The Alaska Oil and Gas Conservation Commission wrote in its May 14 order that Hilcorp failed to submit required meter performance reports for the Beaver Creek unit in the Kenai National Wildlife Refuge. Those reports detail how accurately a meter measures the volume of oil or gas leaving a field. The state uses those volumes to calculate royalties that Hilcorp pays to the government.

Hilcorp’s violation stems from an agreement with the commission in October. The commission allowed for new metering equipment, but required the monthly performance reports.

“Oil custody transfer meters are essentially the state’s cash register,” Jeremy Price, chair of the commission, said in a statement. “AOGCC strives to ensure the till is always accurate.”

In setting the penalty, the commission said, it considered Hilcorp’s “lack of good faith in its attempts to comply with the imposed conditions, its history of regulatory noncompliance and need to deter similar behavior.”

“While improvements in Hilcorp’s compliance can be shown in the past 2 years, the recurrence of failing to account for approval conditions imposed by AOGCC calls into question the effectiveness of corrective actions implemented in responses to past enforcement actions,” the commission’s order said.

The commission said Hilcorp had similar, recent violations in Alaska at the Granite Point and Trading Bay units in Cook Inlet.

It provided Hilcorp with notice of the proposed fine in March.

Hilcorp Alaska spokesman Luke Miller said that when the company received the notice, it took corrective steps and provided the required reports. Hilcorp has not disputed the commission’s findings.

“We also took measures to ensure the quality control of our recordkeeping related to this issue,” Miller said in a statement. “We will continue to work closely with AOGCC to ensure compliant, safe and responsible operations.”

The commission says it has received the data and a corrective action report from Hilcorp. The information indicates the oil metering equipment is giving accurate readings.

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