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State scolds Escopeta for rig

Posted: August 29, 2011 - 8:00am  |  Updated: August 29, 2011 - 9:37am

Escopeta Oil and Gas Co. is negotiating a possible fine with the U.S. Department of Homeland Security over a violation of the U.S. Jones Act that occurred when the company moved the Spartan Drilling Co. Blake 151 jack-up rig recently from the U.S. Gulf Coast to Cook Inlet.

“There are discussions under way but nothing has been determined,” Escopeta spokesman Steve Sutherlin said.

The Blake 151 is now being prepared for final state inspections by the Alaska Oil and Gas Conservation Commission, Sutherlin said. Drilling is expected to begin within days.

The Jones Act violation occurred after Escopeta used a Chinese heavy-lift vessel to move the Blake 151 part of the way to Alaska. The rig was moved from the Gulf Coast to Vancouver, B.C., with the Chinese vessel, where it was offloaded to allow work to be done on the rig. The subsequent tow from British Columbia to Alaska’s Cook Inlet was done with U.S.-built tugs supplied by Foss Maritime, a U.S. company.

The Jones Act requires cargoes moved between U.S. ports to be in American-built and -operated vessels even if the voyage is broken with a stop at a foreign port, as occurred with the Blake 151 movement.

The resulting uproar over the rig movement, with letters of complaint being written to Homeland Security Secretary Janet Napolitano by several U.S. senators as well as U.S. shipping groups, resulted in Escopeta President Danny Davis stepping down from his position, Davis has acknowledged.

The U.S. Customs and Border Protection, which is part of the Department of Homeland Security, has jurisdiction over Jones Act administration.

In a related development, Alaska’s state oil and gas director, Bill Barron, chastised the company for moving the Blake 151 into location in upper Cook Inlet and lowering the legs on the jack-up rig to the ocean bottom without completing sea bottom site surveys required by the state.

“Our concern is with the company’s operational practices, not the condition of the rig,” Barron said.

Barron wrote Escopeta a sternly worded letter intended to put the company on notice that, “these are not acceptable practices,” he said, referring to the company’s action in moving the rig without having all of the authorizations.

No penalty against Escopeta is contemplated at this time, Barron said.

The state just wants the company to adhere to all rules, he said.

“The last thing we need is a major incident in Cook Inlet,” with an oil and gas operator, Barron said.

In his letter to Escopeta’s current president, Edward Oliver, Barrow said, “While the division is pleased to see a jack-up rig arrive in the state, I am gravely concerned about what I perceive to be Escopeta’s apparent disregard for regulatory requirements.”

In the letter, Barron cited Escopeta’s action to ship the Blake 151 rig to Alaska without having obtained a Jones Act waiver as well as the company’s decision to move the rig to the final location without first having U.S. Army Corps of Engineers permit. However, a Corps of Engineers spokeswoman in Anchorage said the company is now in compliance with its requirements. U.S. Coast Guard rules are also being complied with, a Coast Guard spokesman said.

Escopeta had sought a waiver of the Jones Act arguing that no U.S.-built vessel was available at the time that could have moved the Blake 151 safely through rough seas around the tip of South America. The government had granted Escopeta a waiver in 2006, but financing for the rig fell through and when Escopeta put its deal back together in late 2010, the department would not grant another waiver, citing the lack of a U.S. security justification needed for Jones Act waiver.

Alaska U.S. Sen. Mark Begich said in an interview Aug. 22 that the U.S. Department of Energy, which made the energy security determination for Homeland Security both in 2010 and 2006, has not explained reasons for changing its position. Begich and other members of Alaska’s congressional delegation had interceded on Escopeta’s behalf with Napolitano, although the effort to get the waiver was unsuccessful.

“They would never have stopped the rig being unloaded. Napolitano was always supportive of our efforts to get more exploration in Cook Inlet, particularly for natural gas, which we need,” Begich said.

Begich said a penalty is now being negotiated between the Department of Homeland Security and Escopeta, and that he has asked the department for a “modest” penalty.

“A violation of the Jones Act has occurred but we don’t want the penalty to bankrupt the company,” Begich said.

Jones Act penalties are at least partly based on the value of the cargo being transported, in this case of value of the Blake 151 jack-up rig.

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AKMaineIac
14
Points
AKMaineIac 08/30/11 - 10:00 am
0
0

Stupid

Homeland Security? The idea of the whole thing is stupid on its face. The issue of cargo being shipped between ports, one of which is American, and security issues? Really? British Columbia, and a jack-up oil rig? Security issues?

They gave them a waiver before, what changed? Just Homeland Security and Obama's minions going after an "evil oil company" and trying to throw a wrench into the works.

If the rig had stopped in South America for work, I'd accept that things needed to be inspected and reinspected to verify nothing had been sabotaged on it. To insure that some nitwit hadn't placed a device in the rig somewhere to cause a catastrophe here.

But that would not be alleviated with a Jone's Act Waiver, would it?

witchwitch
51
Points
witchwitch 08/30/11 - 01:42 pm
0
0

Security issues?

It the days before 911, people exercised a greater degree of responsibility for their own security. It would be assumed that the owner of the rig would be responsible for assuring that their property was not sabotaged.

We asked for more government protection for our business and our life. They comfort our fears and solve our security issues. We are getting exactly what we asked for.

These necessary programs were created by the politicians that we elected. Everything program has been provided by the consent of the governed, through our elected representatives. We have exactly what we asked for and our elected officials are working hard to give us more.

Where do you think you'd be without such protection?

keeneye
10
Points
keeneye 08/30/11 - 02:19 pm
0
0

D.O.E.

You gotta love a gov't entity (The Dept. of Energy) that has over 16000 employees and makes 0 energy. As shown above they further hinder the making of energy with the swipe of a pen.

Begich knows exactly why the waiver was not granted again in 2010. obama was in office by then.

AKMaineIac
14
Points
AKMaineIac 08/30/11 - 02:48 pm
0
0

Whose "WE"?

I didn't ask for any such protection and am content to take care of myself and those around me. We'd be far better off without the silliness at the airports and ports, and this foolishness affecting the exploration and extraction of more oil and fossil fuels until such time as a viable alternative is in fact discovered and accessible.

So far, airline passengers have proven more of an asset with shoebombers and other sorts than TSA and the Federal Air Marshals. Honestly, I am not surprised and nobody should be. The fellow passengers are in the air with those lunatics, and have much more to lose than anyone else. Motivation can overcome many obstacles... there is no motivation like fighting for your life.

Kenai
65
Points
Kenai 08/30/11 - 08:57 pm
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Jones Act

I get the impression that people are confused about the purpose of the Jones Act. It has nothing to do with terrorism or 9/11. The Jones Act is a name given to a portion of the Merchant Marine Act of 1920. It's purpose was to support the United States Maritime industry. It requires " all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents" (http://en.wikipedia.org/wiki/Merchant_Marine_Act_of_1920).

That's a good thing. Would you scoff so strongly at a "Buy American" bumper sticker, or a product proudly proclaiming "Made in America"? That's what the Jones Act is about.

Repeal the Jones Act and say goodbye to the U.S. shipping industry. Foreign companies will gladly do it cheaper.

kenai_kid
222
Points
kenai_kid 08/31/11 - 02:07 am
0
0

Reason and Fact Check

@Kenai
Thank you for using both facts and reasoning. I could not have put it better myself.
The number of jobs that would be impacted directly in Alaska is significant. From the longshoremen to the tug boat pilots, tanker traffic, container ships and barges ... the number of Alaskans employed in the shipping industry may surprise you! The Jones Act in fact protects those jobs.

DRILLALASKATAPNOTTAX
24
Points
DRILLALASKATAPNOTTAX 09/03/11 - 07:01 am
0
0

The State needs to finally support smaller oil and gas companies

When oil was $ 150 per barrels recently, the American people paid around $ 1 trillion per year to import oil from OPEC and other nations. Why allow this transfer of wealth when Alaska has the oil and gas we need to help secure our nation with energy?

The State and the Federal government should be bending over backwards to help oil and gas development instead of stopping smaller oil and gas companies at ever turn!

Is this the new DNR DOG that Gov. Parnell wants? The Gov. Can't control the Jones Act but what is happening at the DNR DOG? Alaska has a long historty of beating up on the smaller oil companies but many thought that changed with Gov. Parnell in office.

What kind of reasoning is running the DNR DOG these days? This oil company has invested a lot and worked hard to bring new oil and gas jobs to Alaska, why kick them while there down?

The State needs to support small oil companies in Alaska not try to give them more trouble that may run them out of business.

Importing overseas oil is causing our nation to export much of our wealth, it has been reported, " importing oil it is harming the trade balance and the U.S. economy".

The people of Alaska need to see if they can reason with Government officails that get in the way of drilling for more oil in Alaska, this is near madness!!

If Alaska would allow more drilling our nation would not need so much imported oil. Alaska's oil and gas can help fix the trade problem. Let's encourage more drilling in Alaska, like Gov. Parnell and the fine people of Alaska want, write your Senators today and ask for support.

The State and the Federal govenment should stop hurting the American oil and gas workers in Alaska but rather they should encourage them to drill for more oil and gas. Many feel this will bring more jobs to the people of Alaska . The Alaskan voters should get very active and support new drilling, because this is a economic war that is attacking every Alaskan's hope for prosperity!

These type of actions from government are breaking the Alaskan economy apart. This is a economic war we all are losing in Alaska, unless we now allow more oil companies to drill and produce in Alaska.

Here is a FACT; Look at the decline in oil in the Cook Inlet 270,000 barrels per day now around 10,000 and on the North Slope 2 Million barrels per day now around 500,000, if the TAPS is being repaired or shut down then is it's 0.

If Alaska produces an additional 1 million barrels of new oil per day under Gov. Parnells Plan, this would increase every Alaskan's Permenent fund check each year and provide many high paying jobs, or we can keep buying more oil from the Middle East and other nations, you choose.

I suggest stop fighting small oil companies and let them hire Alaskans and let them work toward prosperity.

Our nation is fighting for economic survival and all those that want to stop or hinder our hard working Alaskan oil and gas workers need to be fired, so Alaskans can have high paying oil and gas jobs and enjoy prosperity.

Who want us to stop drilling in Alaska and why? Could it be some of the Middle East Oil Producers that don't like us very much, paying and supporting certain anti-oil people in Alaska?

Do you ever wonder who supports all these anti-oil people in Alaska, who is paying them?

Alaskans love the the money they get from oil as it pays for 90% of state government and provides many Alaskans with good jobs, why let these type of people shut oil and gas drilling down in Alaska? We need to write our government and tell our Senators we more drilling and we want this 1920 ACT changed to exempt oil and gas acitvity in America, right?

http://en.wikipedia.org/wiki/Merchant_Marine_Act_of_1920

drudge
3
Points
drudge 09/03/11 - 01:54 pm
0
0

@Dan Donkel -aka- DRILLALASKATAPNOTTAX

"Why allow this transfer of wealth when Alaska has the oil and gas we need to help secure our nation with energy?"

Alaska will never supply any significant quantity of oil and gas for the country, even if greedy oilmen like you were allowed free reign in ANWR. It's not going to happen.

"The State and the Federal government should be bending over backwards to help oil and gas development instead of stopping smaller oil and gas companies at ever turn! "

We already do, to the tune of $4 billion per year: http://www.nytimes.com/2010/07/04/business/04bptax.html

My favourite bit:

"Because of one lingering provision from the Tariff Act of 1913, many small and midsize oil companies based in the United States can claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights."

Seems to me you're getting plenty of help already.

"The State needs to support small oil companies in Alaska not try to give them more trouble that may run them out of business."

Small oil companies like yours? You've yet to admit that you're the owner of such a company, after posting pages and pages worth of oily rhetoric.

"Importing overseas oil is causing our nation to export much of our wealth, it has been reported, " importing oil it is harming the trade balance and the U.S. economy"."

A large portion of our oil imports come from countries we share a border with. Ranked by quantity: 1. Canada, 2. Mexico, 3. Saudi Arabia, 4. Venezuela, 5. Nigeria, 6. Angola, 7. Iraq, 8. Algeria, 9. United Kingdom, 10. Brazil.

"The Alaskan voters should get very active and support new drilling, because this is a economic war that is attacking every Alaskan's hope for prosperity! [...] These type of actions from government are breaking the Alaskan economy apart. This is a economic war we all are losing in Alaska, unless we now allow more oil companies to drill and produce in Alaska. [...] Who want us to stop drilling in Alaska and why? Could it be some of the Middle East Oil Producers that don't like us very much, paying and supporting certain anti-oil people in Alaska? "

FUD, FUD, and more FUD. Typical shill tactics.

Mr. Donkel, as the owner of a small oil and gas company, it is unethical and downright shady of you to attempt to manipulate Alaskan voters.

How's Florida this time of year?

witchwitch
51
Points
witchwitch 09/03/11 - 11:55 pm
0
0

Alaskan oil is owned by every Alaskan

The tax structure is still VERY generous to the oil companies. If we give away our oil through low taxes they will pump every barrel and leave us dry and broke.

I have no problem with incentives, so that investments can be recovered. However, if YOU owned the oil, would YOU reduce YOUR royalty on YOUR nonrenewable resource?

Well we do as Alaskans. Our Alaskan tax rates are much lower than most other nations. We should not give away our future for the promise of short term gains. The current ACEs system is more than fair. If would be very foolish to follow Parnell's plan to give away our oil. He is not looking out for Alaska's future. He has become a shill for the oil producers.

If you look at the facts it's plain to see that lowering oil taxes will not help Alaskan in the long run.

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