2015 Kenai Alliance Annual Safety Summit by Morris Media Network

2015 Kenai Alliance Annual Safety Summit

Alliance Annual Safety Summit

SAFETY:

A vital part of the Alaska Advantage

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2015 Kenai Alliance Annual Safety Summit

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2015 Kenai Alliance Annual Safety Summit

Kenai Alliance Safety Summit Kenai Peninsula College Kenai, Alaska 301 Arctic Slope Ave. Ste. 350 Anchorage, AK 99518 P: 907-561-4772 F: 907-563-4744 www.alaskajournal.com

Publisher Rona Johnson (907) 275-2179 rona.johnson@morris.com Managing Editor Andrew Jensen (907) 275-2165 editor@alaskajournal.com

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Advertising Director Jada Nowling (907) 275-2154 jada.nowling@morris.com Production Manager Maree Shogren (907) 275-2162 maree.shogren@morris.com Cover and Layout Designer Nadya Gilmore (907) 275-2163 nadya.gilmore@morris.com Reporter Tim Bradner (907) 275-2159 tim.bradner@alaskajournal.com Reporter Elwood Brehmer (907) 275-2161 elwood.brehmer@alaskajournal.com Account Executive Joy Bunde (907) 275-2153 joy.bunde@morris.com Account Executive Ken Hanni (907) 275-2155 ken.hanni@morris.com

State sees sharp drop in lost-time injuries................. PAGE 9 The evolution of OSH curricula: four decades of advancing the safety profession............. PAGE 13 Alaska Clean Seas: Two million man hours with no losttime accidents............................ PAGE 16 Labor Department program recognizes workplace safety....................... PAGE 17 Health, safety â&#x20AC;&#x2DC;overkillâ&#x20AC;&#x2122; is the norm on Slope................. PAGE 18 State geologists raise estimates for Inlet gas.......................................... PAGE 21 Hilcorp Energy keeps up spending despite oil price slide................................ PAGE 25 Cover Photo and this page /COURTESY/STG INC.

2015 Kenai Alliance Annual Safety Summit

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2015 Kenai Alliance Annual Safety Summit

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Phone: (907) 563-2226 Website: www.alaskaalliance.com General E-mail: info@alaskaalliance.com General Manager Rebecca Logan rlogan@alaskaalliance.com Director of Communications Renee Limoge rlimoge@alaskaalliance.com Fairbanks Membership Coordinator Jim Plaquet jplaquet@alaskaalliance.com Kenai Membership Coordinator Hadassah Udelhoven hudelhoven@alaskaalliance.com Communications, Events and Database Coordinator Jill Schaefer jschaefer@alaskaalliance.com Photo/Courtesy/Kiewit Infrastructure West

2015 Kenai Alliance Annual Safety Summit

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2015 Kenai Alliance Annual Safety Summit

State sees sharp drop in lost-time injuries By Tim Bradner Alaska Journal of Commerce

Alaska employers reported a dramatic 46 percent decrease in workplace injuries in 2014, with the accident rate dropped to 0.61 lost-time incidents per 100 employees, state Department of Labor and Workforce Development officials said in interviews. The reduction helped push a decrease in workers’ compensation insurance premiums, bringing Alaska below the No. 1 position in the nation in costs, said Mike Monagle, director of the Workers’ Compensation Division in the department. It is the first time since 2004 that Alaska has not ranked either first or second for the nation’s highest premium costs. In fact, Alaska has slipped to the No. 5 position with California, Connecticut, New Jersey and New York now with more costly premiums. For calendar year 2014, Alaskan employers saw an average decrease in premium costs of 2.6 percent. For 2013 the decrease was 3.6 percent. The 2013 reduction saved Alaska employers about $6 million in premium costs in 2014. About $300 million was paid in premiums in 2013. The data is from the 2014 Oregon state’s Workers’ Compensation Premium Rate Ranking Summary, a report published every other year. Twenty-five states showed increases in workers’ comp premiums over the two years in the Oregon study, but Alaska’s rates decreased. Monagle said the most significant factor in the reduced premium costs is better safety performance and reduced lost-time incidents. “In 2008 there were 30,000 lost-time reports and by 2013 this had dropped to 19,000. This made a huge difference,” Monagle said. “We saw job growth along with declining injuries,” he said. Monagle credited an intense safely culture that has developed among most employers. “Employers are more safety conscious, and this has increased over time. It’s just like using seat belts in autos. There was a time when people ignored seatbelt warnings but now almost everyone clicks up,” he said. “It’s not about people worrying about getting a ticket, either (seatbelts are required by law in Alaska). People can see the benefits, in reduced injuries.” The improved safety trend is national and roughly over the same period, indicating a broad nation-wide greater focus on safety is in the workplace. However, while the premium costs are de-

Photo/Courtesy/QAP

Employees with QAP move heavy equipment during the Sawmill Creek road upgrade in Sitka in 2014. Alaska employers reported a dramatic 46 percent decrease in workplace injuries in 2014, with the accident rate dropped to 0.61 lost-time incidents per 100 employees. During the upgrade, employees safely excavated 120,000 cubic yards of material, primarily by controlled blasting methods.

clining, the overall cost of workers’ compensation insurance in Alaska is still high compared with other states, and the reason is Alaska’s notoriously high medical costs compared with the Lower 48 states. Seventy-six cents of every dollar paid out in workers’ compensation costs in Alaska are for medical services compared with 56 cents in other states, on average, Monagle said. The

average medical cost per workers’ compensation claim is $53,000 in Alaska compared with $29,000 in other states. Medical costs in Alaska are significantly higher than other states for many specialized procedures, sometimes by 200 percent to 400 percent, than for similar procedures in neighSee DROP Page 12

2015 Kenai Alliance Annual Safety Summit

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2015 Kenai Alliance Annual Safety Summit

Photo/Courtesy/STG Inc.

Workers with STG Inc. are seen perched high in the air while waiting on a heavylift helicopter to deliver a tower segment for part of the GCI TERRA-Northwest project delivering faster broadband speeds to rural Alaska. Last year was the first time since 2004 that Alaska has not ranked either first or second for the nation’s highest workers’ comp premium costs.

DROP

Continued from Page 9 boring states of the Pacific Northwest, Monagle said. This is mainly due to the limited number of specialized medical providers in certain fields, and the lack of competition leads to higher costs. Given this, controlling the cost of medical care is really the key to controlling or even reducing workers’ compensation costs and employers’ insurance. Two bills passed by the Legislature during its 2014 session should provide some help, Monagle said. One is a bill that requires medical providers serving injured Alaska workers in other states to charge fees in accordance with those states’ allowable fee schedules rather than Alaska’s fee schedule, which is typically higher. The data shows that 20 percent of injured Alaskans are given treatment out of state mainly because many of those workers are employed seasonally and live in the Lower 48 states for

part of the year. House Bill 141 went into effect in September, Monagle said. Savings in workers’ compensation costs should start showing up in the next year. The second change is in House Bill 316 passed in the 2014 session, a measure that shifts the method of payment for workers’ compensation medical costs away from the “usual and customary” standard to a “relative value” approach. Relative value adopts the payment procedures currently in use by Medicaid and Medicare and adapts them to Alaska through a system of conversion factors that take into account local costs. In contrast, the existing usual and customary standard is where the fee is paid at the 90th percentile of charges by providers in a given area of the state. What this does, essentially, is that it causes the fee structure to escalate over time because if one or a handful of providers

raise rates it raises the 90th percentile average for all providers even when some providers were charging lower rates. A system like that encourages an upward spiral of costs because it builds in an incentive for provider to raise rates, Monagle said. The new system, which is to be in effect next July, links the fees to what Medicaid and Medicare pay, systems health providers are accustomed to, but allows for the conversion factors to adjust the fees to local costs and conditions. The conversion factors are recommended by the Medical Services Review Committee, on which medical providers and organized labor are represented, and adopted by the Alaska Workers Compensation Commission, a state commission that is charged by HB 316 with implementing the new system. Tim Bradner can be reached at tim.bradner@alaskajournal.com.

2015 Kenai Alliance Annual Safety Summit

The evolution of OSH curricula:

four decades of advancing the safety profession By John W. Wells Jr. Editor’s note: Reprinted with permission of the American Society of Safety Engineers, publisher of Professional Safety. This article originally appeared in the December 2014 issue of Professional Safety. The OSH profession continues to evolve. Today’s OSH professionals are specialists who have the ability to recognize, evaluate and implement risk control measures to protect people, planet and profit. As it relates to safety, risk is situational or circumstantial, and OSH professionals focus on forecasting potential losses in the areas of personal injury or property damage. It is OSH professionals’ task to manage, reduce and remove potential risk by applying best practices and current technologies, simultaneously supporting top management in the implementation of effective safety systems. According to BCSP (2011), the contemporary OSH professional must have a solid understanding of engineering, business, industrial health, laws and regulations, human behavior, education, training techniques, and computer and Internet technologies. Such a foundation allows OSH professionals to use qualitative and quantitative analysis of simple and complex products, systems, operations and activities to identify potential or existing hazards. The likelihood of occurrence, possible severity, risk (a combination of probability and severity) and associated costs form the OSH profession’s parameters. OSH professionals are tasked with identifying a broad spectrum of hazards, implementing the best available solutions based on their knowledge of the safety sciences. Supplementing the sciences is a solid foundation in mathematics, business management, training and engineering principles. Safety professionals are found throughout all industries, in every aspect of daily life. Sherrard (2007) alludes to the fact that OSH is an integral part of almost every system used today. The emerging role of the OSH professional continues to transform from the traditional model to that of a change agent affecting all levels of an organization. Safety is now seen as a business function that affects the corporation as a whole (Groover & Spi- gener, 2008b; 2008c). Safety as a science is expected to be an

integral part of the actions and behaviors of all employees. The drive to discover new methodologies that create broader employee engagement has prompted organizations to explore new resources for the OSH professional. Through innovation, management systems continue to present a multitude of challenges to the OSH professional.

The emerging role of the OSH professional continues to transform from the traditional model to that of a change agent affecting all levels of an organization. Safety is now seen as a business function that affects the corporation as a whole. Traditional Safety Curricula Shaping Professionals Programs of study in OSH have a relatively short history in higher education compared to other professions. Prior to OSHA’s creation in 1972, few institutions offered degrees in occupational safety or safety engineering. Consequently, those responsible for safety compliance lacked formal education and were typically assigned safety responsibilities based on experience. Soule (1993) recognized the lack of consistent guidelines for occupational safety curricula across the U.S. In addressing the inconsistencies, Soule attempted to measure the perceived strengths and weaknesses of the existing safety curricula. Surprisingly, environmental issues were deemed the weakest in the curricula, followed by management skills, computer applications, workers’ compensation and risk management. Soule ultimately described the safety professional in 1993 as a well-rounded multidisciplinary generalist. Throughout the 1980s, ASSE and BCSP separately recommended basic core curricula as

more universities began to offer safety degrees (Charehsazan, 1994). Both organizations eventually realized their common goal and jointly began proposing core curricula. In response, Charehsazan (1994) constructed an instrument based on 29 professional competency areas for OSH professionals. Charehsazan asked safety professionals and academic leaders to rate the relevance of those competencies as they applied to the safety profession. The competencies encompassed the majority of the core curricula found in engineering-related degrees at the time of the study. This research evaluated the perceived minimum curricula required for safety students. The study population consisted of 72 universities offering safetybased curricula as recognized by ASSE in 1984 and NIOSH in 1987. Those surveyed rated the following competencies as most relevant for inclusion in OSH programs: • introduction to safety (94.6%); • safety and health (89.5%); • chemistry (86.5%); • rhetoric/composition (84.2%); • industrial hygiene (84.2%); • incident investigation (84.2%). Charehsazan’s (1994) and Soule’s (1993) research revealed a lack of formal OSH curricula. These researchers determined that programs at that time were based on personal preference, interpretation and the perceptions of higher education professionals. Charehsazan’s (1994) research helped justify the need for curricula that supported the premise that the safety profession was evolving into a highly specialized field, advocating that future safety professionals be educated through higher education programs of study rather than on-the-job training alone. Using that research as a foundation, Blair (1997) continued to follow the evolution of the safety profession and academic curricula used in degree programs. He recognized that the modern safety professional was transitioning from a technical generalist to a program manager responsible for multiple staff and facilities. By the late 1990s, safety professionals had established themselves as the technical experts, but were now being recognized as a value-added member of the organization See OSH Page 14

2015 Kenai Alliance Annual Safety Summit

OSH

Continued from Page 13 transitioning into the upper levels of management. Although company safety programs were growing as a result of loss control efforts, increased regulatory compliance and increased litigation continued to shape the profession. To identify evolving critical competencies necessary for inclusion in safety curricula, Blair (1997) created a survey instrument based on the 1991 ASSE curricula standards for baccalaureate degrees in safety and the management competencies framework developed by Quinn, Faerman, Thompson, et al. (1996). He randomly selected 450 CSPs from BCSP’s 9,000-member pool and 137 colleges recognized by ASSE as offering safety- related degree programs. This research determined that management competencies had the highest perceived impact on safety program effectiveness versus the technical aspects of hazard reduction through engineering practices. Blair’s (1997) research also supported the need for an increased emphasis on management curricula as opposed to the historical recommendation of engineering-based curricula by ASSE and Accreditation Board for

Engineering and Technology (ABET).

Curricula Change At its most basic visual representation, the safety profession continues to support the human-machine-environment principles that have been explored for decades. As a result, current curricula and the traditional safety paradigm continue to emphasize the prevention of occupational incidents. However, a new paradigm that encompasses ethical decisions and prevention through design (PTD), combined with the evolution of occupational safety and health management systems (OSHMS), is emerging to meet the demands of an ever-changing global community. Over the past 4 decades, OSH has advanced rapidly compared to other professions. Initially, the profession focused on regulatory compliance and meeting the minimum requirements of standards. In the 21st century, safety professionals are being challenged to continually evolve by creating new methodologies and systems, and affecting perceptions, while serving as transfor-

mational leaders influencing company cultures and managing complex safety systems (Groover & Spigener, 2008a). As technology evolves, OSH professionals must similarly evolve to stay abreast of those changes, maintaining their relevance as technical experts and highly credentialed program managers. Looking to the future, higher-education leaders must ensure that students are presented the latest curricula necessary to prepare them for the dynamic OSH profession. However, educators and safety professionals recognize that preparing industry for members of the Millennial generation and beyond presents additional challenges. Universities are in the midst of a technological renovation. Many have invested millions of dollars over the past decade to update their learning systems to incorporate the latest technology (Clayton-Pedersen & O’Neill, 2005). The creation of new learning systems coupled with the latest technology has kept universities motivated to meet future demands (Lippincott, 2005). See OSH Page 16

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Alaska Clean Seas: Two million man hours with no lost-time accidents Protection Program as a result of outstanding employee Alaska Clean Seas, which recently marked two million man hours safety and health programs. without a lost-time accident, has been reapproved to Department of “Alaska Clean Seas was Labor’s Voluntary Protection Program. first awarded Voluntary Protection Program Star status in 2008, as the 14th recipient of the award in Alaska,” ACS General Manager C. Barkley Lloyd said. “At that time, with 76 employees, the company had just passed one million man hours and seven years without a lost time accident. “Since then, our remarkable safety journey has continued –— we have Alaska Labor and Workforce Development Acting Commissioner Grey Mitchell grown to nearly 100 employees and recently announced that Alaska Clean Seas has been achieved two million man hours and 13 years reapproved to participate in the Voluntary without a lost-time accident. The entire team Photo/Michael Dinneen/AJOC File

at Alaska Clean Seas is proud of our VPP Star status designation and our reputation for safety excellence while operating in some of the most challenging weather conditions in the nation.” VPP recognizes and promotes effective workplace safety and health management through a cooperative program between a company’s management, employees and Alaska Occupational Safety and Health. “While our VPP Star status is proudly displayed, safety doesn’t stop at a sign on the building. As new employees, contractors and visitors are welcomed aboard, their training in proactive hazard recognition and control begins immediately,” he said. There are 12 sites in Alaska with the AKOSH VPP designation. For a complete listing of the sites and more information about the program, go to labor.alaska.gov/lss/vpp-participants.html.

OSH

Continued from Page 14 In 2012, ASSE (2012) listed 194 U.S. campuses with safety and health degree programs. Of those, only 10 programs were accredited by ABET for having an associate of applied science, bachelor of science or master of science degree. Of those, only one university had an accredited program at both the undergraduate and graduate level (ABET, 2012).

A Look Ahead The increased focus on OSHMS continues to precipitate changes throughout higher education. As the demand for well-rounded safety professionals increases, the number of universities offering degree programs that incorporate concepts such as PTD must continue to grow. In response to the changing global market, the safety profession has seen a transformation in management style and principles. Organizations are focusing on cultural changes in employees’ work ethic to accept equal shares in the process while partnering with management to reduce safety liabilities. Companies are demonstrating their commitment to enhancing employee safety by investing in systems that help OSH professionals and management transform culture (Groover & Spigener, 2008b). As the role of safety profes-

sionals continues to expand to fill global demands (Laws, 2007), higher education with its new learning systems will determine how well safety professionals of the future will meet the needs of the global market. Higher education must construct curricula that will prepare future safety professionals to successfully navigate the global waters ahead. In response to the growing popularity of OSHMS, institutions have begun to address topics such as PTD, ANSI/ ASSE Z10, National Mining Association’s CORE- Safety and OHSAS 18001. Such programs continue to gain traction in safety curricula while new models are continually being presented to industry. Traditionally, OSH professionals have managed a multitude of programs independently from other disciplines without the ability to create a singular system that is recognized by management and serves as the vehicle in which to achieve the corporation’s goals. Through system creation and recognition, authors on this subject believe traditional safety programs are afforded the ability to excel as singular systems due to an underlying interdependency among all management programs (Haight, Yorio, Rost, et al., 2014). Managers are quick to discover that the dissection of such systems back into their individual programs does not change the safety profes-

sion’s core objectives. PTD has in fact been a focus of safety professionals for decades based on their knowledge that occupational safety is not the sole endeavor of one individual, but rather a shared system of issue resolution through mitigation or elimination that begins at the design phase or through effective systems management. Emphasis must be placed on the incorporation of safety management curricula because the traditional safety role has evolved to the levels of manager, coordinator, director and vice president within most corporate structures. Ultimately, higher education will be tasked with incorporating PTD and OSHMS into curricula, and with engaging other management and engineering disciplines to help them understand their role as it relates to occupational safety and health. John W. Wells Jr., Ed.D., M.S., CSP, is the senior consultant/owner of EHSPR, a consulting firm, and a faculty member at Murray State University. A graduate of Union University and Murray State University, Wells has more than 25 years in the field managing programs in the manufacturing, petroleum and chemical industries. Wells is a professional member of ASSE’s Northwest Tennessee Chapter.

2015 Kenai Alliance Annual Safety Summit

Labor Department program recognizes workplace safety By Elwood Brehmer Alaska Journal of Commerce

Workplace safety is a topic that can rear its head for all the wrong reasons — typically after an accident. A partnership between the State of Alaska and the federal Occupational Health and Safety Administration tries to make workplace safety a positive subject matter. The Department of Labor and Workforce Development Voluntary Protection Program, or VPP, certifies companies with exemplary safety records. The latest to be recertified was Alaska Clean Seas. VPP Star-rated sites are exempt from random workplace inspections for five years, program coordinator Dave Guinn said. Meritrated sites are exempt from such inspections for three years. Companies still need to file annual reports with the department, he said. “We don’t just walk away for five years,” he said.

The program is a “partnership” between the employer and the state that can improve already strong safety programs, Guinn said. “The whole ideas is to focus on hazard prevention and control,” he said. According to the state Division of Labor Standards and Safety, VPP certified companies average 52 percent fewer jobsite accidents than their industry counterparts. The State of Alaska adopted the OSHA-supported program in 1997. The federal program was started in 1982. To qualify, an employer must first maintain injury and illness rates below Bureau of Labor Statistics standards for their industry, Guinn said. A Labor Department team then reviews the applicant’s workplace safety program and conducts a site visit prior to ruling on the application. Guinn said full company commitment from management through every employee is required to meet VPP standards, along with an

effective safety policy. “VPP is no small thing. The kind of things we’re asking for involve quite the commitment,” he said. Currently, 12 companies are certified at the Star level, the majority of which are ancillary groups of oil and gas companies. Guinn said the reason for that is twofold: The inherent dangers of the oil and gas industry require a strong safety culture and formal safety guidelines, and the typically large companies in the industry have the resources to devote to safety programs that meet VPP standards. Other VPP Star certified organizations include Air Logistics of Alaska Inc.; environmental services firm Alaska Clean Seas; BP’s Exploration Alaska Central Power Station facility in Prudhoe Bay, Insulfoam Inc; Fairbanks Memorial Hospital; and seafood processor UniSea Inc. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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2015 Kenai Alliance Annual Safety Summit

Health, safety ‘overkill’ is the norm on Slope By Elwood Brehmer Alaska Journal of Commerce

POINT THOMSON — North Slope work is big business representing thousands of workers and billions of dollars, and nothing is taken for granted to keep the oil and gas machine running safely and efficiently. ExxonMobil’s Point Thomson Construction Site Manager Carlos Rivera said each first-timer to the natural gas field is initiated with 90 minutes of safety training and proper health protocol. Hand sanitizer stations are visible from nearly everywhere in the Point Thomson camp buildings, and at mealtime, the requirement to wear disposable plastic gloves extends to everyone in the chow line, not just the cooks. The gloves go on immediately after a round of sanitizer. Electronic devices — grimy phones and smudged iPods — are prohibited in the cafeteria. “It may be what some people think is overkill, but it works,” Point Thomson Construction Lead Randy Greenway said.

Isolated from the rest of the North Slope infrastructure about 60 miles east of Prudhoe Bay and Deadhorse, Point Thomson is the $4 billion mega-gas field operated by ExxonMobil that’s been under construction for the past two years. Jeff Kolean, a former Occupational Safety and Health Administration consultant and current health, safety and environment manager for the drilling company Nordic-Calista Services, said the procedures at Point Thomson are common practice in Slope camps. Preventing illness is the most effective way to keep people working, he said. “We treat it like it’s a home away from home; but it’s not, and in the background we don’t treat it like a home away from home,” Kolean said. In the six camps Nordic-Calista operates, housekeepers disinfect every handrail and doorknob at least once daily, he said, and more frequently if a cold or more significant bug is suspected to be in camp. Bed linens at a Nordic-Calista camp are

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Continued from Page 18 of their teams every morning before the day’s work is every discussed. Kolean said any concerns are immediately passed on to the HSE director on site. Workers with a slight cough, for example, are sent to the camp clinic for treatment, which, while it may only be cough drops, is often enough to keep someone’s health from deteriorating. If someone tests positive for strep throat or the flu they are quarantined in their room until they can be flown home. Ill workers at a Nordic-Calista camp flying home from the Slope must wear a surgical mask on site until they land, Kolean said. “You have to be fit for duty and it doesn’t matter if it’s occupational or personal, it has the same effect on your work and your crew,” he said. When illness is not an issue, standard operating procedure at Point Thomson and other Slope work sites prohibits cell phones outside of the camp buildings — absolutely anywhere. “It’s not so much that you’re trying to restrict communication,” Kolean said. “It’s just that when you’re out there on the job that cell phone is a dangerous tool.” Even when in camp, someone talking on a phone while walking down a hall will likely be reminded that they are walking distracted, he noted. ExxonMobil Pipeline and Infrastructure Manager Sofia Wong said the company emphasizes simple, firm, and positive support at all its work sites. “People are more likely to change their behavior if you reinforce it in a positive way,” she said. ExxonMobil has integrated technology into its safety program. Every hard hat in use at Point Thomson is outfitted with four RFID strips, or radio frequency identification. The paper-thin metal transmitters are adhered to the underside of the hard hat and relay a sig-

nal to sensors installed in every piece of heavy equipment on site. If a worker is too close to operating equipment the in-cab sensor begins to beep and notify the operator of a potential danger. ExxonMobil’s Rivera said the RFID equipment was installed last November and Point Thomson is one of the only sites on the Slope

where it is currently being used. “The bottom line is that we’re flying people up there and spending a lot of money and paying them well to make sure they can safely and efficiently do their work,” Kolean said. Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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State geologists raise estimates for Inlet gas By Tim Bradner Alaska Journal of Commerce

State geologists have now increased the amount of natural gas they believe can be economically produced from known fields in Cook Inlet. The state Division of Oil and Gas concluded, in a recent study, that there may be 440 billion cubic feet more gas in the Inletâ&#x20AC;&#x2122;s gas fields than previously estimated. About 1.1 trillion cubic feet of recoverable gas reserves were estimated in a 2009 resource assessment by the division, and the new figure is about 1.54 trillion cubic feet of gas, according to Paul Decker, acting director of the state Division of Oil and Gas. Decker presented the estimates in a briefing to an energy task force of Commonwealth North, an Anchorage-based business and public policy group.

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Continued from Page 21 The estimates are derived from data available to the public from a handful of the Inlet’s larger producing gas fields and do not include resources that could be added from three recent gas discoveries where the estimated volumes are still confidential, Decker said. It’s not known, however, whether the new estimates mean there’s enough gas in the Inlet to supply future utility needs, a possible restart of the Agrium fertilizer plant near Kenai and possibly supplying gas to Fairbanks. That will probably take continued exploration and investment in the producing fields, Decker said. Gas from the North Slope will still be needed someday, he said. The increase in estimated reserves is good news, though, because just a few years ago the regional utilities were seriously worried about depleted supply from the region’s gas fields. Imports of liquefied natural gas were being studied as a short-term solution. What turned things around was the entry of Hilcorp Energy into Cook Inlet and that

company’s investment and aggressive redevelopment of the Inlet’s older fields, Decker said. The apparent shortage also stimulated state geologists to reassess what they knew about the Inlet. Both the 2009 resource estimate and a 2013 update of that assessment included estimates from 28 fields that are known in the Inlet, and a more detailed look at three of the larger fields in the 2013 update. In the 2014 update, there was a more detailed look at four additional gas fields, for a total of seven, of the 28 fields surveyed in 2009. Meanwhile, there is one new producing field added in the Inlet since 2009. It is the small onshore Kenai Loop field that was discovered and developed by Buccaneer Resources. Buccaneer went bankrupt due to unrelated financial issues but Kenai Loop is still producing. The field is now owned by another company, AIX. If the new discoveries are developed, additional reserves would be added in Cook Inlet. Decker said the three new discoveries in-

clude one by Furie Operating LLC, at its “Kitchen Lights” find in upper Cook Inlet; BlueCrest Energy LLC at the “Cosmopolitan” offshore deposit near Anchor Point, and NordAq Energy LLC’s “Shadura” onshore gas discovery on the Kenai Peninsula. Resource estimates by Furie are not public but the production facilities planned by the company, to be installed this summer, will have a capacity to produce 80 million cubic feet of gas per day or 30 billion cubic feet per year, Decker said. Production facilities and wells planned at Cosmopolitan, where installation is hoped to be done in 2016 and 2017, will be capable of handling 22 billion cubic feet of gas per year, he said. Production potential at the Shadura onshore discovery is confidential, but the deposit is within the Kenai National Wildlife Refuge, which means that permitting for development would be complicated. The subsurface mineral rights are held by

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2015 Kenai Alliance Annual Safety Summit Cook Inlet Region Inc. but surface production facilities must adhere to regulations of the refuge. “We believe a tremendous amount of new gas can be discovered in the Inlet,” but it will be found in smaller deposits, Decker said. “Most of the large structures have been drilled,” in the initial exploration of the Inlet, Decker said. These were the large anticline structures easily seen with the type of 1960s-era two-dimensional seismic exploration imaging technology used when the Inlet was first explored. Modern three-dimensional seismic now in use is capable of spotting smaller structural traps, he said, and more complex stratigraphic reservoirs. To date about eight trillion cubic feet of gas has been produced from the Inlet, Decker told Commonwealth North. The Inlet produces about 115 billion cubic feet of gas yearly including some “associated” gas

produced with oil, according to Division of Oil and Gas data. Electric utilities in Southcentral Alaska and Enstar Natural Gas Co., the regional gas utility, consume about 90 billion cubic feet of gas yearly, and the remaining gas is used as fuel on oil and gas production platforms and by Tesoro, which owns a refinery at Nikiski. “The 90 billion cubic feet a year of demand does not include potential gas demand if the Agrium plant were to restart, or if gas were provided to the Donlin Creek mine,” if that gold project were developed, Decker said. It also does not include 4 or 5 billion cubic feet of gas that might be shipped to Fairbanks as liquefied natural gas, which is now being discussed. If other potential demand in the Interior were included, the demand for LNG might reach 8 billion cubic feet per year. Tim Bradner can be reached at tim.bradner@ alaskajournal.com.

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Hilcorp Energy keeps up spending despite oil price slide By Tim Bradner Alaska Journal of Commerce

Hilcorp Energy continues to grow its Alaska business despite the slump in oil prices. The company has increased its Alaska production and plans additional investments of $300 million to $350 million this year in spite of the skid in prices, Hilcorp President and CEO Greg Lalicker told state legislators Feb. 24 in Juneau. The company’s Cook Inlet production has reached about 40,000 barrels of oil equivalent per day, or boe/day, a measurement includes crude oil and natural gas values expressed, in energy content, as barrels of oil. Meanwhile, Hilcorp’s acquisition of interests in three North Slope producing fields last November has added another 20,000 boe/day, Lalicker said. Alaska now contributes 60,000 boe/day to the company, or about 40 percent of Hilcorp’s total production, he said. Hilcorp is the nation’s largest privately-owned independent producer and specializes in buying mature producing properties and rejuvenating them to add production. The company also has to deal with some of the problems that come with acquiring older production properties, however. On Saturday, Feb. 28, a breach occurred in a 10-inch production line in the Milne Point field, one of the older North Slope fields where Hilcorp is now operator, resulting in a spill of undetermined size. Four adjacent production pads were shut in while response crews struggled through blizzard conditions. A plug was inserted in the pipe and spill cleanup operations were underway March 1 as the weather improved. Meanwhile, a bypass line was installed to reestablish the flow of oil through the pipe, eliminating the

danger of a freeze-up and adding additional protection against a further spill. Production was restored to normal levels the same day. So far, Cook Inlet has been a success for Hilcorp. Before the company purchased the aging Inlet producing properties from Chevron Corp. and Marathon Oil in 2012 and 2013, production averaged about 18,000 boe/day. By January 2014, after two years of new investment and intense activity, production had reached 32,000 boe/day. By July it had passed 40,000 boe/day, according the materials Lalicker presented to state legislators. “Our business strategy is straightforward. We buy old producing assets, we figure out how to operate them most efficiently and we find ways to increase production. We don’t just cut costs. We find ways to produce more,” Lalicker said. Hilcorp is now applying a similar strategy on the North Slope. In November it took ownership of the Northstar, Endicott and Milne Point producing fields after purchasing them from BP last November. Liberty, a non-producing offshore discovery, was included in the purchase. Hilcorp now owns 100 percent of Northstar and Endicott and 50 percent of Milne Point, but Hilcorp is operator in all three fields. The company’s immediate focus is on Milne Point, Lalicker said, because there are a larger number of wells there than at the Northstar and Endicott fields. Hilcorp’s strategy of doing aggressive workovers on older wells should have immediate benefits in production at Milne Point, he said. Hilcorp has already put one workover rig to work at Milne Point and is now constructing a new workover rig for the field that will be shipped to the North Slope

in late summer, he said. The company is taking a cautious approach, however, in developing Liberty, a nonproducing offshore deposit also purchased from BP in November. Hilcorp owns 50 percent of Liberty with BP owning the other half, with Hilcorp as operator. Hilcorp presented a possible

development plan to the U.S. Bureau of Ocean Energy Management but the company is still studying the project, Lalicker said. “We haven’t sanctioned development. It’s still up in the air,” he said. “We need to do a lot more on the development plan before we start pouring money into Liberty.”

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