Investigation Summary Report 2015-013: Murphy Oil Company Ltd. Multiple Licences November 2016 Investigation number: 2015-013 Responsible parties: Murphy Oil Company Ltd., BA code 0063 Field centre of origin: Grande Prairie Incident location (nearest town): Multiple locations, Seal Lake, Alberta Contravention date: June 16–18, 2015 Authorization numbers and relevant Multiple licences (F41295, F39631, F41667, legislation, regulations, and rules: F36795, F41611, F40899, F41300, F41598, F42626, F41301, F44036, F41346, F41634, F41297, F41648, F35514) Oil and Gas Conservation Act Investigator: Jonathan Sinclair ISR 2015-013 Alberta Energy Regulator Alberta Energy Regulator Investigation Summary Report 2015-013: Murphy Oil Company Ltd.; Multiple Licences November 2016 Published by Alberta Energy Regulator Suite 1000, 250 – 5 Street SW Calgary, Alberta T2P 0R4 Telephone: 403-297-8311 Inquiries (toll free): 1-855-297-8311 Email: [email protected] Website: www.aer.ca Alberta Energy Regulator Contents Summary of Facts ......................................................................................................................................... 1 Company Overview ................................................................................................................................ 1 Regulatory Background .......................................................................................................................... 1 Incident Overview ................................................................................................................................... 2 Investigation Findings ............................................................................................................................. 4 Contraventions .............................................................................................................................................. 5 Contravention 1: Failure to Comply with the Oil and Gas Conservation Rules ...................................... 5 Compliance History ....................................................................................................................................... 5 Recommended Counts ................................................................................................................................. 6 Counts 1–16 ........................................................................................................................................... 6 Investigation Summary Report 2015-013: Murphy Oil Company Ltd.; Multiple Licences i Summary of Facts Company Overview Murphy Oil Company Ltd., the Canadian subsidiary of Murphy Oil Corporation, is engaged in crude oil and natural gas exploration and production in western Canada and offshore eastern Canada, as well as in the extraction and sale of synthetic crude oil from Alberta’s oil sands. Regulatory Background In the Peace River area, cold heavy oil production (CHOP) is the primary technique used to extract heavy oil. In CHOP operations, oil, gas, water, and sometimes sand are produced from an underground reservoir. This oil is then placed in heated production tanks at the surface before being transported by truck for further processing. Natural gas is also recovered and may be either conserved or flared, incinerated, or vented. Gas produced from the well casing is referred to as casing gas and gas given off from heavy oil while in production tanks is referred to as solution or tank-top gas. To meet the requirements of Directive 017: Measurement Requirements for Oil and Gas Operations, fluids are sent to a test tank, measured, and returned to production tanks. As of November 2013, about 910 (five per cent) of Alberta’s 18 250 licensed CHOP wells and about 170 (four per cent) of its 4325 licensed single- or multiwell CHOP batteries were located in the Peace River area. Complaints from residents about hydrocarbon odours in the Peace River area began to increase in 2009. In February 2010, these complaints escalated. Between January 1, 2009, and November 1, 2013, the AER received a total of 881 odour complaints, of which 715 came from 4 residences. Forty per cent of the complaints included statements of human health impact. These 881 complaints represent 80 per cent of all odour complaints from areas with CHOP operations in the province. The AER has also received odour complaints from residents in the Reno and Seal Lake areas. In January 2014, the Alberta Energy Regulator (AER) conducted a proceeding to address the effects, including health effects, of odours and emissions from heavy oil and bitumen operations in the Peace River area of Alberta. More information on the Peace River Proceeding and the resulting actions taken by the AER can be found on the AER website under About AER > Spotlight On… > Proceeding 1769924. On March 31, 2014, the proceeding panel released Decision 2014 ABAER 005: Report of Recommendations on Odours and Emissions in the Peace River Area. The panel found that odours caused by heavy oil operations in the Peace River area need to be eliminated to the extent possible as they have the potential to cause health issues for some area residents. The panel also accepted that the bitumen deposits in the Peace River area are unique in that the Gordondale-sourced bitumen deposits produce heavy oil that has higher levels of sulphur and aromatic Investigation Summary Report 2015-013: Murphy Oil Company Ltd.; Multiple Licences 1 Alberta Energy Regulator compounds compared to other areas of the province, and these aromatic compounds could cause some health symptoms of the area residents. The panel recognized the distinct geological and geochemical aspects of the Gordondale-sourced bitumen deposits and recommended a localized or “play-based” regulatory approach to heavy oil development in the Peace River area. The AER accepted all of the panel’s recommendations within its jurisdiction, including recommendation 5 of the Operations section of the report, which stated That toward the objective of conserving all captured gas, the AER require that by October 31, 2014, operators, either collectively or independently, provide a feasibility study to the AER into options and timelines to conserve all gas at sites in the Peace River area. The Panel expects that the AER, after considering the information in the feasibility study, will require operators to implement an appropriate conservation plan. On May 1, 2014, the AER released new emissions management requirements for all operators within the Peace River area, including Murphy, through revisions to Directive 060: Upstream Petroleum Industry Flaring, Incinerating, and Venting; the requirements were also outlined in Bulletin 2014-17: New Requirements for the Capture and Flaring, Incinerating, or Conserving of All Casing Gas and Tank-Top Gas by New and Existing Operators in the Peace River Area. The bulletin and the directive require licensees, operators, and approval holders in the Peace River area to capture and flare, incinerate, or conserve all casing and tank-top gas, effective August 15, 2014,1 or as directed by the AER upon consideration of a filed report. Directive 060 requires licensees of existing operations in the Seal Lake and Walrus areas to submit a feasibility studies to the AER outlining an implementation schedule for eliminating all routine venting and preventing nonroutine venting. The AER required all Peace River area operators to submit these studies by October 31, 2014, describing options, associated timelines, and costs for conserving all casing and tank-top gas. The AER reviewed the studies and worked with operators to implement an appropriate gas conservation plan specific to each of the operators in the Peace River area. Incident Overview On June 15, 2014, Murphy submitted an initial draft of its feasibility study, the Seal Lake Venting Control Plan. In the plan, Murphy provided a list of facilities that it considered already compliant with Directive 060 and provided a list of facilities and dates when the remainder of wells would be compliant with Directive 060. On February 25, 2015, Murphy provided a revised venting control plan, detailing its plan and implementation schedule for eliminating all routine venting and preventing nonroutine venting at its Seal Lake operations. The plan also included a list of its 95 well pads within the Seal Lake area listed by 1 This August 15, 2014, deadline was subsequently extended to October 31, 2014, and the area of consideration was expanded to include the entire Peace River area (i.e., Three Creeks, Reno, Walrus, and Seal Lake). 2 Investigation Summary Report 2015-013: Murphy Oil Company Ltd.; Multiple Licences location and the date the wells would be compliant with section 8.7.3 of Directive 060. This also included the original implementation schedule that the AER received on June 15, 2014, for wells already in compliance with Directive 060. On March 20, 2015, the AER sent a letter to Murphy approving the implementation schedule. Between June 16 and 18, 2015, the AER conducted a “compliance sweep” of the Peace River area to confirm compliance with Directive 060. The inspections found that 16 of the multiwell pads inspected at Murphy’s Seal Lake operations did not comply with Directive 060. The AER observed gas being vented from the tank tops through visual observations and the use of a forward-looking infrared (FLIR) camera. A Murphy operator was contacted by the AER and requested to attend one of the multiwell pads. The operator was shown a copy of Murphy’s