DHS slaps Furie with $15M Jones Act fine for Inlet jack-up rig
The U.S. Department of Homeland Security has slapped a $15 million fine on Furie Operating Alaska LLC for a violation of the U.S. Jones Act over transportation of a jack-up rig to Alaska in late 2011, and has given the company 30 days to pay from May 9, the date of a letter notifying the company of the decision.
Furie CEO Damon Kade said May 18 that the action would not impact Furie’s exploration operations now under way in Cook Inlet, however. Furie is back on location of an exploration well started last fall with the Blake 151 jack-up rig, and has resumed drilling of the well.
Kade said he could not comment on the fine or possible further appeals.
Furie, formerly Escopeta Oil Co., transported the Spartan Drilling Co. jack-up rig to Alaska last year on a Chinese-owned heavy-lift vessel in violation of the Jones Act, which requires shipments between U.S. ports to be on American-owned vessels
The Department of Homeland Security asserted the violation occurred and notified Furie of the fine earlier. Furie appealed the decision, but the appeal was denied. The agency decision was spelled out in a document signed by Glen Vereb, director of the Border Security and Trade Compliance Section of the Homeland Security department.
A $7 million dollar fine had been recommended by agency officials in Alaska but the decision was made in Washington, D.C., to apply the agency’s normal procedures for assessing Jones Act penalties, which are linked to the value of the cargo transported, in this case the jack-up rig, according to the decision signed by Vereb.
Escopeta, now Furie, said it used the Chinese vessel because no U.S. vessel suitable for moving the Blake 151 around the tip of South America was available. However, the agency said that a U.S. vessel was available. At the time the company argued the U.S. vessels available were not capable of navigating rough waters at the tip of South America. A route around South America was needed because the heavy-lift vessel with the jack-up rig loaded was too large to transit the Panama Canal.
In the decision document Vereb said, “The petitioner admits that its violation of the Jones Act was deliberate, intentional and committed for commercial expediency,” to meet deadlines for drilling set by the state of Alaska.
The agency could have seized the drill rig but opted to levy the fine instead, according to the decision. Shipping industry sources said penalty against Furie may be the largest fine ever levied for a Jones Act violation.
Meanwhile, Kade said Furie has resumed operations with the jack-up rig on a Cook Inlet offshore exploration well started late last summer but suspended for the winter. The rig was stored in a harbor in lower Cook Inlet and towed back to the well-site last week.
Cade said Spartan Drilling has completed preparations to resume drilling and will conduct tests on a gas discovery made last fall at the 8,000 foot level before drilling on to the target depth of about 16,000 feet. There are additional targets to be tested at deeper intervals including possible oil prospects, Kade said.
The rig will then be moved to a nearby location to drill a second well, according to plans filed by Furie with the state of Alaska, he said.
Tim Bradner can be reached at email@example.com.