HQ 116633 - Coastwise transportation; Salvage; Outer Continental Shelf; 46 U.S.C. App. 316(d), 883; 43 U.S.C. 1333(a) - United States International Trade Commision Rulings

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HQ 116633

March 28, 2006

VES-3-15/10-01-RR:BSTC:CCI 116633 rb

CATEGORY: CARRIER

Stuart S. Dye
Holland & Knight LLP
2099 Pennsylvania Avenue, NW., Suite 100
Washington, D.C. 20006

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

Dear Mr. Dye:

In your letter of March 21, 2006, you request an expedited ruling, on behalf of your client, Newfield Exploration Company, as to the applicability of the coastwise salvage and merchandise statutes, 46 U.S.C. App. 316(d) and 883, respectively, in relation to the use of a foreign-flagged support vessel (TOISA PROTEUS). The vessel would perform inspection, recovery, well abandonment and intervention operations with respect to three offshore drilling platforms on the United States Outer Continental Shelf in the Gulf of Mexico. Our ruling follows.

FACTS:

Due to recent hurricanes, three offshore drilling platforms and their associated wells located beyond United States territorial waters on the Outer Continental Shelf (OCS) in the Gulf of Mexico were overthrown and are lying on the OCS seabed; and the pipelines attached to the platforms were likewise severely damaged. Some of the platform piles may remain attached to the seabed, but they no longer serve any useful purpose. Debris is strewn along the ocean floor surrounding the fallen platforms.

The company owning and/or operating the platforms intends to charter a foreign-flagged diving support vessel in order to remove, or convert to artificial reefs, the toppled platforms and related debris fields on the OCS seabed, and to initiate an abandonment program for the wells that, along with their platforms, were essentially destroyed. The diving support vessel would be outfitted with the necessary equipment, including Remote Operated Vehicles (ROVs), as well as equipment pertaining to platform and pipeline inspection, debris removal, well plugging and abandonment, in order to accomplish these, and any related repair, operations.

Specifically, the vessel would proceed to the three sites where the toppled platforms are located and dismantle them as required for safely securing, plugging and abandoning the associated wells, and for inspecting and properly abandoning the pipelines, that were devastated by the storms; and the vessel would also perform debris, including pipeline, recovery and removal with the use of the diving support vessel at the three sites, with such removal also being undertaken with the use of other, coastwise-qualified barges.

ISSUES:

Whether the anticipated inspection, well plugging, abandonment and any related repair operations may be performed from the foreign-flagged diving support vessel without violating the coastwise salvage and merchandise laws, respectively, 46 U.S.C. App. 316(d) and 883; and whether debris from the toppled platforms and their components, including pipelines, may be recovered/removed from the ocean floor on the OCS and thereafter laden and transported aboard the diving support vessel for unlading at a U.S. port without violating section 316(d) or 883.

LAW AND ANALYSIS:

Under 46 U.S.C. App. 883, 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 in the Gulf of Mexico. In brief, the coastwise laws in part apply to any point in the territorial waters of the United States, defined as the belt three nautical miles wide, adjacent to the coast of the United States and seaward of the territorial sea baseline (T.D. 78-440).

Inspection, Plugging, Abandonment of Wells, Pipelines; Related Repairs

Initially, however, 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) (Headquarters ruling (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 a diving support vessel in connection with the plugging and abandonment of the wells and pipelines 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 Debris

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 encompass the customs and navigation laws, including the coastwise laws, such as sections 316(d) and 883 (see also T.D. 54281(1); and HQ 113838, supra). Notably, when the OCSLA was amended in 1978 concerning 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. No. 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, including pipelines, from the OCS seabed located beyond U.S. territorial waters, and/or of any wreckage or debris regarding 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 three toppled platforms and damaged piles, and including the piles themselves still attached to the OCS seabed, can in no way legally be perceived as hereafter being affixed to the seabed for exploration, development, or production purposes, as required by the OCSLA; and, hence, these particular locations may no longer be treated under the OCSLA as coastwise points (see HQ 116586 of December 29, 2005; HQ 116558 of October 25, 2005; and HQ 115850, of November 12, 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 anticipated inspection, well plugging, abandonment and any related repair operations may be performed from the foreign-flagged diving support vessel without violating the coastwise salvage and merchandise laws, respectively, 46 U.S.C. App. 316(d) and 883; and debris from the toppled platforms and their components, including pipelines, may be recovered/removed from the ocean floor on the OCS and thereafter laden and transported aboard the diving support vessel for unlading at a U.S. port without violating section 316(d) or 883.

Sincerely,

Glen E. Vereb

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