Homer Alaska - Business

Story last updated at 4:43 PM on Wednesday, May 30, 2012

Hilcorp hopes to reopen Drift River



By Brian Smith
Morris News Service – Alaska


 

M. Scott Moon

Flood waters from the Drift River encroach on Chevron's Drift River Facility following the eruption of Mount Redoubt in 2009. The oil storage site, located on the shore of Cook Inlet, processes and stores oil from offshore platforms. The facility is threatened by floods that are created when pyroclastic flows melt glacial ice and snow on Redoubt's flanks.

An oil and gas company plans to reopen a recently mothballed oil tank farm on the west side of Cook Inlet to help it meet its goal of doubling oil production, officials confirmed at a May 23 meeting.

John Barnes, Hilcorp Alaska LLC senior vice president of exploration and production, said the company hopes to bring two tanks back online at the Drift River facility located at the base of Mount Redoubt, an active volcano, by October. The proposal — which includes raising the height of a protective barrier surrounding the facility and amending the facility's spill plan — is being considered by the state.

Bo York, Hilcorp facilities engineering manager, said Drift River is a critical piece of Cook Inlet oil production infrastructure.

"Without Drift River we don't operate as designed," York said. "So we need that critical component back into the mix to produce our oil ... store our oil and transport it to the other side."

The Drift River tank farm was drained of oil following the 2009 Redoubt eruption when volcanic mudflows caused flooding around the facility's protective berm.

No oil was spilled at the time, but York said the event resulted in five to seven feet of sediment deposits around the berm. To compensate for the increased land elevation, he said Hilcorp plans to raise the 20-foot barrier another 15 feet. Hilcorp is working with the state to make sure that action is sufficient, he said.

"The raising of it 15 feet is 100 percent a design call by the (Hilcorp) engineering folks ...," he said. "The state is involved in the process and will determine the sufficiency of that, but the ... state isn't telling us, 'You have to raise it 15 feet.'"

Currently, oil produced from Hilcorp's Cook Inlet assets — recently acquired from Chevron — is moved from the Granite Point and Trading Bay storage tanks by a "tightline operation," which allows only for a finite amount of storage. Most of the oil is moved straight from the pipeline to an oil tanker ship docked at the Christy Lee Platform two miles offshore from the Drift River tank farm.

Bringing the two Drift River tanks back into normal use would allow for less tanker ship traffic, York added.

"The easiest way to explain it is we offload every 12 to 14 days," said York. "A vessel comes into Cook Inlet and they'll offload 100,000 to 120,000 barrels of production. If we double production, which is our intent, then you've got a vessel coming every seven days and they are just doing laps between Nikiski and the tank farm. That's not feasible. That's why the tank farm was put in there in 1966 when production was four times what it is right now."

Also tankers unloading at the facility are currently only filled to half capacity due to storage issues, Barnes said.

"Doubling production — that's hurdle one and now (tankers) are running every six days," Barnes said. "What if you two-and-a-half-times it? It just gets to be unmanageable. It is not a real viable, long term solution."

Betty Schorr, industry preparedness program manager for the Alaska Department of Environmental Conservation, said the state has agreed to let Hilcorp use one tank through the summer if needed.

Comments are currently being taken on Hilcorp's two-tank plan. The state also has a number of requirements of Hilcorp, including submitting a revised oil discharge prevention and contingency plan, re-inspecting those two tanks and submitting an "in-depth volcano response plan" among others, according to information provided by Hilcorp.

"We needed certain assurances before they could put that tank farm back in service," Schorr said. "So it was up to Chevron to do the evaluation of that diversion dike ... and there was a laundry list of things we wanted them to provide before they put the tanks back into service and quite frankly Chevron just decided not to do it."

When asked if Drift River was still a safe location to store oil, Schorr said she thought the facility had a "fairly good track record" and the state wants to maintain that record.

"They have to meet our regulatory requirements, period, no matter where they are and unfortunately we live in a state that has earthquakes and tsunamis and lots of risks that could happen anywhere and not just Drift River," she said. "So as long as they are meeting our state requirements ... that's the only standard I can apply to them."

Comments on the plan are being accepted through June 4. Write to: Alaska Department of Environmental Conservation, Division of Spill Prevention and Response, Industry Preparedness Program, 555 Cordova Street, Anchorage, AK 99501, or call 269-3094.

Brian Smith is a reporter for the Peninsula Clarion.

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