Hilcorp looks to resume oil storage in shadow of volcano

Hilcorp Alaska took over Drift River terminal and applied for plan renewal.

Petroleum NewsMay 19, 2012 

The Drift River Terminal tank farm is seen from the air with Mount Redoubt behind it. The facility, located on Cook Inlet, was affected by lahars and sediment-laden water flows after the volcano erupted on March 23, 2009. The facility has 148,000 barrels of crude oil stored. Production has been halted. Coast Guard and the Alaska Dept. of Environmental Conservation are monitoring the site.

PHOTO COURTESY OF ALASKA VOLCANO OBSERVATORY ARCHIVE 2009

Hilcorp Alaska plans to resume storing oil at the Drift River tank farm on the west side of Cook Inlet. In fact, the company already has obtained interim permission to fill one of the enormous tanks at Drift River.

Hilcorp has told state officials it's important to bring Drift River storage capacity back online to avoid production shut-ins. But the state is requiring Hilcorp to make certain improvements to safeguard the remote property from flooding that could result from an eruption of nearby Redoubt volcano.

An eruption in 2009 forced an evacuation of the Drift River terminal and an emergency drawdown of stored oil. The tank farm since has been essentially mothballed.

Because of the proximity to an active volcano, not everyone is pleased to see the tank farm come back into service.

The Drift River terminal is where tankers load west Cook Inlet crude for delivery to refineries, chiefly Tesoro's refinery on the opposite side of the inlet.

The Redoubt eruption sent mud flows known as lahars down the Drift River. Berms built around the tank farm saved it from a potentially disastrous inundation and spill.

Hilcorp took over the terminal Jan. 1 as part of its purchase of Chevron's Cook Inlet properties. A Hilcorp subsidiary, Cook Inlet Pipe Line Co., or CIPL, operates the terminal.

Hilcorp has applied to the state for renewal of the oil spill prevention and response plan for the terminal and the 42-mile pipeline that feeds into it from fields to the north. The company proposes using two of the terminal's seven storage tanks as a way to improve handling of west Inlet oil production.

Hilcorp plans a public workshop on the Drift River terminal reopening on May 23 at the Soldotna Sports Center. Hilcorp hopes to have a range of people on hand to answer questions, including representatives from the U.S. Coast Guard, the Cook Inlet Regional Citizens Advisory Council, the Alaska Department of Environmental Conservation and the Alaska Volcano Observatory. Also expected at the workshop is Jim Aldrich of Fairbanks, who helped design the flood control system after Redoubt's 1989-90 eruption produced a lahar that partially flooded the Drift River terminal.

Redoubt is 106 miles southwest of Anchorage. It rises to 10,198 feet above sea level. The Drift River terminal is about 22 miles northeast of the volcano.

The Drift River is on one side of the tank farm, with an offshoot called Rust Slough running along the other side. The river currently is sediment-filled and dry, said DEC environmental program specialist Shannon DeWandel.

Hilcorp spokeswoman Lori Nelson said Hilcorp is planning summer construction to improve the fortifications around the tank farm. But it's unclear exactly what that work will entail. The company is still awaiting a final engineering report from Aldrich, Nelson said.

The 2009 lahars deposited a lot of material up against the tank farm berms, reducing their "freeboard," so the barriers will have to be raised a few feet. This will involve building up the earthen berms, or installing sheet piling.

"We've already ordered the sheet pipe," Nelson said.

The engineering report, she said, will help determine the height needed and what forces the barriers will need to withstand.

"We're hoping to have the project completed by early fall. Oct. 1 is the deadline we're shooting for," Nelson said.

Brice Construction, which helped install the original tank farm protections after the 1989-90 volcanic event, will be involved in making the improvements, she said.

The original fortifications worked well to protect the tank farm in 2009, Nelson said.

"It was a non-incident. There was not a single drop of oil spilled," she said, and no one was hurt.

DEC on April 27 approved CIPL's request to use Drift River Tank 3 for oil storage. The approval is good until Sept. 30. The company cited a number of circumstances as the basis for its April 24 request, including a disruption in tanker arrivals at the terminal.

Since the tank farm shutdown, operators have used a "tight line" technique to pipe crude from upstream producers directly onto tankers. But due to unscheduled maintenance on one of the ships hauling for Tesoro -- the tanker Overseas Boston -- west Cook Inlet oil producers were facing shut-ins for lack of storage and tankers calling often enough at Drift River.

Not only was Hilcorp's production subject to shut-in but also that of Cook Inlet Energy and Exxon Mobil, CIPL said.

The company also noted it had lost 40,000 barrels of storage capacity due to tank maintenance at the Trading Bay production facility.

Finally, CIPL said having Drift River storage available would alleviate problems in trying to pig its pipeline during tight line operations. A pig is a device that slides through a pipeline to test for anomalies such as corrosion. CIPL said it has a regulatory obligation to conduct a pig run by August.

In granting approval to use Tank 3, DEC is requiring CIPL to schedule a tanker to respond right away to drain the tank should the volcano observatory raise the Redoubt alert level. And the tank may be used "only as needed to avoid shutting in the producing wells."

Resuming regular storage operations at the Drift River terminal would have significant benefits. Tight lining requires tankers to call at Drift River more often. Arrivals now average one vessel every two weeks. Storage availability would reduce tanker visits.

Further, ships can load faster by withdrawing oil from Drift River storage rather than tight lining. This has the benefit of shortening tanker berthing times at the Christy Lee offshore loading platform, which currently is somewhat hobbled as it awaits replacement of a "fender" damaged by Cook Inlet ice, DeWandel said.

The Drift River terminal was constructed in 1966, and sits in a floodplain.

Bob Shavelson, with the Homer-based nonprofit Cook Inletkeeper, said he believes it's a poor idea to revive the tank farm, given what he considers the facility's poorly chosen location.

It's good to reduce the number of tankers calling at Drift River, he said, but "the fact remains that putting an oil storage facility at the base of a volcano is one of the stupidest things you could ever do."

Shavelson believes the real solution is to lay a subsea pipeline to carry west Cook Inlet oil to the refinery.

John Barnes, Hilcorp's senior vice president for Alaska, addressed the pipeline idea in a May 10 talk to the Alaska Support Industry Alliance.

With Hilcorp just now embarking on efforts to increase Inlet oil production, he said, it's not yet clear how to size a pipeline that obviously would be quite a cost commitment.

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