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Providing coverage of Alaska and northern Canada's oil and gas industry
March 2011

Vol. 16, No. 12 Week of March 20, 2011

Miller CEO hails Alaska energy climate

Parent company of Cook Inlet Energy announces receipt of $2 million state payment; also recoups $1.5M in tariff deal

Wesley Loy

For Petroleum News

At least one Alaska oil and gas producer is sounding quite pleased with the state’s energy investment climate.

Tennessee-based Miller Energy Resources, which operates in Alaska via subsidiary Cook Inlet Energy LLC, recently announced it had received a tax credit payment of more than $2 million from the state.

The payment “validates Alaska as one of the most favorable development environments for energy today,” said Scott Boruff, Miller’s chief executive, in a Feb. 10 press release.

The release said that under two laws passed in 2010, Miller is allowed to recover up to 40 percent of its drilling and exploration costs. The laws began as Senate Bill 309 and House Bill 280.

Miller said it earned the $2 million payment as a result of spending “several million dollars” to bring shut-in operations on the west side of Cook Inlet back online.

The payment “represents the combination of two submissions that covered the time period from December 2009 through July 2010 and is the first of several anticipated reimbursements under these new laws, as we are currently preparing our next applications for submission,” Boruff said.

He added that planned capital expenditures over the next 12 months “should also yield several million dollars in additional refund payments.”

Miller Energy trades as Miller Petroleum Inc. (MILL) on the Nasdaq stock exchange.

The company entered the Alaska scene in late 2009, when it financed Cook Inlet Energy’s purchase of an assortment of oil and gas properties previously operated by California-based Pacific Energy Resources Ltd., which liquidated through bankruptcy.

Cook Inlet Energy immediately set about reviving shut-in wells, concentrating first on the West McArthur River oil field.

The new operator soon hit a serious road bump, however, when Cook Inlet Pipe Line Co. sharply hiked its rate for moving oil. CIPL operates a 42-mile pipeline along the western shore of the inlet.

After a protest to the Regulatory Commission of Alaska, Cook Inlet Energy worked out a tariff settlement with CIPL in late 2010.

The settlement included terms — a “true-up” adjustment — providing for the possibility of reimbursement for overpayment in 2010.

On Feb. 18, Miller announced it had received a true-up payment of about $1.5 million in cash from CIPL, with an additional $250,000 to remain in Cook Inlet Energy’s account at CIPL for credit against future oil shipments.

“This tariff payment represents the significant cost savings we have realized as a result of last November’s settlement,” Boruff said. “Those savings will be even more significant as we continue to ramp up our production in Alaska.”






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