Department of Commerce, Community, and Economic Development
Alaska Oil and Gas Conservation Commission
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HomeMy WebLinkAboutO 153Other Order 153
1.
May 7, 2019
Enforcement action Missing Meter Performance Reports
2.
May 17, 2019
Hilcorp request for informal review
3.
May 20, 2019
AOGCC scheduling of informal review
4.
June 6, 2019
Informal review sign in sheet
5.
----------------
CONFIDENTIAL information held in secure storage
6.
June 21, 2019
Hilcorp follow up from informal review
STATE OF ALASKA
ALASKA OIL AND GAS CONSERVATION COMMISSION
333 West Seventh Avenue
Anchorage Alaska 99501
Re: Missing Meter Performance Reports ) Other Order No. 153
Custody Transfer Meters ) Docket OTH-19-015
Granite Point Unit )
Trading Bay Unit ) June 12, 2019
DECISION AND ORDER
On May 7, 2019 the Alaska Oil and Gas Conservation Commission (AOGCC) issued a Notice of
Proposed Enforcement Action (Notice) to Hilcorp Alaska, LLC (Hilcorp) regarding Granite Point
Unit and Trading Bay Unit oil custody transfer meters based on Hilcorp's failure to submit required
meter performance reports. The Notice proposed specific corrective actions and a $30,000 civil
penalty under AS 31.05.150(a). Hilcorp requested an informal review. That review was held June
6, 2019.
Summary of Proposed Enforcement Action:
The Notice identified violations by Hilcorp of
(1) Conditional approval letter for the changes and upgrades to Granite Point Unit custody
transfer oil measurement equipment dated February 7, 2019; and
(2) Conditional approval letter for the changes and upgrades to Trading Bay Unit custody
transfer oil measurement equipment also dated February 7, 2019.
The Notice proposed civil penalties of $30,000 - as follows:
- $15,000 for the initial violation — failure to provide meter performance report as
specified in Granite Point Unit condition of approval 21; and
- $15,000 for the initial violation — failure to provide meter performance report as
specified in Trading Bay Unit condition of approval 21
The Notice also proposed that Hilcorp submit the required information and describe how it will
prevent recurrence of this violation.
Violation - Failure to Submit Required Custodv Transfer Meter Performance Reports;
Changes to the custody transfer oil measurement equipment for Hilcorp's Granite Point and
Trading Bay Units were conditionally approved by AOGCC on February 7, 2019. Requirements
imposed included the meter prove frequency, notification to AOGCC for opportunity to witness
meter proves, required actions before making changes to the custody transfer measurement
equipment, and reporting obligations following proves.
Hilcorp recommenced flow through oil custody transfer measurement systems at the Granite Point
Unit Tank Farm and Trading Bay Unit Production Facility after completing modifications to the
'AOGCC Docket OTH-18-042, Granite Point Unit; AOGCC Docket OTH-18-044, Trading Bay Unit. Meter
changes and upgrades are designed for the Cross Inlet Pipeline Extension Project by providing two sizes of custody
transfer meters at each production facility to allow for variable flow rates.
Other Order 153
June 12, 2019
Page 2 of 4
meters. An AOGCC Inspector witnessed functional checks and initial meter proves at the Trading
Bay Unit Production Facility on March 1, 2019 and at the Granite Point Unit Tank Farm on March
2, 2019. On April 1, 2019 and May 1, 2019 Hilcorp performed required monthly meter proves at
both locations — AOGCC waived its right to witness these proves.
Condition 21 of each approval letter requires that Hilcorp "Provide results of each meter proved
within 7 days following completion of monthly meter proves, including
i. Prove reports
ii. Batch summaries
iii. Current meter factor control charts — as described in API MPMS 13.2 — with the following
fixed control limits that are used to determine when to initiate recalibration of instruments,
inspections, adjustments, cleaning, or repairing of mechanical equipment, or audits of the
measurement system:
1. +/--0.25% meter factor deviation between consecutive proves
2. +/--0.50% meter factor deviation between current and baseline proves"
Reports from meter proves and transmitter calibration checks were provided to the AOGCC
Inspector on March 5, 2019 — no meter factor control charts were included in Hilcorp's submittal.
Also, no results were provided for the meters proved on April 1 and May 1, 2019.
By email dated May 16, 2019 Hilcorp provided copies of the reports required in the two conditional
approval letters. By letter dated May 17, 2019 Hilcorp acknowledged receipt of the Notice and
requested an informal review of the matter. The informal review was held June 6, 2019 during
which time Hilcorp asked several clarifying questions and provided verbal assurance that
corrective actions have been implemented.
Mitigating Circumstances:
The factors in AS 31.05.150(g) were considered in determining the appropriate penalty. Hilcorp's
lack of good faith in its attempts to comply with the imposed conditions, its history of regulatory
noncompliance and need to deter similar behavior are the factors which most heavily influence
AOGCC's decision and the penalty being assessed:
- The failure to submit information related to meter performance — specifically the meter
factor control charts — cannot be characterized as a good faith attempt to comply with
the AOGCC's conditional approval letters.
- Acceptance of arguments that the conditions of approval are new provisions to Hilcorp
operations personnel responsible for overseeing the custody transfer meters at Granite
Point and Trading Bay Units would essentially encourage personnel not to familiarize
themselves with the requirements of applicable orders and regulations. There is
nothing ambiguous about the approval conditions requiring submittal of meter prove
results, and the requirements are consistent with the industry recognized practices
found in API Manual of Petroleum Measurement Standards.2
- The absence of equipment performance tracking information such as the required meter
factor control charts compromises the ability of AOGCC to make informed, fact -based
decisions about how frequently to witness meter proves.
- Hilcorp's history of noncompliance in Alaska is well documented through various
AOGCC enforcement actions. While improvements in Hilcorp's compliance can be
shown in the past 2 years, the recurrence of failing to account for approval conditions
I Incorporated by reference into AOGCC regulations at 20 AAC 25.228
Other Order 153
June 12, 2019
Page 3 of 4
imposed by AOGCC calls into question the effectiveness of corrective actions
implemented in responses to past enforcement actions.
Mitigating circumstances considered in the assessment of the proposed civil penalty include
Hilcorp's partial submittal of information requested by the AOGCC Inspector who witnessed
meter proves on March 1-2, 2019, Hilcorp's urgency in providing the missing information to
AOGCC after receiving the Notice, the demonstrated good performance of the meters as shown in
their respective meter factor control charts, and no injury to the public. Further, AOGCC has used
its discretion in significantly reducing the penalty by not invoking per -day or per -month
assessments for the violations.
Findings and Conclusions:
The AOGCC finds that Hilcorp violated the February 7, 2019 conditional approval letters for
changes to oil custody transfer meters at Granite Point Unit and Trading Bay Unit. Mitigating
circumstances outlined above were considered in the Notice and the AOGCC assessment as to the
appropriate civil penalty. Hilcorp has neither disputed the findings in the Notice nor the penalty
proposed by AOGCC. Since receiving the Notice, Hilcorp has provided results of each meter
prove as required in the conditional approval letters.
Now Therefore It Is Ordered That:
Hilcorp is assessed a civil penalty in the amount of $30,000 for violating the February 7, 2019
conditional approval letters for the changes and upgrades to Granite Point Unit and Trading Bay
Unit custody transfer oil measurement equipment. If Hilcorp chooses not to appeal this Order the
fine must be paid within 30 days of issuance. If appealed, the fine will be held in abeyance until
the appeal process is complete.
In addition to the civil penalty, within 10 days of the date of the AOGCC's final decision, Hilcorp
shall provide a detailed written explanation that describes how it intends to prevent recurrence of
this violation.
As an Operator involved in an enforcement action, Hilcorp is required to preserve documents
concerning the above action until after resolution of the proceeding.
Done at Anchorage,
Alaska and Dated June 12, 2019.
Jessie L. Chmielowski Daniel T. Seamount, Jr.
Commissioner Commissioner
cc: AOGCC Inspectors
Phoebe Brooks (AOGCC)
Other Order 153
June 12, 2019
Page 4 of 4
RECONSIDERATION AND APPEAL NOTICE
As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further
time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for
reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An
application for reconsideration must set out the respect in which the order or decision is believed to be erroneous.
The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed.
Failure to act on it within 10 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this
order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST
be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the
order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed
within 40 days after the date on which the application for reconsideration was filed.
If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order
or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior
court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC
otherwise distributes, the order or decision on reconsideration.
In computing a period of time above, the date of the event or default after which the designated period begins to run is
not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which
event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday.
Carlisle, Samantha J (CED)
From: Colombie, Jody J (CED) <jody.colombie@alaska.gov>
Sent: Thursday, June 13, 2019 8:16 AM
To: AOGCC Public Notices
Subject: [AOGCC_Public_Notices] oth153 (Hilcorp)
Attachments: othl 53.pdf
Please see attached.
Re: Missing Meter Performance Reports ) Other Order No. 153
Custody Transfer Meters ) Docket OTH-19-015
Granite Point Unit )
Trading Bay Unit ) June 12, 2019
.1odv.L Colornhie
Special <<tssisturn
Alaska Oil and Gas Conservation Commission
333 i1/est ''Avemae
Anchorage, .AK 99.501
(907) 793-1221 Direct
(90" ) 2?6-?512 Fax
List Name: AOGCC—Public—Notices@list.state.ak.us
You subscribed as: samantha.carlisle@alaska.gov
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Bernie Karl
K&K Recycling Inc.
P.O. Box 58055
Fairbanks, AK 99711
George Vaught, Jr.
P.O. Box 13557
Denver, CO 80201-3557
Gordon Severson
3201 Westmar Cir.
Anchorage, AK 99508-4336
Darwin Waldsmith
P.O. Box 39309
Ninilchik, AK 99639
Penny Vadla
399 W. Riverview Ave.
Soldotna, AK 99669-7714
Richard Wagner
P.O. Box 60868
Fairbanks, AK 99706
icd �I►z���Cr
HARVEST
ALASKA
July 12, 2019
Commissioner Jessie L. Chmielowski
Alaska Oil and Gas Conservation Commission
333 West 7h Avenue
Anchorage, AK 99501-3572
RE: Docket No.: OTH-19-015
Missing Meter Performance Reports
Granite Point Unit
Trading Bay Unit
Dear Commissioner Chmielowski:
Post Office Box 244027
Anchorage, AK 99524
3800 Centerpoint Dr.
Suite 1400
Anchorage, AK 99503
I-CEIVED
,JUL 12 2019
AOGCC
Attached please find payment of $30,000 for assessed penalty pursuant to Decision and Order dated
June 12, 2019 for the above referenced matter.
Please feel free to contact me directly at (907) 777-8336.
Sincer y
�p
Richard Novcaski
Vice President, Harvest Alaska
Enclosure
Harvest Alaska, LLC
P O Box 61229
Houston TX 77208-1229
PAY Thirty Thousand Dollars and Zero Cents
To STATE OF ALASKA
THE
ORDER AOGCC
OF 333 WEST 7TH AVE
ANCHORAGE AK 99501-3539
AMEGY BANK
1131
Void After 90 Days
Check No
Check Date
Check Amount
0072009719
6/28/2019
""*"`$30,000.00
Authorized Signature
„°007 2009719115 1: 113 i 105861: 04444080 20,15
101
June 21, 2019
Hilcorp Alaska, LLC
Post Office Box 244027
Anchorage, AK 99524-4027
3800 Centerpoint Drive
Suite 100
Anchorage, AK 99503
RECEIVED
Jessie L. Chmielowski, Commissioner
Alaska Oil and Gas Conservation Commission JUN 2 1 2013
333 West Seventh Avenue /�
Anchorage, AK 99501-3572 AOGCC
Re: Docket Number: OTH-19-015
Missing Meter Performance Reports
Granite Point Unit
Trading Bay Unit
Dear Commissioner Chmielowski:
Hilcorp is in receipt of the Commission Decision and Order dated June 12, 2019 regarding the
above referenced enforcement action. Pursuant to Order, below is a written explanation that
describes preventative measures now in place to prevent recurrence of this violation.
A single point of contact has been established for future submittal of monthly reports to
AOGCC to ensure consistent and complete reporting. We also believe that this change will
help to facilitate clear communications and expectations between Hilcorp and AOGCC.
Internal processes have been updated and communicated. A clear internal process now
exists to ensure the timely and complete delivery of monthly reports and information to
AOGCC. This process includes how field operators provide meter information and how
the meter information is assembled and distributed.
At the informal hearing between Hilcorp and AOGCC on June 6, 2019, it was confirmed that all
required reports have been received by AOGCC. Several outstanding questions were identified
for follow up. We will meet with AOGCC to follow up and address remaining items from the June
6, 2019 informal hearing.
Should you have any additional questions, please contact Richard Novcaski 777-8455.
Sincerely,
David Wil ns
Senior Vice President
Hilcorp Alaska, LLC
5
CONFIDENTIAL information held in secure storage
STATE OF ALASKA
OIL AND GAS CONSERVATION COMMISSION
SUBJECT: Car tc�, r4Ti�d.,a—
DATE: 6 1j
NAME AFFILIATION
0
THE STATE
01ALASKA
May 20, 2019
GOVERNOR MIKE DUNLEAVY
CERTIFIED MAIL —
RETURN RECEIPT REQUESTED
7015 0640 0006 0779 5227
Mr. David Wilkins
Senior Vice President
Hilcorp Alaska, LLC
3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503
Re: Docket Number: OTH-19-015
Informal Review
Missing Meter Performance Reports
Granite Point Unit
Trading Bay Unit
Dear Mr. Wilkins:
Alaska Oil and Gas
Conservation Commission
333 West Seventh Avenue
Anchorage, Alaska 99501-3572
Main: 907.279.1433
Fax: 907.276.7542
v .aogcc.olaska.gov
As part of the informal review process, Hilcorp Alaska, LLC (Hilcorp) has the opportunity to
submit documentary material and make written and oral statements regarding the Notice of
Proposed Enforcement Action for Docket Number OTH-19-015, Missing Meter Performance
Reports, Granite Point Unit, Trading Bay Unit.
There will be no formal record kept of the review and the review will not involve the presence of
counsel, either for the AOGCC or the operator.
The informal review is scheduled for June 6, 2019 at 10:00 am in the AOGCC's Anchorage office
located at 333 West 7a' Avenue.
Copies of all written submissions and summaries of any oral statements planned by Hilcorp should
be provided to the AOGCC no later than June 3, 2019.
Sincerely, n Gn
Je sie L. Chmielowski
Commissioner
17-
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Mr. David Wilkins
1-_I Senior Vice President
Ln Hilcorp Alaska, LLC
C3 3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503
■ Complete items 1, 2, and 3. X
■ Print your name and address on the reverse
so that we can retulp the card to you. &
■ Attach this card to the back of the maiipiece,
or on the front if space permits.
Mr. David Wilkins
Senior Vice President
Hilcorp Alaska, LLC
3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503 L
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May 17, 2019
Hilcorp Alaska, LLC
Post Office Box 244027
Anchorage, AK 99524-4027
3800 Centerpolnt Drive
Suite 100
Anchorage, AK 99503
RECEI'6ED
MAY 17 9019
Jessie L. Chmielowski, Commissioner r
Alaska Oil and Gas Conservation Commission p®GCC
333 West Seventh Avenue
Anchorage, AK 99501-3572
Re: Docket Number:OTH-19-015
Missing Meter Performance Reports
Granite Point Unit
Trading Bay Unit
Dear Commissioner Chmielowski:
We are in receipt of the Commission's Notice of Proposed Enforcement Action dated May 7, 2019,
concerning the provisions required under the AOGCC conditional approval letters dated February
7, 2019. Pursuant to the Commissioner's Notice and 20 AAC 25.535(c), Hilcorp Alaska hereby
requests an informal review of the matter.
Please note that on May 17th, Harvest Alaska provided Mr. James Regg the April and May proving
documentation requested and indicated that Harvest Alaska would provide the State with monthly
documentation going forward as part of its procedure.
Hilcorp Alaska will submit documentary material in advance of the informal review, and make an
oral presentation at the informal review.
Should you have any additional questions, please contact Richard Novcaski, Vice President of
Harvest Alaska at (907) 777-8455.
Sincerely,
avid Wilkins
Senior Vice President
Hilcorp Alaska, LLC
il
THE STATE
May 7, 2019
°fALASKA
GOVERNOR MIKE DUNLEAVY
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
7015 0640 0003 5185 7103
Mr. David Wilkins
Senior Vice President
Hilcorp Alaska, LLC
3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503
Re: Docket Number: OTH-19-015
Missing Meter Performance Reports
Granite Point Unit
Trading Bay Unit
Dear Mr. Wilkins:
Alaska Oil and Gas
Conservation Commission
333 West Seventh Avenue
Anchorage, Alaska 99501-3572
Main: 907.279.1433
Fax: 907.276.7542
www.a ogc c.a laska.gov
Pursuant to 20 AAC 25.535, the Alaska Oil and Gas Conservation Commission (AOGCC) hereby
notifies Hilcorp Alaska, LLC (Hilcorp) of a proposed enforcement action.
Nature of the Apparent Violation or Noncompliance (20 AAC 25.535(b)(1)),
Hilcorp has violated the provisions of the conditional approval letters for the Granite Point Unit
and Trading Bay Unit custody transfer oil measurement equipment.
Basis for Finding the Violation or Noncompliance (20 AAC 25.535(b)(2)).
Changes to the custody transfer oil measurement equipment for Hilcorp's Granite Point and
Trading Bay Units were conditionally approved by AOGCC on February 7, 20191. Requirements
imposed include the meter prove frequency, notification to AOGCC for opportunity to witness
meter proves, required actions before making changes to the custody transfer measurement
equipment, and reporting obligations following proves. Condition 2.f. of each approval letter
requires that Hilcorp "provide results of each meter proved within 7 days following completion of
monthly meter proves", including prove reports, batch summaries, and current meter factor control
charts. Review of the Granite Point Unit and Trading Bay Unit field records reveal that Hilcorp
failed to submit meter performance reports as directed in the February 7, 2019 conditional
approval.
'AOGCC Docket OTH-18-042, Granite Point Unit; AOGCC Docket OTH-18-044, Trading Bay Unit. Meter
changes and upgrades are designed for the Cross Inlet Pipeline Extension Project by providing two sizes of custody
transfer meters at each production facility to allow for variable flow rates.
Docket Number: OTH-19-015
Page 2 of 3
Proposed Action (20 AAC 25.535(b)(3)).
The custody transfer measurement reporting violations at Granite Point Unit and Trading Bay Unit
are not isolated events. An AOGCC Notice of Proposed Enforcement was previously issued in
2016 for a similar violation — failing to provide required performance reports for the Ninilchik
Unit Bartolowits pad custody transfer meter. Hilcorp's non-compliance history in conducting
hydrocarbon development activities in Alaska includes past failures to obtain necessary approvals,
failures to install, maintain, and test required well control safety systems, failures to perform
required tests, and failure to provide reports. AOGCC has issued 18 non -civil penalty and 7 civil
penalty enforcement actions since January 2012 against Hilcorp. Recurring areas of
noncompliance, such as Hilcorp's inability to account for specific approval conditions in its
regulatory compliance tracking efforts, call into question the assurances that corrective actions
implemented in response to past enforcement actions would be effective in mitigating repeat
violations.
For violating provisions of the February 7, 2019 conditional approval letters for Granite Point Unit
and Trading Bay Unit custody transfer measurement systems, the AOGCC intends to impose a
civil penalty on Hilcorp under AS 31.05.150(a) in the amount of $30,000.3 In determining the
amount of the penalty, AOGCC has considered the criteria in AS 31.05.150(g), with emphasis on
the extent to which Hilcorp was acting in good faith in attempting to comply, the extent to which
Hilcorp acted in a willful or knowing manner, the extent and seriousness and actual or potential
threat to public health or the environment, injury to the public, the need to deter similar behavior
by Hilcorp and others similarly situated at the time of the violation or in the future, and Hilcorp's
history of compliance issues.
In addition to the imposed civil penalty, AOGCC intends to require Hilcorp to provide
1) a detailed written explanation that describes how it intends to prevent recurrence of this
violation.
Hilcorp is also to provide the required information within 10 days of this order.
As an operator involved in an enforcement action you are required to preserve documents
concerning the above actions until after resolution of the proceeding.
Rights and Liabilities (20 AAC 25.535(b)(4))
Within 15 days after receipt of this notification — unless the AOGCC, in its discretion, grants an
extension for good cause shown — Hilcorp may file with the AOGCC a written response that
concurs in whole or in part with the proposed action described herein, requests informal review,
or requests a hearing under 20 AAC 25.540. If a timely response is not filed, the proposed action.
will be deemed accepted by default. If informal review is requested, the AOGCC will provide
Hilcorp an opportunity to submit documentary material and make a written or oral statement. If
Hilcorp disagrees with the AOGCC's proposed decision or order after that review, it may file a
written request for a hearing within 10 days after the proposed decision or order is issued. If such
Z Other Order 113: "Final Decision and Order, Missing Meter Calibration Reports, Ninilchik Unit Bartolowits Pad";
October 20, 2016
3 Penalty amount arrived at considering each custody transfer oil measurement system as separate initial violations,
penalized at $15,000 per violation.
Docket Number: OTH-19-015
Page 3 of 3
a request is not filed within that 10 -day period, the proposed decision or order will become final
on the l ls' day after it was issued. If such a request is timely filed, the AOGCC will hold its
decision in abeyance and schedule a hearing.
If Hilcorp does not concur in the proposed action described herein, and the AOGCC finds that
Hilcorp violated a provision of AS 31.05, 20 AAC 25, or an AOGCC order, permit or other
approval, then the AOGCC may take any action authorized by the applicable law including
ordering one or more of the following: (i) corrective action; (ii) suspension or revocation of a
permit or other approval; and (iii) imposition of penalties under AS 31.05.150. In taking action
after an informal review or hearing, the AOGCC is not limited to ordering the proposed action
described herein, as long as Hilcorp received reasonable notice and opportunity to be heard with
respect to the AOGCC's action. Any action described herein or taken after an informal review or
hearing does not limit other actions the AOGCC may take.
AOGCC has granted Hilcorp's request to combine into a single meeting the informal review of
several recent notices of proposed enforcement. This proposed action can also be included in the
informal review but Hilcorp must notify AOGCC within 10 days if it desires to do so.
Sincerely,
Je ie L. Chmielowski
Commissioner
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Senior Vice President
� Hilcorp Alaska, LLC
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Anchorage, AK 99503
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■ Complete items 1, 2, and 3.
■ Print your name and address on the reverse
so that we can return the card to you.
■ Attach this card to the back of the mailpiece,
or on the front if space permits.
Mr. David Wilkins
Senior Vice President
Hilcorp Alaska, ac
3800 Centerporive, Suite 1400
Anchorage, AK503
9590 9402 3704 7335 2702 67
7015 0640 0003 5185 7103
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Mr. David Wilkins
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� Hilcorp Alaska, LLC
r 3800 Centerpoint Drive, Suite 1400
Anchorage, AK 99503
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■ Complete items 1, 2, and 3.
■ Print your name and address on the reverse
so that we can return the card to you.
■ Attach this card to the back of the mailpiece,
or on the front if space permits.
Mr. David Wilkins
Senior Vice President
Hilcorp Alaska, ac
3800 Centerporive, Suite 1400
Anchorage, AK503
9590 9402 3704 7335 2702 67
7015 0640 0003 5185 7103
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