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Furie seeks Jones Act penalty dismissal Cook Inlet explorer contends it never violated shipping law, says government has no ‘legitimate basis’ to collect $15 million fine Wesley Loy For Petroleum News
Furie Operating Alaska LLC says the federal government’s claim for a $15 million civil penalty is “legally defective” and should be thrown out.
Furie, which is exploring for natural gas in Alaska’s Cook Inlet, laid out its arguments in court papers filed Aug. 21 in U.S. District Court in Anchorage.
U.S. Customs and Border Protection, an agency within the Department of Homeland Security, is seeking the penalty for a violation of the shipping law known as the Jones Act.
CBP contends that Furie broke the law when it used a foreign cargo ship in 2011 to transport the Spartan 151 jack-up drilling rig partway from Texas to Alaska.
The Jones Act requires the use of only American ships for transport of merchandise between U.S. ports.
Furie sued first CBP hit Furie with the $15 million penalty on Oct. 13, 2011, and subsequently sent the company a number of bills demanding payment.
Furie never paid, and on Aug. 7, 2012, sued Homeland Security. Furie challenged the penalty as unwarranted, and later said the looming liability was making it hard for the company to secure investors.
The government has responded to Furie’s suit with a counterclaim seeking collection of the $15 million penalty.
A foreign-flag, heavy-haul ship, the Kang Sheng Kou, carried the Spartan rig from Texas to Vancouver, British Columbia. Furie hired U.S. tugs to tow the rig the rest of the way to Alaska.
In its lawsuit, Furie said it had to use the foreign ship for part of the journey, as no U.S. ship capable of doing the job was available. The voyage required steaming around South America, the rig being too big to pass through the Panama Canal.
Rig wasn’t ‘merchandise’ Furie tried to persuade Homeland Security officials to either grant a waiver of the Jones Act, or reconfirm an old waiver obtained in 2006. But federal officials denied these requests.
In a motion to dismiss the government’s counterclaim, Furie’s lawyers contend the company simply didn’t violate the Jones Act.
That’s because the Spartan rig wasn’t “merchandise” within the meaning of the Jones Act, Furie says. That is, it wasn’t an item in the stream of commerce.
Rather, the rig was a “vessel” merely being relocated to a new drilling site. The rig is documented as a vessel in Liberia, Furie says.
“Furie was not in the process of selling or otherwise conveying a property interest in the rig, nor did Furie even own it,” the company says.
The towing statute If Furie violated any maritime law, it would have been the “towing statute,” which governs the transport of vessels, the company says.
Furie’s court papers explain how the Spartan’s voyage to Alaska was, in its entirety, one big tow job.
First, the rig was hauled by foreign ship to Vancouver in an operation commonly known in the shipping industry as a “dry tow.” This is like moving a car with a flat-bed tow truck as opposed to a wrecker that hooks to the vehicle. The rest of the Spartan’s transport to Alaska was a “wet tow,” with tugboats pulling the floating rig through the water.
The towing statute, like the Jones Act, requires the use of American-owned ships for transporting cargos between U.S. ports.
The key difference is that violations of the towing statute carry much smaller penalties than violations of the Jones Act, Furie says.
CBP misapplied the Jones Act to the alleged illegal transport of the Spartan rig, which was a vessel, not merchandise, Furie argues. Thus, it says, CBP has no “legitimate basis” to collect the $15 million, one of the highest Jones Act penalties ever assessed.
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