Judge tosses part of Furie’s bid to beat $15 million federal fine

Furie Operating Alaska LLC recently suffered a legal setback in its quest to fend off a pending $15 million federal fine.

The fine stems from an alleged violation of the Jones Act. The act is a shipping law that generally requires the use of American, rather than foreign, ships for transporting “merchandise” between U.S. ports.

In 2011, Furie used a foreign ship to haul the Spartan 151 jack-up drilling rig partway from Texas to Alaska’s Cook Inlet, where the company used the rig to explore for natural gas. Furie is now installing an offshore production platform in its Kitchen Lights gas field.

U.S. Customs and Border Protection, or CBP, an agency within the Department of Homeland Security, in October 2011 hit Furie with the $15 million penalty.

Furie never paid the fine, and in August 2012 sued CBP and Homeland Security in an effort to kill the fine.

Recently, U.S. District Judge John W. Sedwick, of Anchorage, put a significant dent in Furie’s case, dismissing three counts in the company’s lawsuit.

One of the three counts alleged the Homeland Security secretary failed to exercise “independent judgment” in denying Furie’s request for a Jones Act waiver to transport the rig with a foreign ship. Another count held that the secretary’s refusal to grant a waiver was unexplained and arbitrary. The third count held that the secretary broke a promise to “mitigate” the penalty.

Attorneys for CBP and Homeland Security, in a motion seeking dismissal of the three counts, argued the court lacked jurisdiction because the secretary’s decision to deny Furie a Jones Act waiver and CBP’s decision not to mitigate the resulting penalty were “unreviewable” under the Administrative Procedures Act.

Judge Sedwick, in his 14-page ruling dated July 6, agreed with the government’s position. He observed that the Homeland Security secretary has great discretion with respect to the Jones Act and waivers, and he granted the motion to dismiss the three counts.

Case is not over

Furie has two remaining constitutional claims. First, the company argues the fine is excessive under the Eighth Amendment. Second, it argues the penalty is unenforceable because the government violated Furie’s due process rights.

Lawyers for Furie and the government informed the court they would jointly file, by July 29, a proposed schedule for resolving the remaining claims.

Through the legal contest, Furie has argued the pending fine is excessive and a looming liability that has made it tougher for the company to secure investors.

The government responded to Furie’s suit with a counterclaim, asking the court to enforce the fine.

- WESLEY LOY