VES-3-15-OT:RR:BSTC:CCI H036936 LLB
Thomas Beron, Esquire
Liskow and Lewis
One Shell Square
701 Poydras Street, Suite 5000
New Orleans, Louisiana 70139
Re: 46 U.S.C. § 55102; Dynamically Positioned Vessel; Outer Continental Shelf Lands Act; HQ W116737 (Feb. 16, 2007); HQ 116350 (Jan. 18, 2005); HQ 115134 (Sept. 27, 2000); HQ 110959 (Aug. 1990)
Dear Mr. Beron:
This is in response to your letter dated August, 29, 2008, supplemented by your letter dated November 21, 2008, in which you request a ruling, on behalf of your client [ ], (“the Company”) on the applicability of the Outer Continental Shelf Lands Act and coastwise laws to the project described therein using the foreign-flag vessel [ ] (“the vessel”). Our decision follows.
FACTS
The subject foreign-flag vessel, a drill ship currently under construction, (hereinafter “the vessel”) is being contracted for a project involving drilling
operations in the Gulf of Mexico. The drill ship will arrive from a foreign destination to what the ruling requester describes as an "Integrated Facility" (“IF”) with a cluster of wells that are 300 feet from each other. The IF is located on the seafloor and is a system of production, safety, commingling and transportation equipment that interconnect a series of closely aligned oil and gas wells on the ocean floor. The IF connects each well in the ground with a collection system that consolidates and moves well stream fluids through flowlines to a floating production platform.
Upon arrival at the IF the drill ship will be dynamically positioned with the use of electronically controlled (propeller driven) thrusters. To hold the vessel on station, transponders that are connected to the seabed, communicate with the vessel’s DP system using acoustic beams. Once the vessel has been positioned, it will drill a new well, continue drilling an existing well, perform completion operations on a new or existing well, or perform workover operations. After drilling, completion, and cleanup operations on one well, the driller will temporarily suspend operations and store the recovered liquids in its storage tanks. Subsequently, the driller will disconnect the Blow Out Preventer (BOP) and riser assembly from one well in the IF and either move the vessel to the 500 foot vacant zone to pull the BOP and the riser onto the deck of the vessel, or move the vessel 300 feet to the next well.
Once the drill ship's storage tanks collect enough fluid (including oil, water, and other fluids generated from each cleanup) to be offloaded or when work on all wells within the IF concludes, the driller will offload all the fluids onto a coastwise-qualified barge while remaining within the IF which will transport the fluids to a U.S. point.
Issue
Whether the transportation of fluids, as described in the FACTS section above, by a dynamically-positioned, foreign-flagged drill ship between wells located within the IF, described above, which subsequently, transships the fluids to a coastwise qualified barge for transportation to a coastwise point, violates 46 U.S.C. § 55102.
Law and Analysis
The coastwise laws generally apply to points in the territorial sea, which is defined as the belt, three nautical miles wide, seaward of the territorial sea baseline, and to points located in internal waters, landward of the territorial sea baseline. See 33 C.F.R. § 2.22(a)(2)(2008). The coastwise law pertaining to the transportation of merchandise, 46 U.S.C. § 55102, also known as the "Jones Act", provides in pertinent part, that the transportation of merchandise between points in the United States embraced within the coastwise laws, either directly or via a foreign port, or for any part of the transportation, in any vessel other than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States, i.e. a coastwise-qualified vessel, is prohibited. The CBP Regulations promulgated under the authority of 46 U.S.C. § 55102 provide that a coastwise transportation of merchandise takes place when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point, regardless of origin or ultimate destination. See 19 C.F.R. § 4.80b(a)(2008).
Section 4(a) of the Outer Continental Shelf Lands Act of 1953 (OCSLA), provides, in part, that the laws of the United States are extended to:
... the subsoil and seabed of the outer Continental Shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom, or any installation or other device (other than a ship or a vessel) for the purpose of transporting such resources, to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction within a State.
(emphasis added).
As stated above, the driller proposes to move the drill ship between a cluster of wells located within the IF described above, to drill a new well, continue drilling an existing well, perform completion operations on a new or existing well, or perform workover operations. In the process of doing so, the drill ship will be filled with various fluids which, once filled, the contents of the drill ship will be offloaded to a coastwise-qualified barge at the IF for transportation to a U.S. port. In HQ W116737 (Feb. 16, 2007), a driller proposed an operation similar to the one under consideration except that once the vessel was filled, the driller proposed to move the vessel out to the high seas where it would offload its fluids onto a coastwise-qualified barge for transportation to a U.S. port. CBP held that the foregoing transportation of fluids would be a violation of § 55102. CBP reasoned the fluids were going to be transported from one coastwise point (the OCS drillsite) to another coastwise point (a Gulf Coast refinery), and part of that transportation was going to be accomplished with a foreign-flagged vessel, which would violate the plain meaning of 55102 that prohibits "any part of the transportation" of merchandise between coastwise points to be made by a non-coastwise-qualified vessel.
You assert that the subject operation is distinguishable from the facts in HQ W116737 because the IF is a single coastwise point, thus, any transportation by the drill ship of fluids within the IF between the clusters of wells that will be drilled and serviced, would not be considered transportation between coastwise points under § 55102. In support of your assertion you cite to CBP rulings, HQ 110228 (July 14, 1989) and HQ 111889 (Feb. 11, 1992) in which you state that CBP has "suggested" "that all interconnected oil and gas installations and devices within a field should be considered a single coastwise point." Initially, we note that the issue of whether the locations in these rulings were single coastwise points versus several coastwise points was not at issue in either of the cited rulings. Specifically, although the holding in HQ 110228 refers to an installation site that included a foundation template, piles, a mooring system, and temporarily abandoned wells as "a" coastwise point, what was not contemplated in this ruling was movement of merchandise from one part of that installation site to another part of the installation site, which is at issue in the present case. Further, in HQ 111889, you note that "CBP determined that a location where 'well heads already drilled' would be connected with a 'multi-well template' was a coastwise point." Again, what was not at issue in the foregoing ruling is whether movement by the subject vessel between the well heads would be in violation of § 55102. In fact, any movement by the subject vessel in HQ 111889 was effected by a tow between coastwise points by a coastwise-qualified vessel which is clearly distinguishable from the facts in the present case.
Further, we have held that a well, wellhead, or wellhead casing, whether active, capped, or temporarily abandoned, are coastwise points. See HQ 116350 (Jan. 18, 2005) (holding that exploratory wellhead sunk into the seabed of the OCS for future resource exploration, development or production was a coastwise point); HQ 113113 (June 28, 1994) (temporarily abandoned and capped well). A well's connection to other wells through an IF, no matter the distance apart, should not obviate the fact that it is a coastwise point in and of itself. The IF is a location that has several coastwise points, much like a harbor with several piers and docks. As such, pursuant to 19 C.F.R. § 4.80(a),
transportation between these points would be in violation of 19 U.S.C. § 55102. See HQ H032257 (Aug. 1, 2008) (holding that transportation of merchandise 100 yards from a dry dock hull fabrication area to the dry dock's original mooring location violates 46 U.S.C. § 55102); HQ W115601 (Feb. 28, 2002) (holding that transportation of merchandise a vessel width from a Dock Face to the Dock Face violates 46 U.S.C. § 55102).
Alternatively, you argue that the drill vessel itself is a coastwise point, thus any movement among the wells while it is "attached", as argued below, would not constitute transportation of the fluids. As stated above, the OCSLA, extends the laws of the U.S. to “all artificial islands and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom.” The statute was substantively amended by the Act of September 18, 1978, adding, inter alia, language concerning temporary attachment to the seabed. The legislative history provides, in pertinent part:
...It is thus clear that Federal law is to be applicable to all activities or all devices in contact with the seabed for exploration, development, and production. The committee intends that Federal law is, therefore, to be applicable to activities on drilling rigs, and other watercraft, when they
are connected to the seabed by drillstring, pipes, or other appurtenances, on the OCS for exploration, development, or production purposes.
(emphasis added). H. Rep. No. 95-590; 1978 U.S.C.C.A.N. 1450, 1534.
With regard to the subject vessel, you indicate in your ruling that it will be dynamically positioned over the cluster of wells. We note that with respect to dynamically positioned vessels, this agency has long-held that the lack of any permanent or temporary attachment to the seabed operates to exclude such vessels operating over the OCS from becoming coastwise points pursuant to the OCSLA. HQ 109576 (July 12, 1988); HQ 113838 (Feb. 25, 1997); HQ 115431 (Sept. 4, 2001). Consequently, unless the vessel itself is connected to the seabed, as required by the OCSLA, it will not be considered a coastwise point. See HQ 115134 (Sept. 27, 2000)(stating that floating offshore service facility vessel would not be subject to Customs and navigation laws pursuant to the OCSLA insofar as “onboard vessel propulsion system,” rather than anchoring was used to maintain the vessel’s position next to drilling unit).
Nevertheless, you argue that because the drill vessel is "attached" to the seabed via the transponder array, it is a coastwise point. We disagree. The plain language of the OCSLA's legislative history states that the statute is applicable to drilling rigs and the sort when they "are connected to the seabed by drillstring, pipes, or other appurtenances." See H. Rep. No. 95-590. The foregoing examples contemplate a tangible, physical attachment to the seafloor. The attachment you describe indicates that the drill vessel will be positioned by acoustic signals, e.g. sound waves. As such, we have determined that the acoustic signals are not sufficient to constitute an attachment to the seafloor as contemplated by the OCSLA. Therefore, the drill vessel would not be a coastwise point pursuant to the OCSLA.
To the extent the transponders are attached to the seabed, these devices are not coastwise points. Insofar as they are used to guide the position of the activity on the OCS, e.g. drilling, we consider the transponders more akin to marker buoys, which we have held not to be coastwise points. See Cust. Serv. Dec. 84-96 and HQ 110959 (Aug. 8, 1990); see also, HQ H012082 (Aug. 27, 2007) (holding that suction piles used as a “start-up aid to help guide the pipe lay activity,” were not coastwise points).
Holding
The transportation of fluids as described in the FACTS section above, by a dynamically-positioned, foreign-flagged drill ship between wells located within an IF, which subsequently, transships the fluids to a coastwise qualified barge for transportation to a coastwise point, violates 46 U.S.C. § 55102.
Sincerely,
Glen E. Vereb
Chief
Cargo Security, Carriers, and Immigration Branch