NEWS BULLETIN

August 10, 2012 --- Vol. 18, No. 57August 2012

Furie files suit to contest heavy Jones Act penalty

Furie Operating Alaska LLC is suing the U.S. Department of Homeland Security to challenge a $15 million fine the company calls “unwarranted and unprecedented.”

The 39-page suit, filed Aug. 7 in federal court in Anchorage, concerns the ocean transport of a jack-up drilling rig to Alaska’s Cook Inlet in 2011.

Furie, headquartered in League City, Texas, is using the rig to drill exploratory natural gas wells in its offshore Kitchen Lights unit.

On Oct. 13, 2011, U.S. Customs and Border Protection, an agency within Homeland Security, sent Escopeta Oil Company LLC a notice assessing a $15 million penalty for a violation of the Jones Act. Furie acquired Escopeta in 2011.

The notice said a “nonqualified vessel” was used to transport the Spartan 151 rig. The $15 million fine corresponded to the agency’s determination of the rig’s value.

The Jones Act requires that cargo transported between domestic ports be done with U.S.-made ships, owned and crewed by American citizens.

On March 18, 2011, the rig departed a Texas port aboard a foreign-flag heavy-lift vessel, the M/V Kang Sheng Kou, which hauled the rig to Vancouver, British Columbia. From there, U.S.-flag tugs towed the rig to Cook Inlet, arriving on Aug. 11, 2011, the lawsuit says.

The suit says the Kang Sheng Kou was used because the U.S.-flag Jones Act fleet had no ship capable of safely carrying the rig around South America, as the rig was too big to pass through the Panama Canal.

Furie transported the rig to Alaska “based on a reasonable belief that a national defense waiver would be granted under the Jones Act,” and Homeland Security Secretary Janet Napolitano’s “promise” in May 2011 that any penalty imposed would be substantially mitigated, the suit says.

—Wesley Loy

Furie plans to move to second Kitchen Lights well

Furie Operating Alaska has reached a total depth 15,298 feet with its Kitchen Lights Unit No. 1 well, drilled from the Spartan 151 jack-up drilling platform in Alaska’s Cook Inlet, and is now planning to move the platform to the drill site for Kitchen Lights No. 2 well by mid-August, Furie President Damon Kade told Petroleum News by email yesterday. The company plans to spud Kitchen Lights No. 2 by late August and then drill, evaluate and suspend the well by late October, Kade said.

Furie started drilling the No. 1 well in 2011, reaching a depth 8,805 feet before halting the drilling for the winter. The company reported a natural gas find with probable reserves of 750 billion cubic feet. The company re-entered the well earlier this summer to complete the drilling.

Damon declined to comment on what Furie has found from this year’s drilling of the well — the company is still analyzing the results of the well logging, he said. However, he confirmed that the well had not drilled into the pre-Tertiary rocks of the basin, the rock sequence containing the oil source rocks for the Cook Inlet oil fields and potentially holding as-yet undiscovered oil resources.

Furie plans to install a monopod platform, to develop the gas found in Kitchen Lights No. 1. The company has completed the initial design of the platform, Kade said.

—Alan Bailey

See stories in Aug. 19 issue, available online at 11 a.m. Friday, Aug. 17, at www.PetroleumNews.com


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