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Furie Operating Alaska, LLC v. U.S. Department of Homeland Security

United States District Court, D. Alaska

March 27, 2014

FURIE OPERATING ALASKA, LLC, Plaintiff,
v.
U.S. DEPARTMENT OF HOMELAND SECURITY; SECRETARY OF HOMELAND SECURITY JANET NAPOLITANO, in her official capacity; U.S. CUSTOMS AND BORDER PROTECTION; and ACTING COMMISSIONER DAVID
v.
AGUILAR, in his official capacity, Defendants.

ORDER AND OPINION [Re: Motion at docket 41]

JOHN W. SEDWICK, District Judge.

I. MOTION PRESENTED

At docket 41, plaintiff Furie Operating Alaska, LLC ("plaintiff" or "Furie") requests that the court dismiss defendants' counterclaim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim. It argues that it did not violate the Jones Act, [1] because its transportation of the Spartan 151 jack-up drilling rig ("Spartan Rig") from the Gulf of Mexico to Cook Inlet, Alaska, was not subject to the Act. Defendant U.S. Department of Homeland Security ("DHS"), Secretary of Homeland Security Janet Napolitano, U.S. Customs and Border Protection ("CBP"), and CBP Acting Commissioner David Aguilar (collectively, the "Government" or "defendants") oppose at docket 54. Plaintiff's reply is at docket 60. Oral argument was heard on February 13, 2014.

II. BACKGROUND

The challenged agency action at issue relates to Furie's 2011 transportation of the Spartan Rig from the Gulf of Mexico in Texas to Vancouver, British Columbia, using a foreign vessel and then from Vancouver to Cook Inlet, Alaska, using a U.S. vessel. CBP asserts that Furie's use of a foreign vessel to transport the Spartan Rig implicates the Jones Act, specifically 46 U.S.C. § 55102(b), which provides that no "merchandise" can be transported by water between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel transporting the merchandise is one that is built in, documented under the laws of, and owned by citizens of the United States. The penalty for violating this U.S.-vessel requirement is forfeiture of the merchandise transported or, alternatively, a sanction in an amount equal to the value of the merchandise or the actual cost of the transportation of the merchandise, whichever is greater.[2]

The U.S.-vessel requirement can be waived by the DHS Secretary, but only if the Secretary "considers it necessary in the interest of national defense...."[3] Furie sought and received a waiver from then-Secretary Michael Chertoff in 2006 when Furie had planned to transport a different rig, the Tellus, to Alaska with the use of a foreign-owned vessel. Furie ended up unable to transport the Tellus in 2006 because of repairs and legal disputes. In the meantime, the Tellus was sold to foreign interests, and Furie could no longer use it for its natural gas exploration in Alaska.

By 2010, Furie had made alternate plans, entering into a contract to use the Spartan Rig instead. It had also located a different vessel to transport the Spartan Rig to Alaska, but again it was a foreign-owned vessel. Furie requested that Secretary Napolitano reconfirm the Jones Act waiver that Secretary Chertoff had granted in 2006. When Furie did not get a response, it informed CBP of its intention to ship the Spartan Rig to Alaska with a foreign vessel based on the former waiver. CBP then informed Furie that the waiver was no longer valid and that it would need a new waiver or face penalties if it transported the Spartan Rig as planned.

Furie sought a new waiver from Secretary Napolitano but was denied in March of 2011. The denial was based on the fact that the Maritime Administration said a U.S.-owned vessel existed that could transport the Spartan Rig from Texas to Alaska. Furie believed that the Maritime Administration was incorrect and anticipated that the waiver would be granted given the corrected information, and thus in March of 2011 Furie had the Spartan Rig depart from Texas using a foreign-owned vessel for transportation. Indeed, on March 22, 2011, the Maritime Administration received new information and concluded that the qualified vessel could not transport the Spartan Rig to Alaska until October, outside Furie's requested time frame.

In May of 2011, Furie asked Secretary Napolitano for a reconsideration of her denial of the waiver. It asked the Secretary for an expedited decision because the Spartan Rig was in route to Alaska and scheduled to arrive at the end of May. On May 20, 2011, Secretary Napolitano denied the request, but indicated that DHS wanted to work with Furie to find an equitable way to allow transportation of the Spartan Rig to Cook Inlet. She indicated that CBP officials would be prepared to meet with Furie representatives to discuss possible mitigation of the Jones Act penalties that were likely to result if the Spartan Rig were offloaded in Alaska. Furie advocated for mitigated penalties, and the rig was diverted to Vancouver, Canada. After further negotiations and communications regarding penalty mitigation, in July of 2011, CBP official Allen Gina indicated in an email that he would recommend that a mitigated penalty of $6.9 million be assessed against Furie.

On July 22, 2011, the Spartan Rig left Vancouver for Alaska, towed by a U.S. vessel. It arrived in Alaska a few weeks later. On October 13, 2011, CBP sent Furie a notice of violation based on the transport of the rig from Texas to Alaska via in part by a non-qualifying vessel. The notice assessed a penalty of $15 million, which it stated to be the full amount of the Spartan Rig's value. On December 12, 2011, Furie submitted a petition for mitigation, which CBP denied in January of 2012. In March of 2012, Furie submitted a supplemental petition for mitigation. CBP denied that request in May of 2012. On June 6, 2012, Furie informed CBP that it would file a request for reconsideration, but the next day CBP informed Furie that the regulations did not authorize a request for reconsideration and that if Furie did not pay the full $15 million by the next day, it would forward the matter for a collection action.

CBP sent a bill for $15 million to Furie on June 16, 2012. The bill indicated that payment was due within ten days. CBP sent another $15 million bill to Furie on June 30, 2012, which again noted that payment was due within ten days. On July 9, 2012, Furie submitted a request for reconsideration to CBP, but the next day CBP sent a letter to Furie stating that it would not consider the request to reconsider its decision. Furie asked that its request for reconsideration be forwarded to the Acting Commissioner of the CBP for his personal review, but that request was also denied. Furie received a third bill for the $15 million penalty on July 19, 2012. It did not pay the bill and filed this lawsuit. Defendants filed a counterclaim at docket 38, requesting that the court enforce the penalty against Furie.

Furie argues that the penalty should not be enforced and that Defendants' counterclaim should be dismissed because the transport of the Spartan Rig from the Gulf of Mexico to the Cook Inlet was not a violation of the Jones Act. Furie argues that the Spartan Rig "was not merchandise whose coastwise movement would be governed by the Jones Act, but instead was a vessel whose movement was governed by the Coastwise Towing Statute, 46 U.S.C. § 55111."[4] The Government argues that the Spartan Rig is considered merchandise within the meaning of the Jones Act, and its movement was governed by the Jones Act and not the Coastwise Towing Statute, because it was hauled on another vessel instead of being towed in the water by another vessel.

III. STANDARD OF ...


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