Alaskan showdown: Houston firm trying to get drilling rig into Alaskan waters

A Houston-based exploration firm’s efforts to drill for natural gas in Alaska’s Cook Inlet is drawing the ire of shipping groups that believe it is violating the Jones Act.

Escopeta Oil & Gas has been trying to bring a rig to the waters off Alaska’s southern coast for several years to drill in a number of leases it owns or co-owns with other operators.

The effort has been held up over the years by a variety of disputes with state officials, but in 2006 Escopeta secured an exemption from the Jones Act – which prohibits foreign flagged vessels from delivering goods to U.S. waters – to use a foreign-built heavy-lift vessel to move a jack-up rig.

That deal fell through, but Escopeta has continued to seek out other vessels to bring a rig to the Cook Inlet.

Last year, the State of Alaska held Escopeta in default for not starting drilling in a timely manner and increased the deposit fee the company must have on file to hold its leases by $4 million.

The state gave the company until March 30 this year to get the rig to Cook Inlet and until Oct. 31 to begin drilling or face more deposit fees.

Earlier this year Escopeta lined up the M/V Kang Sheng Kou, a Chinese-flagged heavy bulk carrier, to bring the Spartan 151 jack-up rig to Cook Inlet.

Escopeta’s president Danny Davis told the Chronicle earlier this week the 2006 waiver of the Jones Act was still in effect and that the vessel would arrive in Alaska within days.

But a spokeswoman for the Department of Homeland Security said on Friday the 2006 waiver was no longer valid.

The heavy lift vessel was diverted to Prince Rupert, British Columbia, this week while the company tried to resolve the dispute with the government, according to a report by energy trade publisher Platts.

Davis told Platts he has verbal assurances from Homeland Security that the rig can be unloaded in Alaska. He did not return messages from the Chronicle on Friday.

“We’re making progress but we’re not quite there,” Davis told Platts. “Our plan is to anchor in international waters in Cook Inlet until we get this resolved.”

It’s possible Escopeta could still have the rig delivered to Alaskan waters and pay a fee to the Department of Homeland Security.

“DHS will consider requests for penalty mitigation in the event of Jones Act violation on a case by case basis depending on the evidence and facts presented in each instance,” said DHS spokeswoman Erlinda P. Byrd in an e-mail. “No violation has occurred to date.”

The issue has caught the attention of U.S. shipping groups who believe the Jones Act should be closely adhered to.

“It seems clear that in a race against time and money, Escopeta disregarded the Jones Act and decided that rolling the dice with the Department of Homeland Security rather than face default on their oil & gas leases in the Cook Inlet,” said Tony Munoz, Director of Ship Strong for America, a U.S. maritime industry group sponsored by Maritime Executive Magazine.

“If this violation is allowed to pass without repercussions, what’s to stop the next guy? American harbors will be filled with foreign vessels – is that something we really want?” Munoz said.

While U.S. shipping companies may be against Escopeta, the company seems to be getting support from an unexpected quarter – movie star Robert Duvall.

According to Petroleum News, Duvall, a long-time friend of Davis, said he plans to visit the rig once it begins drilling.

“Alaska’s got plenty of oil and gas that we need down here,”Duvall told the Alaska-based trade pub. It’s preferable to importing energy from foreign sources, such as the Middle East, he said.

“About the best thing we could do is let Danny drill up there. That would be great.”

4 Comments

  1. Adler

    See the lunacy wrought by government regulations trying to pander to special interest groups.

    “American harbors will be filled with foreign vessels – is that something we really want?” Munoz said.” They’re already filled with foreign flagged vessels. Who does this idiot think delivers all the cheap junk made in China, or Japanese cars?

    #1
  2. rat618

    Gee Sarah, I thought it was the President who was keeping you from “Drill Baby Drill”. Now it seems the State of Alaska has done their share too. Where is your outrage?

    #2
  3. Indianpaintbrush

    Don’t ya just love governmental red tape?

    #3
  4. Robbie

    “American harbors will be filled with foreign vessels – is that something we really want?” Munoz said.”
    Uhhhm, isn’t that what free market is all about? Foreign flagged vessels are already bound by Coast Guard rules when they enter US waters. It is NOT a safety issue. It is protecting interest groups that do not like competition. There are other high wage countries that have a proud domestic fleet (Dutch, Scandinavians) that can compete anywhere in the world. US shippers can command rates that are twice (!) as high as in other countries due to this ridiculous piece of legislation. In the meantime, the American domestic fleet is old as dirt and inefficient, a by product of protectionism. Who pays for all this? You and me. Free market? What a joke!

    #4