Energy

Alaska regulators maintain they lacked enforcement power over 2017 Hilcorp gas leak

State regulators are insisting that oil and gas in Alaska cannot legally be deemed wasted if it leaks after it was the subject of a commercial transaction.

The Alaska Oil and Gas Conservation Commission in a three-page order on Thursday denied a petition by former state Sen. Hollis French for the commission to rule gas that leaked for months from a subsea pipeline into Cook Inlet in early 2017 constituted wasted resources, which would be a violation of state law.

“The AOGCC understands the concern over the loss of gas because of the pipeline leak. However, the AOGCC is not empowered to expand the definition of waste just because the event was compelling or garnered national attention,” the order states. “The AOGCC, like any administrative agency, can only act within the scope of its statutory authority. To expand its authority, as suggested by French, would mean that the AOGCC would be extending its authority over cases like the Exxon Valdez tanker spill, a rupture in an Enstar Natural Gas Company’s gas line that serves its residential and business customers, and even private customers who are wasteful with the oil or gas they purchase. The Legislature did not include that authority in the (Alaska Oil and Gas Conservation Act).”

The leaking pipeline was an 8-inch line carrying fuel gas from onshore to Platform A, an oil producer, in the middle of the Inlet. It is owned by Harvest, the pipeline subsidiary of Hilcorp Energy.

The Supreme Court ruled in a Sept. 3, 2021 opinion that the AOGCC had jurisdiction over the leak and should have held a hearing at French’s request, which overturned a Superior Court decision.

Additionally, the commission’s claims that it had investigated the leak when it was ongoing and determined it was not an enforceable instance of waste lacked evidence that a substantive investigation had occurred, according to the court.

The justices ruled that the commission’s argument regarding its jurisdiction to investigate resource waste “puts the cart before the horse.”

“If we accepted the commission’s understanding of jurisdiction, the commission could always undermine (state law’s) hearing requirement by deciding the substantive issue behind closed doors and then disclaiming jurisdiction,” the Supreme Court order states.

French, who chaired the AOGCC when the leak occurred, first petitioned the agency to act on the leak in February 2019, shortly after he was fired from the three-member commission by Gov. Mike Dunleavy.

French claims disagreements between him and the other commissioners over the agency’s authority to take action against Hilcorp because of the gas leak led the Republican governor to remove the former Democratic lawmaker. Dunleavy wrote in a letter at the time that French was fired for poor work habits.

The current commissioners, led by chair Jeremy Price, who replaced French, all signed the order that emphasizes Alaska’s statutes prohibiting the waste of oil and gas resources target practices such as gas flaring at the well site, which is illegal in Alaska, and hasty well planning that can ultimately result in reduced recovery from a reservoir.

“By law, all gas must pass through a custody transfer meter — where volumes of oil and gas are measured, royalties and taxes are determined, and ownership of the oil or gas is transferred — is the point at which AOGCC has always deemed oil and gas resources to have been recovered. It is at this point that gas or oil can no longer be the basis for a waste determination under the act,” the order states.

AOGCC chair Price declined to answer questions about the order through a spokeswoman for the agency.

The Department of Environmental Conservation also declined to bring an enforcement action against Hilcorp for the prolonged subsea gas leak.

The hearing and subsequent order came nearly five years after the leak because French had to take the case to the Alaska Supreme Court to get his day in front of the commission. His initial 2019 petition was denied, leading French, an attorney by trade, to sue the agency and argue the case himself.

French said it doesn’t appear the commission understands the totality of the situation based on the order.

“In reality, they took the same position they took before,” he said. “That’s just malarkey. The Supreme Court said you have jurisdiction to act.”

French said in prior interviews with the Journal that his goal has not been to punish Hilcorp for the leak, but rather to make sure the AOGCC retained its full authority to investigate future potential occurrences of waste.

He said Thursday that he’s torn about requesting the commission reconsider his petition because it would largely mean rehashing the same issues.

The Thursday AOGCC order also contains a brief description of the agency’s investigation into the 2017 gas leak, which concluded the leaking gas had been sold to Hilcorp to aid oil production at Platform A.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Elwood Brehmer, Alaska Journal of Commerce

Elwood Brehmer is a reporter for the Alaska Journal of Commerce. Email him: elwood.brehmer@alaskajournal.com

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