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Mustang appeals AOGCC fine on drilling
Issue is change to approved permit to drill for one of two wells at Southern Miluveach unit M-03A well, a sidetrack completed 9/13 Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission has fined Mustang Holding LLC, operator of the Southern Miluveach unit, $50,000 for unauthorized changes made to the drilling permit the commission issued while drilling for the SMU M-03A well, one of two sidetracks the company drilled at the unit this summer. Both SMU M-03A and SMU M-01B were completed in September.
After the commission notified Mustang of the proposed enforcement action and fine in July, the company requested an informal review which was held Aug. 14.
The commission said in its Aug. 29 decision that Mustang "provided further context surrounding its actions" during the informal review and said, "it did not intend to violate AOGCC regulations."
As previously reported by Petroleum News, the commission said the company did not get either verbal or written approval for changes to the requirements of the permit to drill.
The Aug. 29 decision and order fined Mustang $50,000 for violations of regulations for failing to meet the requirements of the permit to drill for the well, which "required a gamma ray sonde at bit measurement to assure drilling would not enter the Kuparuk sand because of safety concerns."
Mustang then requested a public hearing, which the commission held Nov. 5.
Mustang's view In overheads prepared for the public hearing Mustang said it believes many of the assertions in the Aug. 29 decision and order "are incorrect and reputationally damaging" and asked that the order be rescinded, while also asserting it "wishes to reaffirm our intention to maintain a professional, transparent, honest, and mutually respectful relationship with AOGCC."
Mustang said the well was "safely and responsibly drilled."
The commission said its regulations were violated because Mustang did not submit a 10-403 Sundry to change the permit to drill for review and approval.
But while the commission said Mustang did not receive either verbal or written approval for the change from the permit to drill, Mustang said it did receive "written approval to change the program by email."
The company said three qualified drilling engineers working on the well interpreted email communication from the commission as approval to drill and said that during a crucial point in drilling it could have added the assembly with the gamma ray at the bit "if either Mustang Holding LLC or AOGCC believed it was unsafe to proceed."
The company said that in the past the commission "has allowed changes to approved programs by written email instead of by 10-403," but said it "now recognizes this assumption may no longer be AOGCC's practice," and has implemented a standard operating procedure for regulatory change management.
"In the future, all changes to approved Permits to Drill will be submitted as a 10-403 unless an AOGCC representative has explicitly stated in writing that a 10-403 is not required," Mustang said.
Penalty section language The company disputed language in the penalty section of the commission's decision citing Mustang for "disregard for well control risks," and said it maintains that "is in conflict with the engineering that went into the well, the outcomes of the well, Mustang Holding LLC's history, and AOGCC's written statements."
Mustang said it implemented mitigations "based on sound engineering and on an extensive review of the prior Mustang Pad wells and a review of the surrounding wells near Mustang Holding LLC's leases. The thorough attention placed on well control during planning and drilling resulted in overcoming the well control problems the prior operator encountered."
As for a reference to history of compliance, the company said it was formed in September 2020 and "has very little history, and no history of non-compliance."
Mustang said it "acknowledges that AOGCC would like communications for Permit to Drill changes to look different in the future -- we will ensure this happens and we have implemented a Standard Operating Procedure for this purpose."
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