Ahtna challenges $380,000 fine over safety at Glennallen gas well

Tuesday, 27 June 2017, 03:28:07 PM. The Alaska Oil and Gas Conservation Commission has fined a Native corporation $380,000 for safety violations at a natural gas well drilled near Glennallen. The company is challenging it.

An Alaska environmental and safety enforcement agency has issued a $380,000 penalty against Alaska Native corporation Ahtna Inc. for safety violations at a gas well drilled near Glennallen, asserting the company "stonewalled" inspectors and "ignored" the agency's efforts to bring the well into compliance.

But Tolsona Oil and Gas Exploration, owned by Ahtna, is challenging some of the assertions made by the Alaska Oil and Gas Conservation Commission.

ahtna-challenges-380000-fine-over-safety-at-glennallen-gas-well photo 1 Ahtna’s exploratory gas well, Tolsona No. 1, about 11½ miles west of Glennallen, in October. (Bill Roth / Alaska Dispatch News)

Tolsona issued a statement Friday acknowledging "unsuccessful" communication with the agency and its relatively limited experience as a first-time owner and operator of a well.

But the company said it has taken "immediate action" to comply with the agency's May 24 order. It said the mile-deep well was challenging due to the area's complex geology. It said it is interested in further exploration and conducting additional stimulation work in the well bore.

"The Tolsona project delivered an outstanding safety record, provided employment and development opportunities for Ahtna shareholders and Alaskans, and the targeted zone was reached," the statement said.

Tolsona wants the agency to reconsider the fine. AOGCC chair Cathy Foerster said Thursday she could not comment on the case while it is still being heard.

The agency's order asserted that Tolsona operated an "unmonitored, over-pressured" well that could have posed a serious risk to people and the environment.

"Although there was no injury to the public, the seriousness of the violation, the absence of any effort by Tolsona to correct the violation or prevent future violations and the need to deter such behavior weigh strongly in the penalty imposed," the order said.

Excessive well pressures can lead to dangerous blowouts and spew crude oil or natural gas. But a blowout did not occur at the well.

The Native corporation began drilling Tolsona No. 1 well in September hoping to find natural gas to foster new businesses and lower energy prices for its Native shareholders.

The order notes that on Dec. 15, Tolsona was taking steps to temporarily shut down the exploration well.

During the operation, the pressure measured at one section of the well rose from zero to about 1,100 pounds per square inch, becoming over-pressured, the agency said.

Following that incident, state regulators sought new reports describing pressure in the well, the order says.

Those reports weren't provided on a timely basis, according to the order. Tolsona also failed to install a required pressure gauge.

Company officials "stonewalled" and "ignored repeated efforts of the AOGCC to obtain compliance," the agency said.

In its statement, Tolsona said the well has been monitored "and monthly well pressure reading reports have been provided on time" since December, except for February's report. It was submitted to AOGCC late, but was "confirmed received," Tolsona said.

The state agency initially issued a proposed enforcement action March 6, advising Tolsona that a failure to respond would be considered an admission to the charges, the agency said. Tolsona "never responded," the agency said.

Tolsona disagreed, saying it did reply. And it said it was working to schedule installation of the required equipment, including an extra well-pressure gauge.

The company said its management did not receive the follow-up notice from the agency that was dated April 11. Tolsona said that communication between the two sides "was unsuccessful" until May 25. That was the day after AOGCC issued the fine.

Tolsona said it completed the wellhead work to be "fully compliant" with the agency on Wednesday. A back-pressure valve that helps manage pressure in the well was installed, as well as an additional pressure gauge, which is measuring a pressure of zero pounds per square inch.

Subsidies from the state's tax-credit program are considered crucial to the project. Company officials last year projected the state could pay up to 80 percent of the well's $11 million cost.

In an effort to save state money, deficit-mired Alaska has put off paying many of the cash credits companies are seeking.

Ahtna's statement said the state has paid "zero" of the cash credits the company expected, including for 2014 seismic work before the drilling.

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