Violations not keeping Hilcorp from bigger plans

Aug 11, 2017

News of another spill, this one of an oil-based drilling mud on the Steelhead platform in Cook Inlet, coincided with a piece by journalist Sabrina Shankman in Inside Climate News about Texas-based Hilcorp.

I spoke with Shankman to learn more about the reporting she's done on the company, one of the success stories to come out of the Cook Inlet renaissance of a few years ago, as it moves ahead with big plans on the North Slope in addition to its growing Cook Inlet portfolio.

This is a transcription of the portion of the conversation which aired on KDLL. It has been edited for length and clarity. You can hear the conversation in its entirety in the media player above.

Shaylon Cochran: Hilcorp has had a rough go of it in 2017, regulatorily speaking, anyway. An undersea natural gas leak this spring grabbed a lot of the headlines, but issues with regulators and regulations almost appear to be a trend. I’m joined with Sabrina Shankman, she writes for Inside Climate News, and in a recent piece, she dug into the paperwork to learn more about Hilcorp’s relationship with regulators in the state of Alaska as it prepares to expand operations up on the North Slope. Sabrina, thanks for being with us. Now, of course, we’ll have a link to your piece on our website, but if you could give us a little overview of what you learned about Hilcorp in the course of your reporting?

Sabrina Shankman: The story looks at Hilcorp’s history of violations in Alaska. By looking through regulatory documents and talking to sources in and around the industry, what I learned was that Hilcorp has the really troubling history where they’ve racked up dozens of regulatory violations in the state as they’ve developed Cook Inlet and also some properties on the North Slope. But now they also have their eye on the Liberty project, which is this proposed project that would be the first offshore project in federal, outer-continental shelf waters. We’re expecting the environmental impact statement on that any day now. So it’s putting it all in context — looking at the history and (asking), 'What does that mean for the future of Hilcorp’s drilling in Alaska?'

 

And 2017 has been kind of a rough year. Some of your piece digs into the culture and the history of Hilcorp. Is this something that’s been with them since the beginning? The company is almost 30 years old. Is this systemic in the company or is it just facing different challenges in Alaska?

One of the things that’s interesting about reporting on Hilcorp is that it’s a privately held company, which means that it doesn’t have the transparency that you would have if you were reporting on a larger oil and gas company that’s publicly held. So what I was able to find was that, in many of the states where they operate, Hilcorp has run into problems. Louisiana, in particular, has been a location that looks sort of similar to Alaska where there has been a number of violations. But it seems that Alaska is really where Hilcorp came in and really quickly put a lot of money into developing new projects and expanding really rapidly. So though it is not that different from other states, I certainly didn’t find nearly as many violations in other states as I did in Alaska. And, yeah, 2017, rough year for Hilcorp. What got me started looking at them was that Cook Inlet leak that was reported back in early February and stopped in April. What Hilcorp said from the start was that they couldn’t shut it down, they couldn’t fix it because of the ice and nobody argued with that. It certainly wouldn’t have been safe to send divers down there when there’s ice in the inlet. And they said they couldn’t shut it down because of the leak. Now, I talked to engineers, environmentalists, conservationists, regulators. What all of them said to me was, 'Is there a risk of a little bit of oil leaking? Maybe. But it’s not going to be a lot. It’s going to be a tiny amount, if anything, and the reality is there’s a huge amount of production going on all the time. Some nominal amount of materials may be leaking at different points. What could have come out of that pipeline, had they shut it down, really wouldn’t have changed anything.'

 

In your article you quote Richard Kuprewicz, the president of Accufact, a pipeline safety consulting firm. He says, regarding Hilcorp’s reason for not shutting down the gas line, that there’s a little truth to their story, but not enough to make it fact. And I think that’s telling. As you said, there are no clearcut lines about shutting it down and it’s this kind of gray area. Hilcorp’s specialty is taking over and getting production up in these legacy fields, and maybe that’s part of the success is living in those grey areas and making it an advantage.

Yeah. What sources said is that they have a business policy where they’re basically driving ahead as quickly and aggressively as they can, and that means they might sometimes end up getting in trouble, and in Alaska, it’s a lot. One of the phrases that came up a lot in my interviews for this story was that, in some cases, it seemed like the embodiment of the concept of, 'Better to ask forgiveness than permission.' Just moving ahead quickly, trying to get as many projects online as possible and along the way, some stuff might happen, and we’ll deal with it as it comes up. Hilcorp, unfortunately, didn’t want to respond to the questions I sent them or talk to me for this article, so I wasn’t able to get their explanation for what happened, but I did find in a document their response to what the AOGCC (Alaska Oil and Gas Conservation Commission) has said about them. They say, basically, 'Look, we’re doing the best we can. We’re working hard, we’re working in good faith and we’re trying to comply with laws and regulations and, yes, we’ve fallen short in places but we’ve tried to correct things as quickly as we can when that’s happened.' What the regulators eventually said was that, 'Your actions don’t always line up with your words. We’ve tried to help get you to comply with our regulations. We’ve tried to do extra trainings, we’ve tried to work with you so that you would understand what the expectations are and it’s just not happening.'

And it’s easy to see how maybe that sort of dynamic between the company and regulators can lead to such strong language, again, as we’ve seen from regulators regarding Hilcorp here in Alaska.

Sure, yeah. It’s interesting. The regulators used super strong language. But when I did find one former AOGCC inspector who would talk to me who’s quoted in the article, he had sort of mixed feelings about Hilcorp. He was saying to me, basically, that they’re trying, but they’re trying to do so much, so quickly that these problems were almost inevitable. AOGCC almost had to learn along with Hilcorp. AOGCC had to figure out, 'How do we deal with a company who’s new to Alaska and trying to do so much, so quickly and how do we all get on the same page here?' And that’s taken quite a while.

 

Sabrina Shankman is a reporter with Inside Climate News. Her most recent piece detailing Hilcorp, its plans for expansion on the North Slope and its rather checkered history with regulators here in Alaska, can be found here.