Escopeta Oil Drills for Oil, Finds Fines

[INDENT=3]In 2008, Escopeta Oil President Danny Davis lamented the tax code changes that affected the drilling industry in an open editorial. This editorial was written in 2008, an era when oil prices were spiking as high as $140 per barrel. At that time, Danny Davis wrote, “Congress passed new tax laws in 1982 that reduced the tax write-off available to oil companies and investors for initial drilling investment expenses from 100 percent to just 65 percent. Our elected officials also chopped the tax credits known as depletion allowances from 27.5 percent to a cap of 15 percent. “[1] This was his rationale for explaining the 60% decline in domestic drilling between 1981 and 2008. This was also a period when there were a large number of bills before Congress for economic stimulus and energy subsidies.[2]

Not to parrot Sarah Palin’s, “Drill, Baby, Drill” stance, but domestic oil production certainly plays a part in energy independence for the United States. At a time when a company like BP – granted a major player in the oil and gas industry – is posting a quarterly profit of $7.7 Billion, it would seem impertinent to suggest it is not profitable to drill an oil well without tax write-offs.

While the U.S. should be supporting domestic oil and gas production, as well as alternative energies, it should not be at the expense of other U.S. domestic enterprises. In 2006, Escopeta Oil applied for and received a waiver to the Jones Act to allow the shipping of a jackup oil rig from the Gulf of Mexico to Alaska on a foreign flag heavylift ship. Due to operational considerations, said shipment did not occur and the Jones Act waiver subsequently expired. Despite assurances from Crowley Maritime Corporation to the Maritime Administration (MARAD) that they had the U.S. flag resources available, Escopeta Oil shipped their oil rig from the Gulf of Mexico to Alaska on a Chinese flagged vessel in March 2011.[3]

Many maritime companies, organizations and advocacy groups such as Strong Ships for America[4] decried this willful violation of the Jones Act. In October 2011, U.S. Customs and Border Protection (CBP) assessed a fine of $15 Million against Escopeta Oil for this violation. Despite attempts to mitigate this fine, CBP’s Chief of Penalty Branch, John Connors recently wrote, “we find the facts of the case support the conclusion that the Jones Act violation was deliberate, and thus aggravated.” He also acknowledged that Escopeta Oil was under pressure to get the rig to Alaska in order to receive a $25 Million tax credit.

In the end, it would appear that Escopeta Oil stands to profit $10 Million from this violation of the Jones Act – a profit made at the particular expense of the U.S. Merchant Marine. Not only have U.S. mariners lost the opportunity for employment in this case, but $10 Million of their tax dollars will be going to Escopeta Oil.





Funny because the rig was floated off the ship in Vancouver B.C. Than was towed by Foss to AK.

  1. Coastwise Trade (Jones Act) Violations (46 U.S.C. App 883)
    Section 46 U.S.C. App. 883 [B][U]prohibits foreign flag vessels from transporting merchandise laden at a coastwise port to any other coastwise port (whether directly or via a foreign port)[/U][/B]. Section 883 provides for seizure and forfeiture of improperly transported merchandise or assessment of a monetary penalty equal to the domestic value of such merchandise. Customs may assess a penalty against the master, owner, or any party responsible for the improper transportation.
    Section 883 penalties may be assessed in amounts up to the value of the merchandise moved coastwise in a nonqualified vessel or the cost of the transportation, whichever is greater. If the violation arose because of an emergency to the vessel that required, for reasons of safety or other humanitarian cause, that coastwise transportation occur, the penalty should not exceed $100,000. [B][U]If the violation occurred for commercial expediency, Customs does not limit the penalty amount.[/U][/B] Section 883 penalties generally are secured by international carrier’s bond.

The FPFO and NSPO decide petitions and supplemental petitions, in cases where the penalty liability is less than or equal to $100,000. OR&R, ITC Division, decides those petitions and supplemental petitions in cases where the penalty liability is greater than $100,000.
If the petition for relief establishes that the violation occurred as a direct result of an arrival of the transporting vessel in distress, such that the vessel was in peril or due to an act of God (e.g., hurricane) full mitigation is appropriate. If the vessel was not in distress, but the transportation occurred because of some other humanitarian reason (e.g., disembarkation of crewman with life threatening injuries), the claim may be mitigated in full. If the violation resulted because of commercial expediency, Customs may mitigate the penalty to an amount between 35 and 50 percent of that assessed.

I had thought they got around that by having work done in the shipyard but I guess not.

Except if it was unloaded in vancouver then towed by an american vessel to alaska the above quote doesn’t apply.

It was unloaded in Vancouver than went to the shipyard for a month, than it was towed to AK.

While I haven’t been able to locate the particulars of the complaint yet, I suspect that the rig wasn’t officially imported to Canada (duty paid), thus was considered to have been on a continuous voyage regardless of the time spent in Vancouver.

Hmm I’m not sure as well, what I was also wondering how Crowley planned to tow that thing around? It would have been a long long long tow.

Heavy Lift Barge Transportation


Customers who need to move the huge, the extraordinary, or the complex look to Crowley for marine and engineering solutions.

We have the expertise and equipment to provide safe and reliable marine transportation and logistics services for project cargo movements, offshore construction and offshore module components. With high deck strength barges for uniform loads up to 4,200 pounds per square foot and access to all Crowley services, we can provide a marine transportation solution or a turnkey operation for your unique and challenging needs.


Up to 130 Feet Wide High Deck Strength Barges
Up to 4,200 Pounds Per Square Foot Uniform Loads
Sea Fastening Design
Engineering Load Plans
Launch Barge
High Bollard Pull Tugs

Offshore Energy Exploration & Development Projects
Module Transportation
Top Sides
Offshore Drilling Platforms
Offshore Installation Support
Logistics Experience in Remote Locations Including Arctic, Russia & West Africa


Yah saw the specs on the rig even if it went on a barge it would have stuck way over the sides, pulse that’s still a long tow being it would not fit through the canal unless you cut it apart.