The targets of the allegations are Texas-based Pioneer Natural Resources and to a lesser extent, the Alaska Oil and Gas Conservation Commission, a state agency which regulates oil wells. The agency hired the investigator after determining that it would be a conflict for it to investigate itself.
The investigation centers on Oooguruk, a Pioneer-run oil field that pumps oil from an artificial island in several feet of water near the mouth of the Colville River. Oooguruk began operating in 2008 and it is unique in Alaska because it is the only North Slope oil field not developed and run by one of Alaska's major oil producers.
The whistleblower who lodged the accusations, Mike Kelley, was a technician at Oooguruk who had worked in the Alaska oil industry for at least 30 years, including as a contract worker for BP.
"In all my years in the Alaskan oil industry, I have never witnessed such poor judgement with respect to environmental stewardship," he wrote in a 129-page, single-spaced report he wrote this spring about roughly two years he spent at Oooguruk.
Pioneer lawyers have sifted through his report in recent months and interviewed Kelley and other Oooguruk workers about its contents for the company's own internal investigation, completed last month. The company disagrees with most of Kelley's accusations but has admitted to a couple of them, and company officials said they have made some changes in their procedures based on their findings.
In his report, Kelley claims the company covered up spills, injured wildlife, created unsafe conditions for workers and violated rules by disposing of waste materials into places they shouldn't go, such as into a production line that leads to Kuparuk and the trans-Alaska pipeline, and into the oil reservoir.
He also said the state's oil and gas commission was a "no-show" for inspections at a time when Oooguruk was having testing problems with safety valves that would not seal properly in the event of a blowout.
The state commissioners said they could not comment on a pending investigation. In general, two of the three commissioners said, their staff cannot attend all inspections on the Slope but they analyze the results of all of them. In fact, the commission recently ordered the shutdown of two wells at Pioneer after a May inspection raised concerns about temporary pipes the agency felt were potentially unsafe. The commission says it has the most inspectors per regulated well of any state.
The allegations by Kelley that Pioneer acknowledge involve potential violations of state or federal rules. The state rule violation, at least, could lead to a civil fine.
Because of the potential conflict of interest, the state's investigation was put out for bid and the state awarded it to Hawk Consulants, an Anchorage contractor. The $300,000 investigation is expected to run through the end of the summer. The principal investigator is Rob Shoaf, an Anchorage attorney who used to run the employee-concerns program at Alyeska Pipeline Service Co. Shoaf is working with several private engineers, including one who used to supervise the oil and gas commission's field inspectors.
"We will act on any findings and our actions will be open to the public," said Cathy Foerster, an oil and gas commissioner.
ADMISSIONS OF WRONGDOING
One of Kelley's allegations against Pioneer is that the company injected an anti-freeze chemical into the Kuparuk oil formation after using it to test its pipe. The chemical, glycol, is injected into similar wells on the North Slope, but Pioneer did not have permission to do so.
Kelley also alleged that Pioneer slipped waste products into a pipe that carries oil, gas and water to the Kuparuk oil field for processing.
Pioneer initially told regulators that neither allegation was "substantiated." The company has since acknowledged that it improperly injected thousands of gallons of glycol in violation of its permit.
Pioneer said it was unable to verify the other allegation, but said it had no incentive to pass along contaminated oil to Kuparuk, and testing by Pioneer and Conoco would have shown that the mixture was contaminated, said the company's Alaska spokesman Tadd Owens.
Another Kelley allegation was that company workers violated federal rules that prohibit moving occupied bird nests without a permit, and the company spilled drilling salts on the ground without cleaning them up, and the salts were licked up by caribou.
The birds were snow buntings, a common species on the Slope. In one case, the chicks died at "some point after the move," the company later said, admitting that they didn't have a permit. In the other case, they said they didn't know what happened because there was no documentation.
The company says it doesn't have anything other than Kelley's word about the caribou and spilled drilling salts.
In a final, inch-thick May 24 report to state and federal regulators on Kelley's allegations, the company's attorneys disagreed with most of them. But, they wrote, Pioneer "respects Mr. Kelley's industry experience and appreciates his efforts to bring his concerns to the fore."
The company has since applied for and received permission to put the glycol into the oil formation -- it needs to legally dispose of the rest of what remains in its pipes. Owens said that the company has also made operational changes to keep better track of how it manages fluids and wastes at Oooguruk.
BLOWING THE WHISTLE
Kelley said he took his accusations outside Pioneer because company officials were not taking proper action when he'd raise concerns at Oooguruk.
He said in a recent interview that he left Pioneer because "the friction was growing to a point of where I would get fired or disciplined."
Frustrated, Kelley lodged some of his initial accusations with a person whom he trusted, BP ombudsman Stan Sporkin. After getting the information from Kelley in February, Sporkin passed the information to BP officials, not naming his source but noting that the informant was a former BP contractor who had "in the past, provided credible information to our office." BP passed Sporkin's letter to Pioneer and state and federal regulators, according to documents included in Pioneer's May 24 report.
Kelley began talking to Pioneer staff about his allegations and he resigned from his job in March. Since then, he has discussed his allegations and shared documents with Pioneer lawyers in multiple meetings.
Kelley has mixed feelings about the company's internal investigation. He's glad that Pioneer is making some changes but he believes the company is still hiding its culpability on other issues. He remains worried that workers at Oooguruk ultimately could be blamed for violations.
"Management was responsible," he said. "The book should be thrown at them," he said.
In its final report to regulators on Kelley's allegations, Pioneer characterized the glycol injection as a "good faith" error by the company's operations staff. The company said it is now providing more training to Oooguruk employees about the company's permits and better training about how to apply the information contained in the widely used North Slope handbook for environmental practices developed years ago by BP and Conoco Phillips.
Kelley disagrees that the glycol injection was in good faith. "They were basically trying to get rid of it on the cheap," he said.
Owens said the situation with Kelley also has prompted Pioneer to change its practices for communicating with workers after they lodge concerns.
"We determined that we have a strong system for workers to share their concerns. We can do a better job of circling back with those employees on how their concerns were addressed," he said.
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