Help Wanted!

Job Description:

The Alaska Oil and Gas Conservation Commission (AOGCC) is recruiting for a permanent, full-time, overtime eligible, PETROLEUM INSPECTOR. Under general direction of the AOGCC, the Petroleum Inspector performs fieldwork in the enforcement of Oil and Gas Conservation statutes and regulations to assure the prevention of waste in the exploration, development and production of hydrocarbon reservoirs. Program goals are defined as part of the specific duties and to accomplish these goals inspectors must select which inspections are critical to witness and which inspections can be waived. Inspectors exercise discretion regarding how the AOGCC’s inspection goals are achieved.

Finally, the AOGCC is staffing up. To date, there existed only 5 positions for field inspectors, for the entire North Slope region! And lack of oversight due reduced staff was not due concerns of budget constraints, as the Commission’s $5.6-million a year budget is paid for by the oil companies. So lack of oversight finds no excuses. And that is the reason today the AOGCC is under scrutiny of a 3rd party audit, because it was not watching out what was going on at Pioneer Natural Resources’ Ooogurk project. With no oversight, this 1st Independent is now facing enforcement action by the Commission, for many different derelictions of duty including illegal underground injections, illegal natural gas wasting that polluted the environment and many other atrocities. Bottom line, this Texas based corporation’s project should be shut down and banned from ever again being allowed to work the North Slope.

Serious Non-Compliance

So why would Pioneer Natural Resources deny an “enforcement order” by the Alaska Oil & Gas Conservation Committee to shut in two wells that were unsafely piped? Waiting for over a month’s time to perform this action when conforming to the “order” only after the AOGCC warned of further action, by the police! When the regulators informed that this non-action by Pioneer was a “serious non-compliance” issue! This behavior to misbehave is simple. When a small Independent is dependent on paying the bills, lost production can make the shareholders irate, and when that happens, executives and CEOs may find themselves in the un-employment line. So they take a risk, a gamble just to keep the cash register cha-chinging. And when a small Independent knows not what they are doing in Alaska, they have to take these risks and hope that they don’t get caught. Case in point: Pioneer Natural Resources, a Texas based Independent, a “mom & pop” operation wanted to make it big in Alaska. So they came north to the bidding table, unprepared, What I mean by this is the fact that on record Pioneer has paid out the most for the opportunity upon leases to explore to exploit in Alaska, on the “North Slope”. During the 2008 North Slope Area-wide Sale, Pioneer broke the records for “bid per acre”. With the average bid at $36 per acre, Pioneer went overboard and paid out ten times the average, $306 bucks and ended up with a single lease costing the shareholders some $783,000.00 dollars. The highest bid on record! The state loved it. For a lease that was deemed un-economical by the “Big Oil” players, because it was considered marginal recovery “near-shore” and a logistics nightmare. So what was once an interest to “Big Oil” experienced in Alaska, they let the original lease go by the wayside. There was oil, but to hard to extract in an area that was far away from the existing Prudhoe Bay infrastructure. That is why today Pioneer has a supply barge grounded in the Beaufort Sea and leaking fuel! It is stupidity at its best. And that is why they feel proud to disregard orders, as when the cash register goes broke, this place has no other option, then closing up shop. And with a no-give-a-crap attitude upon oversight and/or environmental responsibility, maybe the state should make it easy, with a “Cease & Desist” order, until this outfit can prove that they know what they are doing. In fact of the three exploration wells drilled after the lease sale, the favorite of interest was a dry hole. So they had to try the least favorite, wherein oil was found but in a pathetic formation that finds today “communication” problems wherein the water-flood finds a direct tunnel to the oil and comes right back up out of the ground! Big Oil probably laughs, but cries when they find out that the state made concessions in efforts to lure in the so-called Independents. With tax relief and royalty relief unheard of after 30-years. This is Drill Baby Drill, this is the Sarah Palin legacy. And in the end, the state will pay, the ecosystem and environment will suffer, as this state is open for business and even the regulators find it hard to do their job. Thanks Sarah… And if you can see Russia from your backyard, maybe you can see what is happening on the “slope” with the Independents!

Pioneer Barge "Hard Aground"!

Barge runs aground, leaks fuel on Alaska's North Slope


SMALL LEAK: No injuries to 4 crew after wheelhouse partially falls off.

By RACHEL D'ORO
The Associated Press
Published: September 15th, 2010 09:17 PM
Last Modified: September 15th, 2010 10:53 PM

An ocean barge carrying oil-field equipment ran aground along the North Slope, and responders

State environmental regulators said the vessel has more than 1,700 gallons of diesel fuel on board.

The Stryker grounded after a section of the barge holding the wheelhouse lost connecting pins and fell partly into the water.

The mishap occurred Tuesday between Oliktok Point and Oooguruk, a field that pumps oil from an artificial island.

No one was injured, but a small amount of fuel leaked from a tank, according to Tom DeRuyter of the Alaska Department of Environmental Conservation. Valves on all the tanks were closed and the sheen dissipated, he said. The Coast Guard also responded.

The barge ran aground about 40 miles west of Prudhoe Bay, the nation's largest oil field. The cause is under investigation and immediate plans call for placing booms around the barge, removing the fuel and salvaging the vessel.



The Stryker is owned by Bowhead Transportation Co. and is under contract with the Oooguruk operator, Pioneer Natural Resources, an independent oil and gas company based in Irving, Texas.

At the time of the grounding, seas were choppy and winds were gusting at 40 mph. The barge has operated in the area for several years in rough conditions, said Amanda Henry, a spokeswoman for Bowhead.

"We are not aware at this time what actually caused this," she said.

The barge is attached in segments, with the wheelhouse held in place by pins on top of the stern, Henry said. The design allows the barge to be expanded for larger loads.

Henry said two of the wheelhouse pins failed for unknown reasons, leading to the grounding. The four people on board were safely removed from the craft, which was transporting three flatbed trailers and a vacuum truck from Oooguruk to a dock at Oliktok eight miles away.

Todd Owens, an Alaska spokesman for Pioneer, said oil production has not been affected. Oooguruk produces as much as 588,000 gallons a day.

Pioneer is already under scrutiny by the state, which hired an independent investigator in June to review allegations from a former worker at the small field. The whistleblower, Mike Kelley, claims Pioneer covered up spills, improperly disposed of waste, created unsafe work conditions and injured wildlife.

The grounding is irrelevant to any concerns raised by the whistleblower, Owens said.

"This is not a Pioneer-operated asset," he said of the barge.

Rob Shoaf, a private attorney looking into Kelley's claims, said the grounding is "not within the scope of this investigation." He hopes to submit his report next week to the Alaska Oil and Gas Conservation Commission, the state agency that regulates oil wells.

Pioneer Fined!

Slope producer fined for unauthorized chemical injection


FINE: Unauthorized use of glycol leads to levy of $10,000 by commission.

By ELIZABETH BLUEMINK

ebluemink@adn.com
Published: September 15th, 2010 08:59 PM
Last Modified: September 15th, 2010 10:53 PM

Pioneer Natural Resources, the sole independent oil producer on the North Slope, paid a $10,000 fine this week for injecting an unapproved chemical into its oil reservoir last May.

The violations involve glycol, which Pioneer was using as an anti-freeze fluid in a water supply line. Glycol is commonly injected into oil reservoirs on the North Slope but Pioneer had not sought or received permission to do so.

The glycol violations were initially reported by an employee whistleblower. Pioneer initially denied the allegations, but after concluding an internal investigation it told regulators that it had improperly injected roughly 45,000 gallons of a glycol-water mixture into the reservoir. The injections happened on two days.

The Alaska Oil and Gas Conservation Commission sent a letter to Pioneer in late August proposing a $10,000 fine.

Pioneer did not contest the fine and sent its payment to the state regulator this week.

Pioneer said in a statement Wednesday that it reported the violations as soon as the company confirmed they had happened and it has received conditional approval from the commission to inject glycol in the future.



The AOGCC is still investigating other allegations reported by the whistleblower, Mike Kelley, who quit his job at the company soon after making the accusations.

Among other accusations, Kelley claimed the company covered up spills, injured wildlife and created unsafe conditions for workers.

Kelley further alleged that the AOGCC neglected its duty to regulate the company. For that and other reasons, the commission hired an external investigator, Robert Shoaf, to handle the case. His report to the agency is expected next week.

________________________________________

Find Elizabeth Bluemink online at adn.com/contact/ebluemink or call 257-4317.

Irresponsible Attitude and Behavior

Case in point as to why Pioneer Natural Resources’ Oooguruk oil production facility should be temporarily shutdown, until such time this Texas based corporation can prove to State of Alaska oversight police that they are indeed responsible and competent to explore and exploit natural resources on Alaska’s North Slope, in the Beaufort Sea:

Alaska Oil & Gas Conservation Commission inspects Pioneer Natural Resources well ODSK-35 on May 12, 2010 and instructs Pioneer field personnel to replace temporary piping that is allowing this well to produce crude oil. On May 18th, Commission requests timing for the above mentioned resolution. On May 27th, Pioneer requests a meeting to discuss the above mentioned inspection and the Commission’s attempt to have Pioneer come into compliance and fix problems. No meeting is ever scheduled by Pioneer, a No-Show! On June 9th, Commission again warns Pioneer that the use of “temporary piping” was inconsistent with “good oilfield practice” and a possible violation of Alaska statutes. Pioneer did not respond. On June 16th, the Commission once again inquired about status of the “temporary” well piping and Pioneer was verbally instructed to shut the wells in immediately. Pioneer did not comply! On June 18th, Pioneer asserted that it was a “good oilfield practice” to utilize temporary piping to produce crude oil for sale. Finally on June 22nd, the Commission through correspondence warned the following:

The Commission recognizes there have been unexpected conflicts that have prevented direct communication between appropriate personnel of the Commission and Pioneer. However, for over a month, Pioneer has clearly and repeatedly been instructed to correct the problem or shut in the well. Pioneer’s failure to resolve this matter constitutes serious non-compliance and must be resolved immediately. In accordance, Pioneer is instructed to shut-in both wells immediately.

The above scenario is clear-cut evidence that this state cannot trust the Independents. With “Drill Baby Drill” the Sarah Palin legacy, what she left for this state to deal with, it is now starting to show its ugliness and if not stopped will ruin the Beaufort Sea. If the regulators cannot even get Pioneer to shut down wells that are violating the state statutes, because of unsafe practices, then this state is doomed and we see that Sarah Palin’s “DBD” is a wrecking ball, just like her run for the vice! Like already mentioned, if the state oversight is in-effective it can have devastating effects, making such oversight a useless tool in efforts to keep the environment safe for future generations to come, without responsible oil development. Write your representative, in fact call your representative and demand that PNR’s Oooguruk development project located on Harrison Bay of the Colville River delta watershed be stopped through a “Cease and Desist” order until such time the state can be guaranteed that the so far no give a crap attitude is changed, as it is a privilege to work the “slope”, not just a free-for-all crap shoot wherein oversight is just a suggestion!

Oil Man vs. ICE

A giant ice sheet attacks Oooguruk Island, a man-made drilling island in Harrison Bay of the Colville River delta, Beaufort Sea. With only 13-ft elevation above sea level, within seconds the island was bracing to be totally destroyed. This man-made island was not designed to handle such storm fallout, and even though destructive ice was considered as part of the island design - the 100-year flood criteria with a probability of 0.1 percent that it would actually happen in a 100-years - well it happened during the 2nd year this island was in operation. The drilling rig was shaken so violently that rig workers were running for their lives. And after the storm subsided, there was an environmental nightmare, from broken boxes of drilling chemicals that littered the island’s perimeter. As to why it is still in operation today without a protective re-design is ridiculous and points to an “oversight” attitude that “Drill Baby Drill” rules, and protecting the environment is just a suggestion, just ask Sarah Palin, the “Drill Baby Drill” queen.

Your PFD

How does your PFD stuff money, extra cash, in your pockets? It comes from resource development. As a “resident” of the state of Alaska, you are entitled to enjoy the results of under-surface development, as ownership of the resources comes by virtue through that residency. So in efforts for the state revenue police to make sure we are getting our “money’s” worth, they provide oversight. Hundreds of state jobs were created to provide the management of state resources, with respect to taxation and royalty. Upon the PFD when considering oil development, once a lease is “spuded” and produces the “Black Gold”, the oil must be measured, so the state can stake claim the “royalty” and severance tax, thus the PFD pot from “black gold” begins to grow. So for the past 30-years, it meant accurate measurement with oversight, all in efforts to make sure that the amount of oil depleted from a lease formation was accurate. In fact, the entire North Slope oil measurements scheme is unsurpassed, wherein a barrel of oil can be justified to 4decimal places and that accuracy traceable all the way back to the National Bureau of Standards, in D.C., as it is big money and any inaccuracies along the way means millions in lost revenue. But when Pioneer Natural Resources came to Alaska to develop risky formations in the Beaufort Sea, things changed, for the worse. Based on the “smaller footprint” concept, to sell projects that “Big Oil” said was a risk, the state legislative branch provided concessions. One step forward three back came when the state bureaucrats allowed PNR to use a new measurement devise, never once allowed for “fiscal” oil measurement and at the same time allowed the “industry” to be the oversight with the approval of such. Today as oil is transported from PNR’s Oooguruk Island, an island that is man-made and almost disappeared during a major ice storm - something the engineers said wouldn’t happen in a 100-years - well that “approved” oil accounting is costing the state in revenue, it is loosing ground with your PFD! In fact, the measurement is so bad that a “Big Oil” company that was made to accept PNR oil, this company demands in return for the “measurement uncertainty risks” upon this type of measurement, free oil in return! This “risk” is not enjoyed by the state, so we are getting screwed. What is good for the goose should be good for the…. So each day that PNR produces 20000 barrels, 600 barrels are given to a major oil company for no other reason than the fact that the state allowed for a shabby form of accounting. At the same time, the state gets screwed accepting this inferior type of measurement. But this is what happened when the oversight police, the AOGCC, was taken over by Palin. Then she became governor, so the reign of ineptness with respect to oversight continued, and made its debut of dereliction when Pioneer developed the Oooguruk project – as the 1st Independent to take advantage the “Drill Baby Drill” mentality. Lighten up on the “Independents” was the pre-requisite to “Drill Baby Drill”, and it may create jobs and allow oil development where no “Big Oil” has the balls or guts to visit, in the end we get screwed and the environment suffers. That is not what resource development is all about. But maybe the regulators have learned their lesson, and we will not see a repeat, as with a 3rd party investigation upon Pioneer’s Oooguruk “near-shore” development on Harrison Bay, of the Colville River delta on the Beaufort Sea, for reasons upon environmental atrocities, maybe the tides have turned, and from now on end maybe the PFD and/or environment will not be in jeopardy any more then what it has too to support oil development. But we cannot have our cake and eat it too! If we see oil development “creep” in sensitive areas upon Alaska’s northern coast, we must say “No”, not on our watch, until such time all of our environmental demands are secured. And money cannot ever cover the cost of irresponsible development, and all the jobs “created” are not worth it, neither is that PFD, as the latter is nothing short “sham” recycling! Just ask the Pioneer executives. Hey what is an oil executive with 4 bars?

The Mighty Beaufort

And they said it would never happen, not in a 100 years!

http://www.break.com/usercontent/2009/6/oooguruk-island-june-23rd-2009-790036.html

Another Endicott/Doyon Waste Fiasco?

Much, much worse off than the 1998 Endicott illegal waste disposal scenario by Doyon drilling, which realized stiff fines and jail time for those involved. When Pioneer Natural Resources was first made aware of inappropriate waste disposal concerns by a former employee at this oil company’s Oooguruk project up north, a company investigation team flown to Alaska from Texas gathered information in efforts to protect the company. Being the 1st “Independent”, it was prudent that the operation was squeaky clean, as the Alaska legislature caved in on this project, with royalty and taxation incentives. Such fallout in concert to Sarah Palin’s legacy, “Drill Baby Drill”. So the company was supposed to mind the P’s & Q’s. According to documents on file at the Alaska Oil & Gas Conservation Committee, the oversight police, it is recorded that “The investigation team was able to determine wastes are properly indentified at Oooguruk as hazardous wastes and to confirm that records are maintained as the waste is manifested for disposal. The investigation found that operations and HSE staff are able to correctly identify non-exempt non-hazardous wastes. Pioneer’s investigation found no evidence of non-exempt non-hazardous waste being slipstreamed into the production stream. In addition to the regulatory requirements for management of these wastes, and the ready availability of a Class I disposal well for this purpose, there are significant operational and commercial disincentives to placing non-exempt non-hazardous waste into the crude oil production stream.” Of course if one wanted to get rid of waste, by placing it into the crude oil production line, it would fetch the going rate of oil, like $80-dollars a barrel! So there is an incentive. And even though Pioneer would deny such, and even though Pioneer admits that its staff can correctly identify and manifest waste for proper disposal, well this company’s own reports side differently the truth of this matter. And they document it: “Flowback tank is all Class I waste, slipstreamed 400 barrels to ConocoPhillips”. Caught in the act! One thing for sure, they indeed keep good records! So this Independent gets to send this stuff to Conoco, where it fetches some $32-thousand bucks and is eventually sent along towards the Trans-Alaska-Pipeline, contaminating the entire industry! If this is what to expect from the “Independents” then maybe it is time for jail time!

Good Faith Action Lullaby?

The independent investigation sanctioned by and through the Alaska Oil & Gas Conservation Committee targeting Pioneer Natural Resources’ Oooguruk oil development project is wrapping up. The evidence is overwhelming, that Class I - possibly hazardous at that - waste was shipped to the Trans-Alaska-Pipeline, along with miss-injections at this “Independent’s” man-made oil production island wherein thousands of gallons of “used glycol” was released into the environment and wherein “wet” hydrocarbon rich natural gas was allowed to also pollute the once pristine environment of Harrison Bay, of the Colville River delta that drains into the Beaufort Sea. And the dead birds found at the site, was the cause of death mishandling, because business comes first, or was it from environmental contamination, because business comes first? Regardless, this place is a mess when it comes to environmental stewardship. Even the state of Alaska’s attorney general called this investigation “unprecedented and serious”. So “persons of interest” were requested to be questioned by the investigative team, but here is where it gets really interesting ugly. Those on the request list were provided “legal guidance” by an attorney that said he was working independently, but at the same time was retained by guess who? Pioneer! The oil company under indictment! In fact, it is the same attorney that authored the 1st report submitted by Pioneer to the regulators, including the EPA, which basically complained about wasting over 1000 man-hours finding nothing upon the allegations of a former employee, nothing was substantiated upon the concerns with regards to Pioneer’s Oooguruk operation with respect to environmental concerns. But when the former employee provided evidence to the contrary, it was then the company shifted into damage control mode. The only way the company investigators found nothing the first go-around was by (1) workers like lying, or (2) they were told to lie! It is that simple. So the company was forced to amend the 1st report, which is not a good thing when one is dealing with the EPA! So in the 2nd report, which started to unveil the admittance of environmental atrocities, it was this same attorney who now blames everything evidenced upon on the operators , the hourly wage earners – which meant the damage control blame game was in full effect! These are the same individuals that he is now providing legal advice and advise, during the independent investigation. Something wrong with this picture? Yes, but what can we expect when the law firm this legal advisor is affiliated with is the same outlaw outfit that Enron retained, when Ken Lay was telling everybody everything is OK, when at the same time things were falling apart at the seams. Bottom line, the attorney most likely used the scare tactic upon the workers, that they needed his presence in front of the private investigators, so he could find out what those interviewed were saying, so he could further provide a lullaby for the corporation, that it wasn’t upper management who called the shots to pollute the environment by maintaining a total disregard for the rules and regulations that are designed as a deterrent, but in efforts to collect more information to tag the operators, the in-experienced operators, as the source of the illegal activates. Look out, as the bozo bus is heading that way! Yes indeed, the blame game “who is the scapegoat “ is in full production, because as soon as the investigator’s report hits the regulators desks, the oversight police will have to throw the book at Pioneer. In the 2nd report, this attorney uses conditioning tactics like, “The injection of glycol was, we believe, the result of honest, albeit avoidable, mistakes”. Wrong, as when the on-site supervisor said do it, those that wanted to stay employed did it without an iota of concern, based on fear of finding out what the un-employment line was all about! And mention is made that the “Operations personnel believed the glycol must not be hazardous”. Now according to the “Operations Supervisor at the time, test proved negative; however, no documentation of the test results has been located”. If indeed the glycol was tested, it could only be accomplished by a “certified lab”, over at Kuparuk. And the paper trail doesn’t evaporate. So here again we see lying, in efforts at trying to pull the wool. But the attorney forgot the icing on the cake with this one, “The fatal flaw was failing to start by consulting the AOGCC”. Admittance of a “fatal flaw”, somebody is in trouble my environmental friends! And attorney Lullaby goes on, “As described, the analysis performed was flawed and the conclusion reached was in error; however, no one intended to willfully or knowingly violate applicable regulatory requirements. Pioneer has taken this matter seriously from the start”. From the “START”? The company denied it in the 1st report to the regulators, “Pioneer’s investigation has located no evidence of slipstreaming used glycol into the seawater injection stream or of an incentive to do so.” Talk about a full court press denial! But now, the lullaby speaks differently, that some 49000 gallons of used glycol was discharged, but it was an honest mistake? And get this for an ending, “Pioneer appreciates that very regulatory infraction is a form of injury to the public, we respectfully believe that the injury was slight”. So Pioneer is bracing, that there was indeed a violation upon the “public trust doctrine”, an injury that should find Pioneer digging deep into its profit pocket, to pay for a management mindset even BP wouldn’t put up with, just ask the Operations Supervisor!

Worse then British Petroleum

In 1998, British Petroleum was slapped a felony and fined $500,000 along with a requirement to establish an “Environmental Management Program” at an estimated cost of $15-million, all because one of its drilling contractors decided it was all right to violate the Clean Water Act, by injecting hazardous waste - like used glycol - down an injection well not permitted by the state of Alaska to receive such crap. Doyon, the drilling contractor who sent BP in trouble, was indicted on 15 counts, with fines totaling $3-million, plus the person with his finger on the trigger found out what life in a jail cell was all about. And the U.S. Department of Justice, handling this case for the EPA, literally “threw the book” at BP and Doyon, as a means to demonstrate this penalty as a deterrent, so future oil developers on Alaska’s North Slope would realize they “shall” abide by the rules and regulations, or else. Well Pioneer Natural Resources, the 1st Independent to brave the “slope” when the “Drill Baby Drill Open for Business” sign became Alaska’s motto, this small Texas based company has found itself in trouble with the regulators, for the same dam thing. ECXEPT, the volumes miss-injected in comparison makes Pioneer the worst of the worse in the entire life time of the Prudhoe Bay oil field – some 30 years! If what BP went in trouble for was like a rain storm on the scale of environmental atrocities, Pioneer gets to use its name on the next hurricane! And finally, Pioneer has admitted to injecting 49,000-gallons of used glycol down a well, to get rid of it, without a permit. This admittance after they informed the regulators having jurisdiction that it didn’t happen, as there was “no incentive” to do such a cowardly deed! So this should be the granddaddy fine of all times, way beyond what BP and Doyon combined have paid out for violating the “Acts”, most likely enough cash that could send this “mom & pop” company packing and heading back home, maybe to jail! “Don’t come back now, ya hear!”

Say It Ain't So Sarah

When governor you said: Independent energy companies like Pioneer and many others are coming to Alaska to take advantage of the opportunities available here for creative, aggressive players in the energy industry. Offshore, northeast of Kuparuk, is a great example of what independents can do. Pioneer Natural Resources bought the leases in 2004, and along with its partner, E-N-I Petroleum, worked well with the state to get their permits fast. It’s a good model for more success by independents in the future. We will aggressively defend the state’s obligations to responsibly develop our resources. You in the industry make your living by providing the goods and services necessary to get Alaska’s resources to market. You live by contracts and legal obligations. This is how business is conducted, and you honor your legal obligations. As I told the state on Wednesday evening, WAREHOUSING Alaska’s resources isn’t an option. We’re stepping out there on some issues and sending a message that Alaska’s new administration understands how important it is to expand to areas with great potential beyond the North Slope. That includes advocating for environmentally responsible lease sales in offshore waters. To prove we can responsibly develop, we’ll beef up oversight on the North Slope because we’ve seen some legal obligations ignored.

Now that Pioneer is under investigation by a 3rd party investigative team funded by the AOGCC, it appears that you meant to say “WHOREHOUSING Alaska’s resources!

Dear Former Representative Ralph Samuels

Dear Former Representative Ralph Samuels;

With interest in becoming this state’s governor, how do you now feel about the “Independents” as you and Representative Meyers elaborated upon with praise in a legislative update on October 26, 2007? With Pioneer Natural Resources under a 3rd party investigation, requested by the AOGCC, for questionable waste disposal and air pollution waste, not to mention dead birds found at its Oooguruk drill site in the Beaufort Sea, is this what we really want from outsiders? Remember, Pioneer was the 1st Independent to brave the “North Slope” and the legislature was hoping for success. So $300,000 of state money is being spent for this investigation, or wasted, because this so-called “Independent” thought that it didn’t have to worry about the rules of the road when operating in Alaska. Is this what we want from the Independents, these small “mom & pops” that not only garnish royalty relief but bring to the “Last Frontier” an interest in capturing the interest of the legislature in efforts to change the entire oil field infrastructure, for the worst! But when the state can charge British Petroleum $4-million for oversight and charge ConocoPhillips $3-million for oversight but Pioneer gets away with a measly $2500 dollars a year for similar oversight, you get what you pay for and in this case it appears to be a no give a crap attitude towards the environment. Bottom line, when the state ignited the “Open for Business Drill Baby Drill” good-ol boy invite, we find that we are investing in interests that may not care our demand for respect, and when they get away with it, it seems like your crying out loud “We need them” idea backfired, as it is not worth it, especially for only pennies on the dollar from our resources and a mindset that places the environment at risk. So please Don’t follow in Palin’s footsteps, that these Independents are needed now and forever, amen, and realize that what may have sounded good, isn’t!

State Looses $68-million

Rep. Meyer & Rep. Samuels Legislative Update

Dear Neighbors,

We both have received several emails expressing concerns about attracting independent oil companies to Alaska and encouraging new exploration and development. We thought that this would be a good time to look at this issue and the discussion we have had on this issue during the special session.

What is an Independent Oil Company?
The oil industry is generally divided into two categories: integrated and independent. Integrated oil companies are involved in the entire value chain of oil from production to pump. In Alaska, the notable integrated companies are Exxon, B.P., ConocoPhillips and Chevron. An integrated oil company explores for, produces, transports, refines and markets oil, gas and petroleum products. An independent oil company on the other hand, is involved only in the exploration and production of oil or gas. Pioneer and Anadarko are examples of an independent oil company. You may have read recently that next year, Pioneer Natural Resources will be the first "independent" operator on the North Slope. I find the story of Pioneer in Alaska interesting. Pioneer is new to Alaska, has brought new investment and is bringing new production online early next year. New business and new production is good for Alaska but I think we can learn a lot from the challenges Pioneer has faced and the investments they have made.

Pioneer Natural Resources
Pioneer Natural Resources is a small oil company based in Irving, Texas with around 1,600 employees. To put that in perspective, Fred Meyer has 2,700 in Alaska alone. Pioneer came to Alaska in 2002 and drilled their first exploration wells on leases near the Kuparuk unit on the North Slope in 2003. Pioneer and their partner Armstrong, later replaced by ENI, discovered a relatively small accumulation of oil and began putting together a plan to develop the discovery, which was named "Oooguruk." In 2005, Pioneer discovered the project was uneconomic and applied to the State of Alaska for royalty relief.
Alaska law allows the Commissioner of the Department of Natural Resources to reduce royalties on a field if the company can present "clear and convincing evidence" that without royalty relief a project is uneconomic. The State determined that without royalty relief, Oooguruk would never be developed and granted Pioneer and its partner royalty relief on the field in December of 2005. This was the first time the State had approved an application for royalty relief and the decision can be found online at the Department of Natural Resources website.

Oooguruk
The first wells in what is now called the Oooguruk unit were drilled in 1977. The unit was originally leased in 1983, but when the original owners determined prospect was not economic they surrendered the leases to the State in 2001. The State's decision to grant royalty relief to Pioneer was based in large part on the fact that over more than 25 years of exploration, no company had been able to develop the resources. When the State considered granting royalty relief to Pioneer for the Oooguruk field, they compared State revenues with, and without royalty relief.

With royalty relief, the present value to the State of developing the Ooogurk field was $160 million dollars. You'll notice in the chart above that at the time the State wouldn't receive any severance tax from the Oooguruk field. This is because the royalty relief application was considered under the old ELF severance tax system where small fields paid no severance tax.

Twenty days after the State granted royalty relief to Pioneer on the Oooguruk project, Governor Murkowski introduced the Petroleum Profits Tax. In the table above, you'll notice that severance taxes were zero when the royalty relief application was considered. In 2006 the Legislature changed the severance tax structure in Alaska and levied severance taxes on the Oooguruk field. After evaluating the project with the additional severance taxes Pionner made the decision to continue with the project and construction started in 2006. Although the State had increased their share of the revenue from the development of the Oooguruk prospect with the new severance tax, the credits the State gave to a company for capital investment in the tax actually improved the economics for Pioneer.
Between the royalty relief and the capital credits in the new tax, the State was able to take a greater share of the revenue while encouraging the development of a field that wouldn't have been developed. Pioneer's Oooguruk project represents an investment in Alaska of more than $500 million dollars, hundreds of jobs and millions of dollars in new state revenues.

An important aspect of Pioneer's Oooguruk project is that it is the first time an independent company has negotiated a facilities access agreement with the major North Slope producers, in this case ConocoPhillips. Access to facilities is often cited as an obstacle for independents on the North Slope. Pioneer's successful negotiation of an access agreement paves the way for other independents and proves to those considering investing in Alaska that gaining access to facilities is possible.

Why Independents are Important to Alaska's Future
The development of an oil basin around the world follows a general progression. From the first discovery of oil, large companies provide the capital and develop the large discoveries. As the large pools of oil are developed, smaller companies move in and develop the smaller pools of oil around the larger pools. Alaska is following a similar progression, with the major companies dominating the large discoveries at Prudhoe Bay and Kuparuk and newer, smaller independents like Pioneer developing the smaller fields like Oooguruk.
Alaska is at the beginning of this transition period and the success of a company like Pioneer will demonstrate to others that a smaller company can succeed in Alaska. In my first email update I described the 5 criteria I believe should be used to evaluate an effective tax policy:
A tax policy that promotes "maximum use" of our resources "consistent with the public interest" will:
1. Provide a fair share for our Alaskan owned resources.
2. Encourage investment to maximize North Slope oil production from existing fields to keep our pipeline full.
3. Encourage exploration and development to expand our oil and gas resource base in order to ensure opportunities for the next generation of Alaskans.
4. Be fair to small and large producers in order to build new economic activity and jobs for Alaskans.

Given the changing nature of the North Slope, and the increasingly important role independents will play in our future, it is especially important to consider how tax policy affects the smaller companies.

Thank you for allowing us to share this information. Please feel free to contact us with any feedback.

Retaliation Alive on the "Slope"!

It is well known that back in the 90’s, oil patch “whistleblowers” feared their livelihoods and were retaliated against for raising concerns, about safety or environmental issues. But with intervention by Congress and labor laws that protect so-called “whistleblowers”, it is un-wise to think that a retaliatory like environment at the workplace may get the point across to other workers that bringing up concerns will not be tolerated. The old ways of minding your own business and letting management worry about the rules and regulations, is a thing of the past in the Alaskan oil business, maybe! Just recently a person of interest that was well aware of the environmental concerns that are under investigation by the Alaska regulators was unexpectedly let go, through his contractor performing work for Pioneer Natural Resources, at the Oooguruk oil development project located on Harrison Bay of the Colville River delta, to which this “blog” site is dedicated upon. The “whistleblower” was informed that his concerns and behavior to follow Standard Operating Procedures was “impeding” the activities of the operation! Basically this individual had the gall to confront a Pioneer direct over some issues, and found himself a right-now helicopter ride to the unemployment line. Questioning procedures! Well it was lack of procedures that finds Pioneer the possibility of stiff fines and penalties for illegal waste disposal and other mind-boggling irresponsible behaviors. This guy was laid off, for following the rules, when at the same time his position was posted, a day before being told the bad news! According to reliable sources, he was labeled a “disgruntled employee” after being interviewed by his company’s attorneys, after Pioneer’s 1st report upon the environmental concerns was denied by Pioneer’s own legal advisors, denials which today have found Pioneer in hot-water with the regulators, basically the denial tactic didn’t work. So this dedicated employee of a contractor was trying to follow the rules and regulations, he was let go. With no work, a mortgage and a baby, this indeed is a frightening attempt by business to use the old ways and means to instill upon workers that retaliation may follow workers that don’t mind their own. This is what is happening today on the “slope”, not with the “Big Oil” players that learned over the years that this type of abuse doesn’t work, but this kind of mentality is resurfacing with the new kid on the block, the Independents. Déjà vu? Yes, pure out-right outrageous retaliation upon responsible and respected workers who are concerned upon this beautiful environment and ecosystem that keeps Alaska apart from the wasted lands. So this is not a good sign and it appears that we may be going through the same damn horror scenario that occurred years ago, wherein these oil company bastards think it is just a wasteland. Wherein raising concerns hurts production, something the shareholders get concerned upon, as it appears that the “No” concern mentality trumps a stewardship of ethical behavior, and people that deviate outside that fraternity loose their jobs. How pathetic! Sue them is my sentiment.

Alaska's Attorney General's Response

STATE OF ALASKA

DEPARTMENT OF LAW
OFFICE OF THE ATTORNEY GENERAL

August 10, 2010

Michael S. Kelley
8525 Pluto Drive
Anchorage, Alaska 99507

Dear Mr. Kelley:
Thank you for your message regarding the Alaska Oil and Gas Conservation Commission's (AOGCC) investigation of the Ooguruk Development Project. I assure you that the state takes the allegations of lack of oversight seriously. As you pointed out, the AOGCC has engaged a third party to independently investigate the allegations. This very unusual step demonstrates the seriousness with which the AOGCC is treating the allegations. Further, an investigation by an independent third party makes any determinations concerning the allegations less susceptible to accusations of bias.

Because the AOGCC has engaged a third party to investigate, there is no need for the Department of Law to initiate a separate investigation.
Please feel free to contact me with further questions.
Sincerely,

DANIEL S. SULLIVAN
ATTORNEY GENERAL

AOGCC/EPA Report Excerpt #1

Glycol Injection without State Permit
In a report filed on March 12th to the Alaska Oil & Gas Conservation Committee(AOGCC), the U.S. Environmental Protection Agency(EPA) and Alaska Department of Environmental Conservation(ADEC) through Pioneer’s legal advisor Stoel Rives, it is stated, “Pioneer’s investigation has located no evidence of slipstreaming used glycol into the seawater injection stream(or of an incentive to do so)” along with bragging rights that over 1000-manhours had been consumed finding “nothing”. But Pioneer’s own legally binding Daily Operational Log Book stated differently, providing evidence that the above mentioned report was a smoke-screen. The official log book documented the following entry: “Shutdown water line to island, depressurized and pumped glycol from beer tanks into water line”. The informer sent this readily available evidence to Pioneer’s legal advisor, stating his dissatisfaction with the original report, that it should have been discovered during the 1000-man hour investigation. When this evidence surfaced contradicting what was told to the authorities having oversight jurisdiction, Pioneer sent an amended report to the oversight agencies, now claiming that it was unfortunate that over 49,000-gallons of glycol may have been miss-injected without a permit from the AOGCC, which oversees things for the state as well as for the EPA. On April 22, Pioneer met with representatives of the AOGCC and verbally reported the injection of the glycol/water mixture(withdrawing the original “no evidence” plea to admitting 49000 gallons had been miss-injected without a permit). Accordingly, “The same day, these events were also described in brief to Chief Assistant Attorney General Steve Mulder, as ADEC’s representative in this matter”. The amended report tried to soften the blow, as reporting “nothing substantiated” upon a former employee’s concerns about illegal injections required finding a convenient scapegoat to place blame upon, as these activities are illegal, a violation upon the “public trust” doctrine and perpetrators can face jail time if convicted. According to the amended report, “The injection was the result of honest mistakes”. Bottom-line, this report tried to place blame on the inexperienced operators, who were directed to pump the glycol, as a means to get rid of this hazardous stuff and considered “sham recycling”, by orders from the senior on-site management. Based on Reporting Quantity requirements of in force through EPA guidelines, this was a reportable quantity as it was in total over 5000-pounds. And when the 1st report was received by the oversight agencies, had it not been for the informer pressing on his “mission” to uncover a blatant disregard for environmental stewardship this Independent had to offer at the Oooguruk development site, the smoke screen may have worked. In line with what BP was fined for that which occurred at its Endicott Island facility wherein illegal injection was also uncovered, and as a future deterrent, Pioneer should find the same punishment. The EPA fine should be the same. A felony conviction for the corporation, a $500,000 fine and required to have those involved in such disposal, properly trained, including management, through an Environmental Management Program. It cost BP 15-million to implement this type of program. Along with that, the state of Alaska statutes allows a civil penalty of $100,000 along with $10,000 fine for everyday wherein the violation continued, and a class A misdemeanor. Besides this illegal activity, injection without a permit and in violation of AS 31.05.150, Pioneer is under indictment for not reporting events wherein natural gas was vented, considered waste and a penalty which garnishes 3-times the market value of the wasted gas and also under scrutiny for shipping Class I hazardous waste into its crude oil production line, which could make its way into the Trans-Alaska-Pipeline-System. In the end, Pioneer Natural Resources, a Texas based oil company and Alaska’s 1st Independent to brave the “North Slope” in competition with “Big Oil”, this corporation should be assessed the maximum penalty allowed by law, as a future deterrent! Anything less will indicate that the authorities are not doing their jobs!

Stiff Fines for Alaska's 1st Independent

Pioneer Natural Resources - the 1st Independent oil company to brave the North Slope in competition with “Big Oil” - is today facing the possibility of stiff fines and penalties in the millions. This is in comparison to what British Petroleum was faced with back in the 90s when one of its contractors went involved in illegal disposal of oil field waste byproducts. In that action at law, BP was slapped a felony conviction(for after the fact reporting), $500,000 in fines, 5 years of organizational probation and required to ear-mark $15-million for implementing a company wide “Environmental Management System”. Today, PNR is facing not only fines and penalties for miss-injection, along with un-reported gas venting and hazardous waste “sham recycling”, but also fines and penalties for not reporting injuries to wildlife on their project property proper. PNR operates the Oooguruk development project, a man-made island that sits in the once pristine waters of Harrison Bay, of the Colville River delta watershed. Due inexperience in the arctic, the design fell short of what was required in efforts to perform according to regulations mandated by “Public Policy” doctrines supposedly kept in check by the AOGCC, DNR, ADEC and the EPA. In the original response to the complaint of mismanaged injection and waste disposal, PNR’s attorneys denied “all allegations” and made it clear and convincing that they were upset that “1000 man hours had been wasted investigating to find nothing”. So they blew the “last clear chance” to admit that the operation had problems. When BP was made aware of the illegal waste problem at its facility, it was reported, not denied. Now PNR has amended its original report of “nothing substantiated” to the state and Federal regulators , as evidence didn’t let them slide so easily by the oversight police. So based on state statutes and EPA guidelines, PNR faces fines and penalties in the millions, along with the possibility of Class A misdemeanors and possibly felony convictions. In the BP Endicott crime scene, a contractor was awarded jail time! And there is a realistic difference between the BP and PNR case, as in the BP case, the contractors said they knew not the waste disposal laws. For PNR, the operators were instructed to perform illegally by the senior management! So this is the litmus test, as when BP found that a contractor was involved in criminal activities and fined accordingly, it was supposed to be the deterrent that would make sure companies involved in future oil field work on the “slope” performed by the book. It didn’t work, as we see similar malfeasance going on today. So look to see PNR facing fines and penalties that this time gets the point across. But there could be a catch-22 herein. PNR was given royalty and tax incentives to develop this marginal field, as an incentive to lure in more “mom & pop” types. Stiff fines could back-fire, but it goes with the territory as it is a privilege to explore to exploit the resources on the “slope”, and if you play against the odds, then you must pay! In this case, the state and Fed.’s must throw the book, hard and fast at Pioneer and if other “mom & pops” see that the oversight is too tough and that sentiment compromises their future interest in Alaska, then they can stay away and wreck havoc in their own backyards.

Admittance of Guilt Score-Card

To date, Pioneer Natural Resources - a Texas based “mom & pop” Independent oil company - in concert with developing the Oooguruk Project in Harrison Bay on the Colville River delta watershed of the Beaufort Sea has admitted to Federal and Alaska oversight agencies:

The illegal disposal of 49,000 gallons of glycol(an aquifer injection crime);

The illegal venting of massive quantities of liquid hydrocarbon saturated “wet” natural gas, not reported as required by Alaska statutes( a resource waste, air & water pollution crime);

The illegal disposal of hundreds of barrels of Class I hazardous waste into the Trans-Alaska-Pipeline-System(the possibility of an EPA crime);

Birds killed by disturbance from worker activities(a wildlife crime);

Using another entities ice road when it was not known whether a required polar bear denning survey had been completed, as required by the U.S. Department of the Interior(a possible endangered species act crime).

This admittance came after strong denials, after an informer brought these atrocities to the attention of concerned individuals. But there is just too much evidence that for now disallows this Independent the privilege of “innocent until proven guilty”. The fines and penalties for such violations, for such malfeasance behavior should be the maximum allowed by law and felonies should be forthcoming - as a reminder and deterrent. This is the litmus test case upon State of Alaska regulators following the DeepWater Horizon incident in the Gulf of Mexico. There should be no leniency at all!