An accident at the Milne Point oil field would have resulted in the suffocation deaths of three North Slope workers had it not been for the "good fortune" that one of them collapsed in fresh air outside the nitrogen-filled trailer they were working in, a state agency has found.
The agency, the Alaska Oil and Gas Conservation Commission, is proposing to set a $720,000 fine for Milne field operator Hilcorp Alaska for improperly using nitrogen gas during a well clean-out. The improper and unauthorized use of nitrogen, a colorless and odorless gas that can replace life-supporting oxygen in the air, led to the "near deaths" of the three rig contractors, the AOGCC said.
The agency said the three workers were knocked unconscious after working in an oxygen-depleted trailer. The one who fell outside the trailer door had the luck to be surrounded by fresh air, it said.
Nitrogen, a fire suppressant and one of the most common elements on Earth, normally makes up most of the atmosphere where people live and work, but there's usually not enough to replace oxygen. That wasn't the case Sept. 25, when nitrogen was misused in the oil field, the commission said.
The agency enforces some safety rules in Alaska's oil fields. It presented the allegations in a notice of proposed enforcement sent to Hilcorp on Nov. 12 and signed by AOGCC chair Cathy Foerster. The seven-page notice said the accident was not isolated and illustrates the company's history of failing to comply with Alaska rules.
Hilcorp Alaska's external affairs manager, Lori Nelson, said in an emailed statement that Hilcorp is disputing the proposed fine as well as others recently recommended by the agency. Nelson did not respond to requests to see Hilcorp's written responses to the AOGCC.
In the aftermath of the Milne Point accident, the commission has notified Hilcorp Alaska of three other proposed fines totaling an additional $190,000. Those fines stem from other alleged infractions at Milne Point the agency asserts are "emblematic" of the company's ongoing compliance failures. The agency has also launched other investigations of the company this year over operations in Cook Inlet and the North Slope.
"The disregard for regulatory compliance is endemic to Hilcorp's approach to its Alaska operations and virtually assured the occurrence of the incident" at Milne Point, the notice said. "Hilcorp's conduct is inexcusable."
Foerster said she could not comment because the cases remain open.
Nelson said Hilcorp is conducting an internal review of the steps that caused the three workers to be "temporarily overcome by nitrogen gas."
She said the workers, whom she did not name, "quickly regained consciousness and were released for duty."
Nelson said Hilcorp, based in Houston, Texas, maintains a strong record of regulatory and safety compliance across the United States. The company takes issue with the AOGCC's characterizations of its conduct, she said.
"The health and safety of our employees and contractors is of the utmost importance to Hilcorp," she said.
One of the nation's largest privately held oil companies, Hilcorp is known for aggressively squeezing more oil and gas from old fields, in part by conducting "well workovers" that enhance or restart production. The effort can involve cleaning out old wells that may be clogged with sand or other material.
The company has made much of its money in shale fields in the Lower 48, but a large chunk of the company's oil and gas portfolio is based in Alaska, where Hilcorp has expanded rapidly after arriving in 2011. It's the dominant oil and gas company in Cook Inlet, producing 30,000 barrels of oil daily there and at properties on the North Slope it acquired last year from BP. The North Slope properties include partial ownership at Milne Point and the Liberty field that might lead to the first offshore petroleum production in the Arctic Ocean's federal waters.
For the past three years, Fortune magazine has recognized Hilcorp as one of the nation's best places to work, in part for the large bonuses workers receive as the company boosts oil and gas production.
In its notice, the AOGCC said Hilcorp notified the agency on the day of the accident.
Early that morning, Halliburton contractors had pumped nitrogen gas into the well during the clean-out. But the agency said the blame for the accident fell to Hilcorp's "management and engineering staff." It said the accident was caused by a lack of training and safety protocols on Hilcorp Automated Services Rig No. 1, or ASR1.
"Hilcorp failed adequately to identify the hazards, to assess the hazards, and to implement actions to mitigate the hazards, and in doing so failed to maintain a safe work environment during the fill clean-out operations," the agency said.
Calls to Halliburton's offices in Anchorage were not returned Wednesday.
During a clean-out, nitrogen gas can be mixed with other fluids such as seawater and pumped into wells to force out unwanted materials. Procedures to ensure safe use of nitrogen are widely followed in the industry, the AOGCC said.
However, Hilcorp had not asked the agency for authority to use the gas for a clean-out that reached a depth of 6,500 feet. Instead, in the plans approved by AOGCC, the company said only seawater would be used, according to the agency.
Halliburton records viewed by an agency inspector who arrived at the scene the day of the incident show that 200,000 cubic feet of nitrogen gas was used in the operation, the notice said.
The nitrogen gas returning to the surface after the clean-out should have been vented out of the trailer after going through a "gas buster," a device that separates gas from liquids. But a valve was left open, allowing the gas "to enter the enclosed mud trailer and displace oxygen to a deadly level," the agency said.
The lack of safe procedures led the workers to assume there was not a problem, the agency said. They didn't understand the gas detection system, and the "lack of audible gas alarms" suggested the trailer was safe.
The workers initially left the trailer after experiencing symptoms of oxygen deprivation, but returned without testing the space with gas monitoring equipment, another mistake leading to the accident, the agency said.
The AOGCC ordered Hilcorp to suspend work-over operations on the rig on Oct. 1, a sanction lifted on Oct. 29 after Hilcorp accepted a list of corrective actions proposed by the agency.
The company was directed to contact the agency before beginning any more work-overs even if past approvals for such work had been issued by the agency.
The unusually large fine by AOGCC is largely based on Hilcorp's "failure to maintain a safe working environment" and using an unapproved work plan.
The alleged violations included:
The "near deaths of three rig personnel indicate the job safety analyses and Hilcorp's oil-field practices were woefully inadequate to address nitrogen-related hazards and the controls necessary to prevent an exposure incident," the agency said.
The notice is just one of several sent this year by the agency to Hilcorp officials, according to records provided by the agency in response to an open records request by Alaska Dispatch News.
In two cases, Hilcorp quickly took corrective action that satisfied the agency, including fixing a broken surface safety valve at Hilcorp's Northstar Unit on the North Slope.
Investigations related to other issues, including operating with a failed gas and fire detection system in early August on the ASR1 rig at Milne Point, appear to remain open.
The agency's three additional notices of proposed fines assert that Hilcorp didn't test a blowout preventer or report its use to the agency during well work-over operations conducted this spring on Nordic Rig 3 at the Milne Point unit. The agency is proposing a $40,000 fine for those violations.
The AOGCC also said Hilcorp changed approved plans twice without permission for two work-overs this year at Milne Point before the nitrogen accident. The work took place on rig ASR1 and Nordic Rig 3. AOGCC has proposed a $75,000 fine for each incident.
The commission said a 2013 fine against Hilcorp over violations in Cook Inlet appeared to have no "significant impact" on the company's conduct. The commission's order in that decision said the company's "aggressiveness" in its operations had apparently contributed to regulatory compliance issues.
Hilcorp spokeswoman Nelson said, however, the company is continuing "to work to ensure we are providing a safe work environment and are developing Alaska's resources responsibly."