Escopeta hit with fine

Jones Act violation will cost company $15 million
Tugs pull Escopeta Oil’s Spartan 151 jack-up drilling platform up Cook Inlet on Aug. 10. The U.S. Departmnt of Homeland Security has fined Escopeta $15 million for Jones Act violations committed while transporting the rig from the Gulf of Mexico to Cook Inlet.

Escopeta Oil Co.'s exploration efforts in Cook Inlet haven't been all smooth so far this drilling season despite bringing a jack-up rig to the area.

Spokesman Steve Sutherlin said Escopeta received a notice of a $15 million dollar penalty from the U.S. Customs and Border Protection on Oct. 13 because of the company's alleged Jones Act violation this summer. The company did not secure a waiver to the Jones Act, which requires that intra-American transportation be conducted by American vessels, before transporting a Spartan 151 jack-up rig from Texas to the inlet on a foreign-flagged vessel. The Chinese heavy lift vessel did stop in Vancouver, B.C. before the rig was towed to the inlet for good.

Sutherlin said Escopeta can file a petition for relief, but has not yet decided how it will respond to the penalty notice. The company has 60 days to file such a petition.
"The company is reviewing its options at this point," Sutherlin said Monday.

The penalty wasn't a complete surprise, Sutherlin said, as Escopeta was waiting to hear something from customs.

Escopeta is operating the rig on an offshore well in the 83,394-acre Kitchen Lights unit north of Nikiski in Cook Inlet.

The company also saw a delay in that development this month after finishing the first stage of drilling earlier this month and waiting for the state to OK continued development.

The state had asked Escopeta to pause just shy of 5,000 feet to re-evaluate. Escopeta announced Oct. 11 that it reached that depth.

Sutherlin said drilling could resume as soon as Monday afternoon.

The state told the company to take steps to prevent a blow out and test the casing on the well before drilling restarted. The Alaska Oil and Gas Conservation Commission oversees weekly tests to ensure the company is complying with regulations.

"We basically have to meet the (AOGCC) regulations," he said of what the company had left to do.

"No, there weren't any penalties, it was just a matter of making sure that the well was done properly," Sutherlin said.

Sutherlin said the stop was just part of the process, and wouldn't alter the project too much.

"Every drilling project has its delays," Sutherlin said.

The company will stop drilling for this season pretty soon, Sutherlin said. He didn't know when the results of this round of exploration might be finalized.

A tax credit is available from the state of Alaska to help mitigate the cost of bringing the rig to the inlet, but so far that credit has not been applied for, said Bruce Tangeman, a deputy commissioner in the state's tax division, last week.

Molly Dischner can be reached at molly.dischner@peninsulaclarion.com.

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