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HQ 116586

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December 29, 2005

VES-10-01-RR:BSTC:CCI 116586 rb

CATEGORY: CARRIER

Thomas F. Fiorito
Sr. Vice President, Exploration and Production Anglo-Suisse Offshore Partners, LLC
1111 Bagby Street, Suite 4800
Houston, TX 77002

RE: Coastwise Trade; Salvage; Outer Continental Shelf; 46 U.S.C. App. 289, 316(d), 883; 43 U.S.C. 1333(a)

Dear Mr. Fiorito:

In your letter of December 19, 2005, you request an expedited ruling, on behalf of Anglo-Suisse Offshore Partners, LLC, concerning the applicability of the coastwise merchandise law, 46 U.S.C. App. 883, and the law for salvaging operations, 46 U.S.C. App. 316(d), in connection with the use of a foreign-flagged diving support vessel to facilitate the decommissioning of five offshore platforms located on the Outer Continental Shelf (OCS) in the Gulf of Mexico. Our ruling follows.

FACTS:

The remains of five offshore drilling platforms are involved in this case; the platforms were situated beyond the three-mile United States (U.S.) territorial sea on the Outer Continental Shelf (OCS) in the Gulf of Mexico. During a recent hurricane, however, the platforms and their attached wells and pipelines were toppled and/or severely damaged and are now lying on the seabed of the Gulf of Mexico, outside U.S. territorial waters on the OCS (although some of the platform piles remain attached to the seabed there). All components of the former drilling platforms have effectively been destroyed and have no current commercial value.

The toppled platforms, if accepted by the State of Louisiana, may be left in place as artificial reefs. A foreign-flagged diving support vessel, along with the crew and divers working from the vessel with the necessary equipment, will be employed to inspect the debris located on the OCS in this regard and to facilitate the plugging and abandonment of the wells and related pipelines lying on the sea floor of the Gulf of Mexico. Also, debris from the toppled platforms and their components, including the piles still attached to the OCS seabed, may be recovered/removed from the ocean floor on the OCS and thereafter laden and transported aboard a non-coastwise-qualified materials barge to a U.S. port.

ISSUES:

Whether the proposed well plugging and abandonment operations may be performed from the diving support vessel without violating the coastwise laws (46 U.S.C. App. 289, 316(d), or 883); and whether debris from the toppled platforms and their components may be recovered/removed from the ocean floor on the OCS and thereafter laden and transported aboard a non-coastwise-qualified materials barge to a U.S. port without violating the coastwise laws (section 316(d) or section 883).

LAW AND ANALYSIS:

Under 46 U.S.C. App. 289 and 883, respectively, passengers and merchandise may not be transported between ports or places in the United States embraced within the coastwise laws in any other vessel than one which is coastwise-qualified (i.e., built in and documented under the laws of the United States and owned by persons who are citizens of the United States); and, under 46 U.S.C. App. 316(d), a foreign vessel, with certain exceptions not here relevant, is prohibited from engaging in salvaging operations in the territorial waters of the United States on the Gulf of Mexico. In pertinent part, the coastwise laws apply to any point in the territorial waters of the United States, defined as the belt, three (3) nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline (T.D. 78-440).

Plugging of Wells; Use of Diving Support Vessel

Initially, it is well settled that the transportation of equipment, supplies and materials by a diving support vessel for use on or from the vessel in effecting services such as inspections of, and/or repairs to, offshore or subsea structures, including pipelines, does not constitute a use of the vessel under section 883, provided such equipment, supplies and materials are necessary for effecting the vessel’s mission, and are usually carried aboard as a matter of course (such articles are not considered “merchandise” in this context under section 883); likewise, the crew of the vessel, including divers and technicians and construction personnel that are carried on board in order to effect the aforementioned services on or from the vessel, are not “passengers” under section 289 (HQ 113838, dated February 25, 1997). And such services would plainly include
the plugging and abandonment of wells, wellheads and pipelines (ibid. (“The services to be performed with respect to wells [and] wellheads... include the...abandonment of wells by cementing them in at the end of production”)).

In addition, the employment of the diving support vessel in connection with the plugging and abandonment of the wells as described herein clearly would not constitute salvaging operations under section 316(d) (see HQ 113838, supra, and the authorities set forth and discussed therein).

Recovery of Wreckage

Under the Outer Continental Shelf Lands Act (OCSLA), as amended, 43 U.S.C. 1333(a), the laws of the United States are extended to the subsoil and seabed of the OCS 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 to the same extent as if the OCS were an area of exclusive Federal jurisdiction within a State. Thus, the laws applicable to the OCS include the customs and navigation laws, as well as the coastwise laws, which encompass sections 289, 883, and 316(d) (see also, e.g., T.D. 54281(1); and Headquarters ruling (HQ) 113838, supra). Notably, when the OCSLA was amended in 1978 with respect to temporary attachment, the legislative history further made 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.

H. Rept. 95-590, reprinted at, 1978 U.S. Code Cong. & Admin. News 1450, at 1534 (emphasis added).

Accordingly, the recovery of any remnants of the toppled platforms and their related components from the OCS seabed located beyond U.S. territorial waters, and of any wreckage or debris related to the destroyed platform piles still clinging to the seabed there, would not implicate sections 316(d) and 883. To this end, specifically, the locations of such debris and wreckage at and around the demolished platform piles, and including the piles themselves still attached to the OCS seabed, can in no way legally be perceived as thereafter being affixed to the seabed for exploration, development or production, as required by the OCSLA; and, hence, these particular locations may no longer be treated under the OCSLA as coastwise points (see HQ 116558 of October 25, 2005; and see HQ 115850, of November 15, 2002, finding that a destroyed drilling rig’s severed leg remnants that were still embedded in the OCS at or near their original locations no longer constituted coastwise points, where the leg remnants themselves were “mangled pieces of debris [that] have no function”).

HOLDINGS:

Under the facts presented in this case, the well plugging and abandonment operations may be performed from the foreign-flagged diving support vessel without violating the coastwise laws (46 U.S.C. App. 289, 316(d), or 883); and remnants (wreckage or debris) from the subject toppled platforms and their components, including the platform piles still clinging to the seabed, may be recovered/removed from locations beyond U.S. territorial waters on the OCS and may thereafter be laden and transported aboard a non-coastwise-qualified materials barge to a U.S. port without violating the coastwise laws (section 883 or section 316(d)).

Sincerely,

Glen E. Vereb

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