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Story Last modified at 9:29 a.m. on Thursday, June 23, 2011

Government, trade groups cobble Alaska economy
Editorial

ALASKA JOURNAL OF COMMERCE

Three American organizations that aim to promote American jobs and improve American economies have stymied efforts to do just that. And Alaska is taking the brunt of it all.

For months, we have been reporting on a veritable race under way between two companies rushing to be the first to get jack-up rigs to Alaska's Cook Inlet. Now, almost simultaneously, news emerged that both rigs hit bureaucratic brick walls in their efforts.

The race has been diverted, at least for now, to overseas markets. And the jobs and money that could have been rolling into Southcentral Alaska this year will instead fall into a holding pattern.

Escopeta Oil and Gas was moving a rig from the Gulf of Mexico to Cook Inlet. It was nearly there when it had to turn around and head first to Prince Rupert and then Vancouver, Canada, because the president of the company hadn't received a written confirmation from the U.S. Department of Homeland Security on what kind of fines it would face — fines that Escopeta was fully aware would be levied and remains more than willing to pay as a cost of doing business.

Escopeta was moving the rig on a China-based vessel, one of the few vessels in the world that was available that was large enough to move such a big piece of equipment around the tip of South America and through the rough waters in the region. No U.S. ships exist that could do this job.

The Jones Act bans foreign-born vessels from transporting cargo from one U.S. port to another. Homeland Security had given Escopeta the OK to bring the rig to the Inlet in 2006 on a similar vessel, but earlier delays on financing halted that one.

The U.S. government wasn't the only one making waves. A Florida-based organization Ship Strong for America lambasted Escopeta for disregarding the Jones Act and "rolling the dice with the Department of Homeland Security..."

"If this violation is allowed to pass without repercussions, what's to stop the next guy," wrote director Tony Munoz. "American harbors will be filled with foreign vessels. Is that something we want?"

So Alaska — the Kenai Peninsula specifically — lost out on about a month's work to Canada. The good thing about that delay, however, is that it might be long enough time that the vessel's voyage be considered "American" enough under the Jones Act, since the move from Canada to Alaska would constitute a separate trip, effectively qualifying the vessel under U.S. law. The law is rather murky on the subject.

Meanwhile, negotiations between the state's Alaska Industrial Development and Export Authority and Buccaneer Energy, an Australian company, are taking longer than expected, for reasons that have to do money, we're told. Drilling will be put off for at least a year, assuming the deal doesn't fall through completely.

The state authority plans to invest $30 million in a partnership with the Australian company to buy the rig from TransOcean Ltd, a global driller based in Switzerland. Financing will be arranged with Overseas Chinese Banking Corp. Ltd., based in Singapore. The state, through AIDEA, would put up about a third of the money needed for the deal.

The delay has an advantage, said AIDEA's director, Ted Leonard said: "it will allow us more time to negotiate with a shipyard in Singapore on modifications needed to the rig and to do the engineering on the modifications."

We confess to being little puzzled why AIDEA, a state entity, is making this investment in the first place, seemingly in competition with private company Escopeta.

As two private-sector companies struggle to bring their rigs to Alaska — and in effect, put Alaskans work, and add millions of dollars to the Alaska economy — three bureaucratic entities continue their work to spike the ultimate race.

With support like this from the nation's "economic proponents," who needs liberal environmental groups to bollix economic development? Government and trade groups are doing a great job cobbling the racers.



This article published in The Alaska Star on Thursday, June 23, 2011.