Controversial Alaskan rig move completed

Controversial Alaskan rig move completed    A months-long debate about the Jones Act and the capability of U.S.-built vessels to move the largest equipment, appears to be coming to an end with the arrival of a jack-up oil rig leased by Escopeta Oil and Gas at Cook Inlet in Alaska.
   The rig, which will be used to drill for gas by Escopeta Oil and Gas, was reportedly at its drilling site after being inspected last week by Customs officials in Homer, Alaska.
   U.S.-flag shipping interests say the rig was moved part of the way from the Gulf of Mexico to Alaska on a foreign-flag ship in 'blatant violation' of the Jones Act, which requires cargo moving between two U.S. points to be moved on ships that are registered and built in the United States and crewed by Americans.
   Erlinda Byrd, a Department of Homeland Security spokesperson, said Customs and Border Protection, which enforces the Jones Act, “is making an assessment of the current situation.”
   It was unclear what, if any, fine Escopeta would face for using a Chinese ship to move the rig part of the way to Alaska.
   If there is no fine or a very small fine, that is likely to create a further outcry by the domestic shipping industry.
   If the fine is substantial, Escopeta may be able to get it reduced on appeal, say maritime attorneys.
   Over the past month, the rig was reported to have been towed from Nanaimo Shipyard on Vancouver Island in British Columbia, to Alaska with tugs operated by Seattle-based Foss Maritime. That final leg of the move raised no issues.
   But the first leg of the voyage, which began in March, created a fury among Jones Act shipping advocates.
   That's when Escopeta directed Chinese shipping company COSCO to have its float-on/float-off heavy lift ship Kang Shen Kou, transport an oil rig from Freeport, Texas, around Cape Horn to Alaska.
   Danny Davis, president of Escopeta, said Alaskan cities, including Anchorage are facing a shortage of natural gas unless there is additional production from Cook Inlet.
   He contended there was no Jones Act vessel capable of transporting the jack-up rig, Spartan Rig 151, which his firm hired from Spartan Offshore Drilling, from the Gulf of Mexico where it had been working, around Cape Horn to Alaska.
   Escopeta said the rig was too wide to fit through the Panama Canal, and the notoriously rough waters around Cape Horn were too rough to use a U.S.-flag barge. As it was, the rig was damaged in a storm and had to be repaired in Montevideo, Uruguay before completing its voyage, Escopeta spokesman Steve Sutherlin said.
   Davis had contended he had a waiver, issued by DHS in 2006, to transport a rig on a foreign-flag ship.
   But last November, the DHS said his waiver was no longer applicable and that Jones Act waivers 'address specific voyages undertaking specific voyages, they are neither open-ended nor transferable.'
   Davis's contention that no U.S.-flag vessel was capable of moving the rig safely is hotly disputed by the U.S. shipping industry.
   In June, the American Maritime Partnership (AMP), an advocacy group for the domestic maritime industry said in an op-ed published in the Alaska Journal of Commerce that 'American shipping companies have spent more than $100 million over the past five years building new heavy-lift vessels in U.S. shipyards so that this kind of transportation need could be met using suitable and qualified vessels.
   'The Maritime Administration ruled that American vessels were available when Escopeta set sail. Escopeta was apparently dead set against using those vessels, preferring a foreign alternative,' AMP wrote.
   Janet Napolitano, secretary of DHS, which decides whether to grant Jones Act waivers, told Davis in March that CBP had the Maritime Administration canvass U.S. maritime industry executives and 'the result indicated that U.S.-flagged vessel operators have barges available that are technically suitable to the task.' She denied the waiver, but said as the process of moving the rig had begun, and said it was prepared to 'discuss the facts and circumstances of the transportation of the rig that may be relevant to mitigation of the Jones Act penalties that will likely result if your rig is offloaded in Cook Inlet.'
   In a March letter to David Matsuda, MarAd administrator, Mike Roberts, senior vice president and general counsel for Crowley Maritime, said since the Escopeta waiver was first authorized in 2006, 'Crowley has invested tens of millions of dollars to renew and modernize its heavy-lift fleet, building nine new barges in U.S. shipyards, as is legally required if the vessels are to provide marine transportation in U.S. domestic trades.'
   Roberts said based on its experience and the limited information provided by Escopeta, 'we are confident that our equipment is capable of transporting the Spartan 151 rig safely from Freeport, Texas, to Cook Inlet, without unusual modifications to either the rig or the barge.'
   As the ship was being moved to Alaska, Spartan brought suit in a Texas court, asking the ship be brought to Vancouver because of uncertainty whether it would face penalty if the ship was moved directly to Alaska.
   Escopeta had COSCO turn the ship around at Prince Rupert, British Columbia, near the Alaska border and had the work done to prepare the rig for drilling in Canada instead of Alaska.
   The magazine Petroleum News said DHS told Escopeta it would not take action against the rig, and the rig was moved to Cook Inlet.
   Maritime attorneys said they were skeptical that moving the ship to a Canadian shipyard and having work done there before continuing on to Alaska would exempt the movement from being subject to the requirement that the rig be moved on a Jones Act ship.
   One shipping executive said that is called a “bank shot,” and would still be seen as dirty pool under the Jones Act. ' Chris Dupin