Exploration spurred by jack-up rig: Escopeta Oil begins, drilling in Cook Inlet.

• Author: Orr, Vanessa
• Position: OIL & GAS

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For almost two decades, Escopeta Oil & Gas has had a presence in Alaska. But it wasn't until Sept. 2, 2011, that the company was able to begin drilling its first well in the state; and getting to that milestone wasn't easy.

Difficulties in the transport of a Spartan 151 jack-up rig--and issues with the U.S. Department of Homeland Security-delayed drilling at the company's Kitchen Lights Unit No. 1 by more than three months. And a whopping $15 million fine for the transportation of that rig may also color the discovery of what the company says could be the largest discovery of natural gas in Cook Inlet for a quarter of a century.

JACK-UP RIG'S DIFFICULT JOURNEY

Transporting the huge rig from the Gulf of Mexico was a challenge. The 150-foot independent leg/cantilever unit needed to be transported from Texas to Alaska in time for the 2011 drilling season, or Escopeta risked losing the Kitchen Lights Unit and most of its leases. In addition to the expense offerrying the mobile drilling unit, which is designed to work especially well in shallow offshore areas such as Cook Inlet, regulations cited in the 1920 Jones Act forbid the transport of goods between U.S. ports by a foreign-flagged vessel.

According to Danny S. Davis, owner of Escopeta Oil & Gas and a working interest owner in the Kitchen Lights Unit, though the company tried to find a U.S. flagged heavy-haul vessel to transport the jack-up rig in 2006 and again in 2011, it was unsuccessful. The company had been granted an open-ended Jones Act waiver from Homeland Security in 2006, which would not have expired until June 7, after the jack-up rig was offloaded in Alaska had it remained on schedule. However, Escopeta was asked to apply for a new waiver, which was turned down in late May, after the jack-up rig was already en route.

"The Obama administration treated us rough on this; we had the Jones Act Waiver provided by the Bush administration, which we thought was in effect," Davis said. "We had to unload the rig in Vancouver and spend two months there, which put us behind for the drilling season. And then we were fined $15 million for breaking the Jones Act, which we never broke."

According to Davis, Homeland Security threatened to confiscate the rig and the boat on which it was traveling, the M.V. Kang Sheng Kou, which had brought it around the tip of South America. The rig was detoured to the coast of British Columbia.

"We had to turn around and drop the rig off in...