Elizabeth Earl

BlueCrest: Credits an investment, not a cost

KENAI — BlueCrest Energy President and CEO Benjamin Johnson urged the public to contact the Legislature and ask them not to make any changes to the oil and gas tax credit program until 2017. The company is less than three months away from its first oil production at the Cosmopolitan field off the coast of Anchor Point. Production will be relatively limited at first — neighbors can expect to see one to two trucks a day on the Sterling Highway, taking crude oil north to the Tesoro refinery in Nikiski. As more wells are drilled, that number could be as many as 20 per day, Johnson said. While the oil production is on schedule, the other aspect of the development remains in limbo. A gas pocket that sits above the oil reservoir will be postponed if the state makes significant cuts to the oil and gas tax credit program, Johnson said at the annual Industry Outlook Forum in Kenai’s Old Carr’s Mall on Jan. 28. “It doesn’t work without the tax credits or some type of incentive,” Johnson said. “But we know that we have large amounts of resources. … These resources need to be developed. The tax credits are really critical to make sure that that’s done.” The position of the gas requires offshore drilling, while the oil development will be done with directional drilling from a facility onshore. Placing offshore platforms is significantly more expensive, and if the tax credit program is modified too much, it will postpone the gas development, Johnson said. There is a deadline for the gas development as well. A jack-up rig, the Spartan 151, is currently harbored in Seward and would be used to develop the gas wells if the development moves forward, Johnson said. However, unless the development goes through in 2016, the rig will leave Alaska and, “I’m not sure when we’ll be able to get another rig to drill offshore,” Johnson said. “To know if we’ll drill in 2016, we have to have the funding commitments and everything put together in 2016,” Johnson said. “Everything’s ready to go, we could be drilling April 15 if we knew the tax credits were going to be in place. ” The oil and gas tax credit program is one of the most scrutinized area of Alaska’s state budget as the Legislature looks to plug an approximately $3.5 billion gap in the unrestricted general fund this year. Gov. Bill Walker has called the incentives “unsustainable” and has proposed changes that would significantly cut payments, limiting the annual repurchases to $25 million. While Johnson said he could see the reason for some changes to the program, he said the Legislature should keep the same program for at least the next year. The company has already signed contracts based on the expectation that those tax credits will be carried through, he said. BlueCrest has accrued $45 million in tax credits to date, and the building this year would total about another $100 million in tax credit payments, Johnson said. He asked the attendees at the forum to “let the governor know” the impacts of changing the oil and gas tax credits. “This is the time that … it’s important that the Legislature and the governor understand that the gas development in the Cook Inlet is very important,” Johnson said. “Properly designed tax credits are … a very good investment for Alaskans. It’s an investment, not a cost.” Even if the gas production has to be delayed, the company plans to begin drilling soon, with first oil expected by April from the first well. Two additional wells will be drilled later this year, all of which will be hydraulic fracture wells, Johnson said. All three wills will be directionally drilled from an onshore rig that was designed specially for the BlueCrest project, designed to run on both diesel and natural gas, Johnson said. Johnson said 100 percent of the employees hired to work on the facility are Alaskans, and the company just hired several graduates from Kenai Peninsula College. Jayce Robertson is one of those new employees. A December 2015 Kenai Peninsula College graduate, Robertson obtained his degree in process technology and was immediately offered a job working at BlueCrest, which he said he will start Feb. 1. “I am extremely grateful for the opportunity that BlueCrest has offered me,” Robertson said when he spoke at the forum. “This is also a success story for Kenai Peninsula College and BlueCrest Energy.” Johnson said Robertson was one of a group of students who attended the forum last year who stood up during Johnson’s speech and asked to be hired for the development of Cosmopolitan. “We’re really excited about the folks that we just hired out of Kenai Peninsula College,” Johnson said. “I was thankful when they stood up last year and said, ‘Hey, hire me!’ And we did.” Reach Elizabeth Earl at [email protected]

Hilcorp still ready to buy assets as it looks to cost control

KENAI — As other oil and gas companies seek to trim expenses with layoffs and stalling development, Hilcorp Alaska has no plans to stop acquisitions. The company will continue to buy properties in Alaska, said Chad Helgeson, the Kenai area operations manager, in an update to the public at the annual Industry Outlook Forum in Kenai on Jan. 28. “Hilcorp is a growth company, acquisition-based,” Helgeson said. “That’s been our model.” The company’s workforce has also steadily increased. Of the approximately 520 employees statewide, 240 live on the Kenai Peninsula, Helgeson said. Aggressive purchases have left Hilcorp as the largest producer in Cook Inlet and with holdings on the North Slope. The company has no plans to downsize, either, and will take advantage of properties coming up for sale as other companies hit the rocks, Helgeson said. “Right now, pretty exciting times — a lot of properties are probably going to be available for sale,” Helgeson said. “What are we going to buy next? I have no idea.” At the same time, the company is feeling the impacts of sliding oil prices, though it continues to purchase and spend. Between 2014 and 2015, Hilcorp’s spending in Alaska decreased from $443 million to $281 million, a direct reflection of the decline in oil prices, Helgeson said. This year, the company expects to spend about $220 million, he said. The allocations of investment changed as well. In 2014, most of the money went to capital projects and drilling; in 2015, that changed to be majority maintenance and operations. As oil prices continue to decrease, the company will continue to monitor it and adjust its operations accordingly, Helgeson said. “As the price of oil continues to drop down, our goal is to be responsible and sustainable,” Helgeson said. “Our goal is to be here for the long-term. Our oil and gas contracts are going eight years out … we’ve got to be responsible.” The focus for the Kenai area this year is to control costs, Helgeson said. One of the questions is how the company can look at its Cook Inlet assets and continue to make them profitable, he said. The company applied earlier this year to drill two new wells in its Happy Valley pad southeast of Ninilchik and is in the process of applying to expand the boundaries of its lease in the Deep Creek Unit. The current pool boundaries, defined by the Alaska Oil and Gas Conservation Commission in 2004 when Marathon Oil leased the property, do not adequately include the majority of the gas in the formation, according to the application. This is still in process but is something the Kenai area team will work on this year, Helgeson said. If the commission approves the motion, Hilcorp’s rights under the lease would expand by about 400 acres, according to the application. Helgeson said the company is also exploring a project on the southern Kenai Peninsula and is planning to do seismic work on it later this year. However, the permitting process takes time, so it may be 2017 before any work actually begins, he said. He said there would be public meetings on any exploration the company does but did not give a more exact location of the exploration. “(We’re asking) ‘What can we do to extend the life of our fields?’” Helgeson said. “We’re planning to do some exploration type of activity. … What we’re finding is that it takes somewhere between 12 and 18 months to fully permit a project.” Reach Elizabeth Earl at [email protected]

Miller, SEC settle for $5M fine; assets overvalued by $400M

KENAI — The U.S. Securities and Exchanges Commission has reached a $5 million settlement with Miller Energy Resources after the company inflated the value of its Alaska assets. The settlement, reached Jan. 12, concluded the SEC’s investigation into the oil and gas company, the parent company of Cook Inlet Energy. The SEC charged the company, two former executives, and one of its former accountants with fraudulently inflating the values of the company’s Alaska oil and gas properties by more than $400 million. The inflated reports began in January 2010, shortly after Miller Energy acquired a series of Alaska properties from another company, according to the settlement document. Between 2010 and the announcement of the charges in August 2015, the company’s stocks skyrocketed — from about 60 cents per share to almost $9 per share. The company’s then-CFO, Paul W. Boyd, double-counted fixed assets, and then-CEO of Alaska operations David M. Hall knowingly understated expenses, according to the SEC’s cease-and-desist order from August 2015. An accountant from now-defunct accounting firm Sherb & Co audited the company’s reports in the year after the acquisition and failed to thoroughly investigate the financial statements, according to the cease-and-desist order. The company bought its Alaska properties for $2.25 million in 2009 and later valued at $480 million. “When computing their estimate of fair value, Miller Energy and the CFO failed to consider the existence of numerous, readily apparent data points strongly indicating that the assets were worth substantially less than the $480 million value Miller Energy recorded,” according to the settlement. Boyd and Hall requested a reserves report with faulty numbers and then presented it as the total fair value of the oil and gas reserves, increasing the total value of the company on paper by $368 million, according to the settlement. They also “refashioned” an insurance study that misrepresented the value of the company’s assets, according to the settlement. “As a result of the foregoing, Miller Energy overvalued the Alaska assets by more than $400 million,” according to the settlement. Miller Energy has agreed to unregister all its stocks and fully cooperate with the SEC to produce documents and provide employees to testify about the violations, according to the settlement. Miller Energy is also in the midst of a Chapter 11 bankruptcy and restructuring itself. The company announced the bankruptcy in October, blaming plummeting oil prices, a drilling plan that did not produce to expectations and the withdrawal of a private lender. The company owes more than $180 million, as reported by the Clarion on Oct. 1, 2015. Should the bankruptcy court accept the company’s plan for restructuring, the $5 million will become a “general unsecured claim,” essentially an IOU. The fine would then be paid “consistently with the payments made to Miller Energy’s other general unsecured creditors,” according to the SEC decision. The federal bankruptcy court has until June 30, 2016 to decide whether to accept the bankruptcy plan, according to the settlement. If the court does not accept the bankruptcy plan, Miller Energy will have to pay the SEC in installments, completing payment by no later than 2019. Reach Elizabeth Earl at [email protected]

Miller Energy, SEC settle for $5M

KENAI — The U.S. Securities and Exchanges Commission has reached a settlement with Miller Energy Resources after the company inflated the value of its assets for a $5 million payment. The settlement, reached Jan. 12, will conclude the SEC’s investigation into the oil and gas company, the parent company of Cook Inlet Energy. The SEC charged the company, two former executives, and one of its former accountants with fraudulently inflating the values of the company’s Alaska oil and gas properties by more than $400 million. The inflated reports began in January 2010, shortly after Miller Energy acquired a series of Alaska properties from another company, according to the settlement document. Between 2010 and the announcement of the charges in August 2015, the company’s stocks skyrocketed — from about 60 cents per share to almost $9 per share. The company’s then-CFO, Paul W. Boyd, double-counted fixed assets, and then-CEO of Alaska operations David M. Hall knowingly understated expenses, according to the SEC’s cease-and-desist order from August 2015. An accountant from now-defunct accounting firm Sherb & Co audited the company’s reports in the year after the acquisition and failed to thoroughly investigate the financial statements, according to the cease-and-desist order. The company bought its Alaska properties for $2.25 million in 2009 and later valued at $480 million. “When computing their estimate of fair value, Miller Energy and the CFO failed to consider the existence of numerous, readily apparent data points strongly indicating that the assets were worth substantially less than the $480 million value Miller Energy recorded,” according to the settlement. Boyd and Hall requested a reserves report with faulty numbers and then presented it as the total fair value of the oil and gas reserves, increasing the total value of the company on paper by $368 million, according to the settlement. They also “refashioned” an insurance study that misrepresented the value of the company’s assets, according to the settlement. “As a result of the foregoing, Miller Energy overvalued the Alaska assets by more than $400 million,” according to the settlement. Miller Energy has agreed to unregister all its stocks and fully cooperate with the SEC to produce documents and provide employees to testify about the violations, according to the settlement. Miller Energy is also in the midst of a Chapter 11 bankruptcy and restructuring itself. The company announced the bankruptcy in October, blaming plummeting oil prices, a drilling plan that did not produce to expectations and the withdrawal of a private lender. The company owes more than $180 million, as reported by the Clarion on Oct. 1, 2015. Should the bankruptcy court accept the company’s plan for restructuring, the $5 million will become a “general unsecured claim,” essentially an IOU. The fine would then be paid “consistently with the payments made to Miller Energy’s other general unsecured creditors,” according to the SEC decision. The federal bankruptcy court has until June 30, 2016 to decide whether to accept the bankruptcy plan, according to the settlement. If the court does not accept the bankruptcy plan, Miller Energy will have to pay the SEC in installments, completing payment by no later than 2019. Reach Elizabeth Earl at [email protected]

ADFG reports show sportfishing may damage Kenai River

KENAI — The increasing numbers of bank anglers and powerboats on the Kenai River may be damaging the river habitat. The Alaska Department of Fish & Game released two long-delayed reports in October addressing the effect of bank angling and powerboat use on bank erosion in the Kenai River. The reports, covering the years 2000 and 2001, found that as more anglers fished the river, the more banks crumbled and vegetation disappeared. The reports are the final two installments of a series commissioned by the Board of Fisheries in 1996 to study the effects of increased sport fishing participation on the Kenai River after the board increased the sockeye salmon escapement goal. Sport fishing participation more than tripled on the Kenai River between 1977 and 1995. The Board of Fisheries requested that the ADF&G monitor angler use and impacts to the habitats on the river, which was done from 1997 to 2001. Although the reports from 1997, 1998 and 1999 were published within two or three years, the reports from 2000 and 2001 never appeared. At first, the research team encountered some snarls with methodology, said Mary King, a former fisheries biologist who served as the principal investigator for the study. When they began in 1997, there was no definitive methodology for studying bank change over time. By 1998, they had determined how to approach the measurements and were getting observable results by 1999. “The reports that were published in ‘97 and ‘98, we were stumbling around trying to find a method that the Board of Fisheries asked us to do,” King said. “Once we found a method and were getting results, they never got published.” The researchers focused on the herbaceous lands and shrublands to study angler effect because they would be more sensitive to foot traffic, said Patricia Hansen, King’s co-author on the study. They also tried to select an even number of sites on both sides of the river, she said. “For each macrohabitat type, sites were selected as randomly as possible allowing for various levels of angler use,” Hansen wrote in an email. “We also checked to be sure both bank and meander were represented within each habitat type.” The plant habitat on the banks was significantly impacted because of trampling by anglers, according to the 2001 report. As vegetation was trampled, bare ground and water cover increased. Invasive species moved into the damaged soil — dandelions, grass and horsetails. Low angler effort areas had a small increase and areas with many anglers saw less grass but more horsetails and dandelions. About half the sites showed bank gain while the other half showed bank loss. Bank gain largely occurs when the bank has broken but not separated yet in a process called calving. The average bank loss came out to about .28 meters, slightly more than 10 inches, King said. Some of the accelerated erosion underneath the edge of the bank can be attributed to the wake from powerboats and some is due to the increased presence of sport anglers, she said. “What the conclusions indicated was that there are measurable changes in habitat that can be attributed to the presence of sport fishing on the Kenai River,” King said. “If you compound (powerboats) with whatever shore angling is going on, we saw changes in vegetation that were damaging to the natural habitat.” Stuck in draft That significant changes were detected over only three seasons was “cause for concern,” the researchers wrote in the conclusion. They recommended the fisheries managers reevaluate how sport fisheries are prosecuted on the Kenai River to minimize damage to the riparian habitats. Though the results were presented to the Board of Fisheries in 2002, the studies were never published. King said she did not want to speculate as to why they were not published, but said the results had been filed on time and presented as requested. In her presentation to the board in 2002, King made three recommendations: to continue assessment of shore angler use and bank position change until better methods are developed, to finish the aerial photogrammetry feasibility study and make recommendations for future application river-wide and to develop better programs to educate anglers on how to preserve the environment. The second two were carried through, but the shore angler and bank change assessments were abandoned. Jim Hasbrouck, the chief fisheries scientist for the Fish & Game in Anchorage, said the reports were delayed because of staffing changes. The reports were classified as “draft” for that time period. “The information was presented to the Board of Fisheries, but several staffing changes happened at the time, people moving around into different positions,” Hasbrouck said. During the 14 years it took to release the reports, several people called for their release at Board of Fisheries meetings, but the logs held at the Alaska Department of Fish and Game commissioner’s Office have no record of anyone ever submitting a public records request for the reports, said Lisa Evans, assistant director of Fish and Game’s Division of Sport Fish. There are also no records of correspondence about the reports between 2000 and the present between staff at the Soldotna Fish & Game office and the Commissioner’s office, Evans wrote in an email. In a public comment submitted at the 2008 meeting, Gary Hollier of the Kenai Peninsula Fisherman’s Association cited King’s presentation in 2002 on the damage to the riverbanks and asked why there were no updated habitat reports in the years since. Two other members of the public also asked why there had been no updates on the habitat reports in 2008. In 2014, Lisa Gabriel, also of the Kenai Peninsula Fisherman’s Association, submitted a public comment to the Board of Fisheries detailing that she knew the reports existed and asking why they hadn’t been published. Gabriel said she never submitted a formal records request for the 2000 and 2001 reports because she was able to find the draft versions on the Internet. When she requested a copy of the most current habitat report, she was given another Kenai River habitat assessment from 2010 from a team of researchers from Inter-fluve, a river restoration research firm, and Cramer Fish Sciences, a fisheries research firm. The report had been presented to Fish & Game and to the Kenai River Sportfishing Association. It primarily focused on restoration efforts, but in the section addressing bank erosion said some reports had indicated that increased angler traffic caused bank loss. The report concluded that there is insufficient information about the scale of habitat changes and what causes them. “There was nothing on biological habitat information,” Gabriel said. “(The report said) we’re repairing walkways, that sort of thing. All of the reports we were seeing at the Board of Fish level, none of them were official reports.”  ‘Appropriate modification’ King, who retired from Fish & Game in 2010, said she did not change offices for some time after the reports were filed and did not know why the reports had not been published. In a presentation she gave to the Kenai River Special Management Area board in February 2015, she said she requested the status of the reports when she retired in 2010 and was told they had never been peer-reviewed. The project ended in 2001 and has not been revived, she said. There are no ongoing habitat research projects on the Kenai River through Fish & Game, according to Habitat Division director Ginny Litchfield. Fish & Game is required by statute in the late-run salmon management plan to conduct habitat studies “to the extent practicable” for the Board of Fisheries meetings on the Upper Cook Inlet. It also requires the board to make “appropriate modification” if the studies show a net loss of riparian habitat, according to the management plan. To be published, Fish & Game’s research reports must first be compiled, sent through the peer review process, edited, reviewed again and then sent to Research and Technical Services in Anchorage to be published. Sometimes this process takes years, with backup through the system. However, King and Hansen’s report remained in publishing purgatory for an exceptionally long time compared to other reports published by Fish & Game. Other reports are published within five or six years; some are published in less time. The first reports they wrote were published in fewer than three years. Jeff Fox, the former Director of Commercial Fisheries based in Soldotna, said people repeatedly came in asking for those reports and that they were demanded at various meetings. The department is required to perform yearly assessments on the habitat quality of the river but has not done so in years, he said. At this point, King’s reports are so old as to be irrelevant, he said. “That’s the interesting thing,” Fox said. “If you hang onto something long enough, it doesn’t matter what the conclusions are.” Under the Alaska open records laws, oral requests are usually considered valid requests for public records. If the oral request is denied, the requester is supposed to follow up with a written request. The department can ask that the request be submitted in writing, but it is still a valid request. Fish & Game has been investigated for noncompliance with the open records laws before. In 2009, an incident at the Anchorage office over the disclosure of a public document led to the Alaska Ombudsman’s Office investigating Fish & Game and recommending that the department release the record, train its staff how to comply with records requests and consult with the Assistant Attorney General on how to better fulfill requests in the future. The department did release the record requested, but the investigation was closed as “partially rectified” because the agency did not fully implement the ombudsman’s recommendations, according to the investigation archives. No further reports have been funded by Fish & Game on the habitat of the Kenai River. King said the studies were cut off, but they would have likely continued to show damage. “Had the project continued, we probably would have found further correlations with the sport fishery,” King said. “But the hard part of it is the teasing out of what the natural process was. The correlations were to look at whether or not something was significant accelerating the erosion.” Reach Elizabeth Earl at [email protected]

AK LNG Project may bring more Kenai River traffic

KENAI — Managers are concerned that pressure on the Kenai River could increase if the Alaska LNG P roject goes through. The project is still tentative and will not receive a final ruling until 2018 at the earliest, but if it does go through, the borough could see an influx of as many as 5,000 workers for the five years it takes to construct the 900-acre plant in Nikiski. Unless the camp is closed, many of them will likely recreate on the Kenai River. The Kenai River Special Management Area board raised concerns about access to the river at its meeting Nov. 12. The Kenai River is already seeing impacts from too many people wanting to fish and boat, and the addition of a potential 5,000 more LNG employees — and potentially their families — to the peninsula. Larry Persily, borough mayor Mike Navarre’s special assistant for oil and gas, addressed the board with an update about the particulars of the project. Much is still up for debate, including whether the project will even happen, he said. “It’s going to be three years at best before we know whether this project is going to go through,” Persily said. “But during those three years, there will be a lot of work to do and a lot of community input.” The board has been debating ways to limit access to the river for some time. During the board’s October meeting, the members asked Alaska Department of Parks and Outdoor Recreation representative Jack Blackwell to request a white paper from the Department of Law about ways to limit use of the river. Blackwell said he requested the paper, but it was not ready for the November meeting. However, he said it would be ready for the December meeting. The overuse of the river could be affecting habitat and water quality as well. Jeanne Swartz, a board member and an environmental program manager with the Alaska Department of Environmental Conservation, said a water quality survey from the Kenai Watershed Forum showed a relative improvement in water quality but elevated levels of certain metals, including copper and zinc. “We’re not sure what could be causing that,” Swartz said. “We looked at the things that we were sure weren’t a problem and took them out of the program, and everything else is going to be looked at closely. Then we’ll be able to make a more sophisticated or more in-depth analysis.” Elevated levels of copper can disturb young salmon, according to the National Oceanic and Atmospheric Administration. When the agency conducted a survey of 811 sites around the country in 2007, they found that elevated levels of copper may have come from road runoff in the surrounding areas and interfered with the salmon’s senses. Swartz said the Department of Environmental Conservation is not sure what is causing the elevated levels of metals in the river but may request data from the Alaska Department of Transportation about road traffic as well as other information about potential sources of toxins in the environment. If the LNG does come to Nikiski, there will likely be significant increases in traffic on roads close to the Kenai River, which could cause impacts in the water quality if road runoff damages salmon. Persily suggested that the board list all its items of concern and submit them to the Federal Energy Regulatory Commission, which will be conducting the Environmental Impact Statement for the LNG project. That statement will take approximately three years and will play a significant role in the project’s fate, he said. “FERC and the regulators know that this is going to have to look at salmon habitats, road traffic and air quality standards,” Persily said. “If there’s a concern that what are the company’s plans to deal with 5,000 workers roughly who on their days off will want to go to limited recreational opportunities on Kenai, that should be proposed in the EIS.” Reach Elizabeth Earl at [email protected]

Peninsula providers sue Xerox over Medicaid payment snafus

KENAI — Three Kenai Peninsula health care providers filed a lawsuit against Xerox State Healthcare for failing to provide contracted services. South Peninsula Hospital in Homer, the Kenai Vision Center and the Alaska Speech and Language Clinic, both in Kenai, filed the lawsuit in federal court, requesting that it be designated a class-action lawsuit. Xerox State Healthcare, a Georgia-based subsidiary of Xerox Corporation, provides Medicaid claim technology to state health care organizations. Alaska implemented one of Xerox State Healthcare’s Medicaid Management Information Systems in October 2013, intending to use it to manage reimbursement. However, the system was unable to accept new, legitimate claims that day. Claims were rejected, leading to a loss in reimbursement for the approximately 22,000 health care providers enrolled, costing “hundreds of millions of dollars,” according to the complaint. “The providers were deprived of regular reimbursement for many months, and had to fund operations from other sources or go out of business,” the complaint states. “The need to resubmit improperly rejected claims required health care providers to incur labor costs of clerical time. Some larger providers hired additional staff, while others paid overtime to existing employees, to the detriment of other parts of their medical businesses.” The plaintiffs also claim that Xerox knew the system was faulty. The state engaged a company called ACS State Healthcare to build an MMIS in 2007. Although the company said it would have a system ready to launch by October 2010, it was not ready to go live until three years later. Xerox acquired ACS in 2010. The Alaska Department of Health and Social Services tested the system in September 2013, just before it went live, and found 44 errors that it requested Xerox correct. The company replied with reassurances that the system was ready to go live, which the DHSS believed, according to the complaint. In addition to supplying a system that failed, Xerox also allegedly refused to fix the problem for months, according to the complaint. A DHSS investigation in 2014 revealed that “hundreds of thousands” of unprocessed paper claims from smaller providers were sitting in stacks in the Xerox facility. A large number of electronic claims were also “suspended,” with no action for extended periods of times, according to the complaint. Providers immediately noticed the problem when few claims were accepted, and those that were received no reimbursement. South Peninsula Hospital bills approximately $16 million to Medicaid every year, about 28 percent of its income; Kenai Vision Center bills approximately $150,000 annually, and the Alaska Speech and Language Clinic billed $14,160 between October 2013 and early 2014. “The effect on providers was the same as with the unprocessed paper claims: reimbursements were not received, causing financial hardship,” the complaint states. To bail out the health care providers, the DHSS lent out approximately $160 million, to be repaid when the claims were processed. All the providers had to resubmit all their claims between four and seven times over the next two years to receive payment, according to the complaint. “In many situations, resubmitted claims were rejected as well,” the complaint states. “One dental practice has written off over $500,000 in claims that it was unable to submit within one year of the dates of service because of the MMIS failure.” The Alaska Speech and Language Clinic was forced to cut back its services. Kenai Vision Center’s office manager spent more than 200 hours troubleshooting and still has not been reimbursed $3,000 for Medicaid claims. South Peninsula Hospital employees put in 971 hours of overtime as well as extra time during the day, which delayed billing to other insurance companies, according to the complaint. Derotha Ferraro, the director of public relations and marketing for South Peninsula Hospital, said the state had multiple conversations with the hospital during the time the system was not working properly. Winning the lawsuit would be a positive outcome for the providers, but it is essentially compensation for what they have already spent to overcome the system’s failures, she said. “We had hard costs, things like overtime, extra staffing trying to make heads or tails of things and resubmit claims and research claims and everything, just trying to survive that Medicaid confusion,” Ferraro said. “But then there’s also lost opportunity. We really had all of our staff, which isn’t very many, focused on this and we were missing other opportunities.” The plaintiffs are asking for three times their damages plus punitive damages. Arthur Stock, an attorney from Philadelphia-based firm Berger & Montague who is coordinating the case with Kenai-based attorney Peter Ehrhardt, said it will be some time before any action is taken. Although the complaint lists a general punitive amount, he said he could not disclose a more exact figure. A representative from Xerox did not reply to a request for comment. This is not the first lawsuit over the failed MMIS system. Alaska DHSS sued Xerox in September 2014 over the failed system, demanding that the company fix the problems. The company responded and all major problems were corrected by March 2015, according to Gov. Bill Walker’s office. Elizabeth Earl can be reached at [email protected]

Hilcorp applies for two exploration wells near Ninilchik

KENAI — Hilcorp Alaska’s plans to drill two additional oil and natural gas exploration wells southeast of Ninilchik are moving forward into the permitting phase. If approved, the company plans to begin clearing vegetation in late September, construct a gravel pad and begin drilling two wells to be completed by May 2016. Hilcorp has been exploring in the Deep Creek unit, near Happy Valley, since 2013. The plans for the Happy Valley Middle Pad have been in the works since March 2004 under then-operator Unocal. The company is currently working in four other pads in the Deep Creek Unit and has proposed another pad to the northwest of the Happy Valley Middle Pad. The company says it presented the initial idea to the public in Ninilchik in October 2014. “Hilcorp employees are actively engaged with regulators and stakeholders on all activities within the state,” the company said in the application. “Hilcorp community outreach to date has included presentations to the Kenai Chamber of Commerce, the Alaska Support Industry Alliance, the Anchorage Chamber of Commerce, and the Cook Inlet Regional Citizens Advisory Council. Hilcorp has also participated in Ninilchik Natives Association, Inc. board meetings to present project updates.” The proposed gravel pad will be approximately 300 feet by 400 feet and will include an approximately 2 mile access road. Because the proposed road will cross the Happy Creek, the company will construct a bridge and install a 12-foot culvert, according to the application. The road will connect to an existing logging road, an extension of Tim Avenue, which branches off the Sterling Highway at milepost 142.8. To support the culvert and additional access, approximately 175 feet of Tim Avenue will be widened. The contractors will attempt to use existing road material to widen the road and propose to fill in approximately 0.02 acres of wetland to prevent future erosion of the road, according to the application. If granted, the permit does not allow the company to set up a permanent operation — if the exploration is successful, the company will have to file another application for permission to continue. A Hilcorp spokesperson did not return a request for comment regarding a construction start date or potential hires within the area. The company said in its application that 88 percent of its workforce is made up of Alaska residents. If the project is successful, the company will establish permanent drilling facilities and build a buried pipeline that would stretch 5.6 miles to reach an existing Enstar pipeline, according to the application. Hilcorp, a privately held company based in Houston, Texas, has rapidly expanded its holdings in Alaska in the last decade. After it won a regulatory approval for its purchase of Marathon Oil’s Alaska assets in 2012, Hilcorp took control of approximately 70 percent of the natural gas production in the Cook Inlet. In July, the company cut a deal with Exxon Mobil subsidiary XTO Energy to purchase its Cook Inlet holdings for approximately $550 million. Elizabeth Earl can be reached at [email protected]

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