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Vol. 16, No. 22 Week of May 29, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Duvall ‘on board’

Napolitano acknowledges SC Alaska energy needs; will mitigate jack-up fine

Kay Cashman

Petroleum News

Robert Duvall won’t be on board the Kang Sheng Kou when it offloads Escopeta Oil’s jack-up rig May 29, but he will be making a trip north once Escopeta starts drilling for oil and natural gas in Alaska’s Cook Inlet.

A long-time friend of Houston-based Escopeta President Danny Davis, Duvall is a staunch supporter of domestic oil and gas drilling.

“Alaska’s got plenty of oil and gas that we need down here,” Duvall said in a May 26 interview with Petroleum News. 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.”

An added bonus for Alaskans and the well known actor and director is that Duvall plans to visit Escopeta’s Spartan 151 jack-up once it starts drilling, as a show of support.

“Alaska’s the only state I haven’t been to. I plan to support what Danny’s doing up there, as well as get in a little fly fishing,” he said.

Duvall would have been on the Kang Sheng Kou or one of the Foss tugs that will tow the jack-up to Nikiski, but he’s about to start work on an independent film, “Jayne Mansfield’s Car,” directed by Billy Bob Thornton.

“Bobby Duvall is a true American patriot, 100 percent red, white and blue,” Davis said.

Good, bad news on Jones Act waiver

The Spartan 151 jack-up is expected to start drilling in late June in Escopeta’s Kitchen Lights unit in upper Cook Inlet, and is due into Kachemak Bay for off-loading late May 29.

Escopeta recently got good and bad news from the U.S. Department of Homeland Security in response to its request for a new Jones Act waiver for the foreign-flagged Kang Sheng Kou. In a letter dated May 20, Secretary Janet Napolitano said no to a new waiver. But she did not say what Escopeta executives most feared: and that was that the Spartan 151 rig would be confiscated or refused entry into the inlet.

In fact, Napolitano made a point of acknowledging the energy needs of Southcentral Alaska in her letter to Davis, offering the services of Glen Vereb, director of U.S. Customs and Border Protection’s Border Security and Trade Compliance division, to discuss “the facts and circumstances of the transportation of the rig that may be relevant to the mitigation of the Jones Act penalties that will likely result if your rig is offloaded in Cook Inlet.”

A May 23 letter from Escopeta’s Washington, D.C., attorney, Jonathan K. Waldron of Blank Rome LLC, to Davis said members of the firm had met with Vereb, who confirmed the vessel could land and offload the rig in Cook Inlet without interference.

In regard to the mitigation of penalties, Vereb asked for a letter outlining the circumstances that support mitigation of the penalties and assured Blank Rome attorneys that CBP has no intention of pursuing any penalty actions against any of the other parties involved in transporting or unloading the jack-up.

Existing Jones Act waiver

Escopeta’s existing open-ended Jones Act waiver was granted by the Bush administration on the basis that the drilling and development of the oil and gas prospects in the company’s offshore Cook Inlet basin acreage was necessary for national security reasons. Napolitano said “unlike in past instances” where the departments of Energy and Defense supported a waiver that would allow a foreign-flagged vessel to transport cargo from one U.S. port to another, in this case neither department found a waiver “necessary in the interest of self defense. …

“Nevertheless, the Department of Homeland Security fully understands the energy needs of the Cook Inlet/South-Central region and therefore wants to work with” Escopeta to mitigate any penalties that would normally be assessed against the company, the Secretary said.

Davis credits Napolitano’s decision to the efforts of the three members of Alaska’s congressional delegation, who recently met with Napolitano and other federal officials to plead Escopeta’s case and explain the need for increased oil and gas production in Southcentral Alaska. That effort was started several months ago by Sen. Mark Begich, D-Alaska.

“I think the people of Alaska are some of the most fortunate people in the United States, having Begich, Murkowski and Young represent them in the fashion that they have in the last few months in trying to obtain a Jones Act waiver,” Davis said. “No one could have better representation in Washington.”

Steve Sutherlin, an Escopeta contractor, said “Sen. Begich was instrumental in educating DHS about the pain his constituents were feeling from high natural gas prices and supply worries. His leadership in the effort to explore Cook Inlet was a proactive response to the problem which we hope will prevent further suffering or disruption in Southcentral Alaska.”

Escopeta’s initial Jones Act waiver was secured by Republican Ted Stevens, former U.S. senator from Alaska.

Three Foss tugs to take it to Nikiski

When the Spartan 151 arrives, it will “take shelter” in Kachemak Bay, where it will be off-loaded and towed to the OSK dock at Nikiski, north of Homer, its home for as long as four years, and possibly longer if Escopeta moves on its option to purchase the rig.

“Foss Maritime will be using the two tugs it keeps in Cook Inlet to tow the jack-up. It’s also bringing in a larger tug from Seattle, so three tugs will be involved,” Sutherlin said.

It will be the first time in more than a decade that a jack-up rig is headed to Alaska’s Cook Inlet.

The rig was supposed to arrive at the southern end of the Kenai Peninsula on May 25, but because of “sea conditions”, the heavy haul vessel bringing it to Alaska “has only been able to travel at about 9 knots,” Vladimir Katic told Petroleum News May 24. Katic heads up Escopeta’s operations in Alaska.

NPDES permit, DEC certificate issued

When it arrives at the OSK dock, the jack-up’s “home” in Alaska, Escopeta will be doing some final work on the rig to prepare it for drilling, which includes adding a 15,000-pound blowout preventer, a major step-up in the equipment previously used on the rig in the Gulf of Mexico — and the largest blowout preventer ever employed in Cook Inlet.

Once the work is complete, the rig has to be inspected by the Alaska Oil and Gas Conservation Commission before drilling can commence.

Escopeta has almost all its permits and authorizations, the most recent being the Certificate for Proof of Financial Responsibility from the Division of Spill Prevention and Response, which is part of the Alaska Department of Environmental Conservation, and the permit to discharge under the National Pollutant Discharge Elimination System, or NPDES, from the U.S. Environmental Protection Agency.

“We have all but a couple of permits and authorizations in hand,” Sutherlin said.

The company expects to be able to begin drilling between June 21 and June 30, Katic said.

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