Mailbag: 'Violating the Jones Act?'

Readers respond to Tuesday's OpEd 'Violating the Jones Act?' by Tony Munoz, Editor-in-chief, Maritime Executive Magazine and MarEx eNewsletter:

Tony,

I just read your article in Maritime Executive and found it very interesting.  My name is Robb Erickson and I am Vice President, Heavy Marine Transport Worldwide, for Dockwise, the largest heavy-lift ship operator in the world. We are Dutch company and our ships are not U.S. flag. We were invited to bid on transportation of the Spartan 151 by Danny Davis of Escopeta and did so with a very clear subject:  That he have a valid Jones Act Waiver in hand at the time of departure.  We were never contacted again by Mr. Davis, and our understanding at this time is that the rig left Freeport, Texas in March without a valid waiver.  I am not happy about this as you can imagine as we operate within the laws of all the countries we do business in and do not like to see our competitors, in this case NMA/Cosco, exploit this situation.  We have heard that they have a clause in their contract with Escopeta that says something to the effect that if they get close to Alaska and there is no valid waiver, they have the option to discharge the rig in Vancouver, Canada, thereby getting around the Jones Act.  This would still be a clear violation of the act as there is a clause in the act titled “The Bank Shot”, which essentially says if the original intent was to go from one U.S. point to another, an intermediate stop in another country does not qualify. 

I have filed an allegation of potential trade violation with the U.S. Department of Customs & Border Protection but I doubt it will amount to anything due to the size of the bureaucracy involved.  But to answer your question: Yes, this is a violation of the Jones Act if when they arrive in Alaska they do not have a current and valid waiver for this specific ship and this specific cargo.

Pleased to hear your comments/suggestions.

Robb Erickson
Vice President Sales, Heavy Marine Transport Worldwide 
Dockwise USA LLC

******

Tony,

Interesting article about the Jones Act Waiver and Escopeta.
http://www.maritime-executive.com/article/violating-the-jones-act

How much did Buccaneer pay you to write it?  You failed to mention that no insurance company in the world would have insured the transportation of the Spartan 151 on the back of a flat-bottom barge pulled by two or three tug boats around the tip of South America, the deadliest seas on the planet.  The Jones Act Waiver Escopeta obtained in 2006 was for a heavy-lift vessel hauling a rig to the Cook Inlet, it was issued by Homeland Security, not Customs and Border Protection.... what they say is just their opinion.  Also, a barge is not a vessel, it has no engine, it is just a floating platform that is towed by vessels.

Lastly, Davis (Escopeta) will not get the second and third jack-up rig incentives, which are actually $22.5MM and $20.0MM.  I know, because I was involved during the drafting  Senate Bill 309 which provides for the incentives.  The three incentives are for the first three wells drilled by three unaffiliated companies using the same jack-up.  Escopeta can only get one one of them.

You should write an article about Buccaneer and all its former predecessor companies (Renaissance, Steller, etc) and all their failed attempts to get a rig to the Cook Inlet.  Just for your information, part of the Kitchen Lights Unit is made up of the proposed Northern Lights Unit leases which Renaissance (now Buccaneer) could not develop and had to transfer to Escopeta or lose them.

It was Buccaneer that came up with the idea to get the State of Alaska to fund the wells through a tax incentive program, and is trying to get the State of Alaska to pay for its rig through the federal government stimulus funds administered by AIDEA.  Now that it is apparent Buccaneer will not get the SB309 (Cook Inlet Stampede) incentive money, they have again went to the legislature to get yet another bill passed to allow a second company using a different jack-up rig to get a separate $20MM credit.  Usually there is no prize for fourth place, we'll have to wait and see what the legislature does with SB112 (the Pirate's Bill).  Buccaneer needs this Bill to pass in order to justify their purchase of the drilling rig through AIDEA (which is going to use state and federal money to fund a foriegn company to directly compete with U.S. private business), without the state paying for their well, chances are they can't get it financed on their own.

So let's see.... Buccaneer (Renaissance) couldn't develop their own leases and had to assign them to Escopeta, couldn't afford to drill their own well and asked the Legislature to fund it - but it appears Escopeta will get it first, they can't afford to buy or contract their own rig so they are trying to get the State of Alaska to buy them one, and now that they aren't going to get the State's booty (SB309) to drill them a well - they are asking for another hand-out (SB112).  What's next?  Are they going to ask the State of Alaska to just drill the well for them?

Be careful about the mis-information you print that comes from Buccaneer.... it affects your credibility.

Escopeta didn't ask the state for a nickel, they contracted and paid for their own rig with private investment capital - not government cheese.  If Escopeta drills the well first, then they deserve the credit that Legislature created as an incentive for it's efforts.  As you pointed out in your article, Escopeta has paid over $10MM in mobilization fees, and is in for spending another $30MM + , this doesn't include the $30MM or so already spent on the unit and prospect. 

Escopeta has their hat in the ring, not in their hands.

-Bruce from Webpetro

*******

Good morning, good afternoon tony,

My question is “Is not the Jones Act a violation of free trade?” Foreign companies are prohibited to deploy their own equipment. To my mind it is trade protection of US businesses. Please fill this suspicious reader (and Dutch shipping correspondent) in.
Janny Kok _Rottterdam

Janny,
The Jones Act covers 3 miles offshore along the 95,000 miles of US coastline and throughout the 25,000 miles of inland waterways. Since 9/11, I do not think Americans would be comfortable having foreign vessels transporting cargoes up and down the Mississippi River from New Orleans to Chicago and everyplace in between. The U.S. does not have a deep water fleet. In fact, it’s foreign carriers that import and export the vast majority of cargoes in the $14.7 trillion (2010) economy. The U.S. primarily maintains working merchant seamen to man the MSP and RRF ships, and these mariners also work for operators in the Jones Act fleets.

Free trade, now that is whole different subject. America no longer has an industrial base and its middle class has faded away and now exists with 9.9 percent unemployment and a lower standard of living. Do you know the 2010 stimulus package sent over $2 billion overseas for wind turbines and created about 6,000 jobs and only a few hundred in the U.S.  So, how about that for an open economy?

If you really want to know what I feel about the Jones Act, please read my OPED “McCain Leaves Washington.”

http://www.maritime-executive.com/article/mr-mccain-leaves-washington
Kind regards,
Tony

*******

Editor Munoz,
To answer the question you pose in your article (posted above), YES; Escopeta is in violation of the law.  The firm was not given a waiver in the interest of national defense.  Strictly speaking, this is the only waiver option that exists without a specific act of Congress.  This is irrespective of whether the US-flag fleet can accommodate the transport.  I followed the Escopeta escapade and it became apparent they made little, if any, effort to seek a qualified American vessel operator for their cargo needs in a timely manner. 

In any event, your piece was both insightful and an excellent summary of the story thus far.  You also point out a number of questions policy makers need to start asking.  By all accounts, this Danny Davis is quite a character and one who seems to play fast and loose with the facts and rules. 

Particularly after the Gulf/Horizon spill, I would suspect Alaskans, knowing the details you point out in your article (which is only a partial history of Mr. Davis and his exploits), would think twice about having his operation in their waters, let alone give him a bonus for being there.  The last thing Alaska needs is a spill in its majestic waters, particularly from an operation that has a known history of being duplicitous.
Best wishes,
Richard Berkowitz

 

*******

Tony,

Regarding the above article I believe there is a plain violation of the Act.

First, as stated by CBP there is no open ended waiver and new waivers would have to be applied for. I agree as the conditions for the first waiver had been changed by changing the rig and the carrying vessel.

2nd, each proposed transport over the years should be considered as a separate and complete activity, especially since it involved two separate rigs and two separate vessels, and there was a publically stated US flagged vessel available from Crowley at the time of the selection of the second rig and the second Chinese vessel.

What is the point of having the Jones act if someone pulls in political favors from State legislators and governors and they then expect the federal politicians and the public servants who enforce our laws to succumb to pressure and grant waivers.

The Jones act protects US interests and in this matter there has been no attempt by the Alaska State legislators and the governor of Alaska to do the same thing. It all appears to be handled in the financial interest of the operator and the State of Alaska, not the overall USA interest as provided for through the Jones Act. This man Davis should be brought up on charges for violating the Jones act in this way.  
Ralph Sugden
President & Managing Director
Caribbean Marine and P&I USA Inc

*******

Dear Editor:

There is no way a five year Jones Act waiver can be granted.  Waivers are usually only granted based on very specific limited named vessels and circumstances.  This appears to be a total failure by the shipper to properly follow clear rules and regulations in order to chase potential major oil exploration and development rights.

The shipper should have followed the process to try to seek a new waiver and did not.

Even if Crowley's capability were found to be insufficient, they are fully entitled to due process and even hearings prior to any grant of a waiver.

Crowley should be entitled to damages, as well as, potential fines due the US government for Jones Act violation.

John Morris

 

Missed the article, read it here: 'Violating the Jones Act?'