46 U.S.C. App. 883; 43 U.S.C. 1333(a); Coastwise transportation; Outer continental shelf

HQ 114846 October 26, 1999 VES-3-17-RR:IT:EC 114846 GOB CATEGORY: Carriers George H. Robinson, Jr., Esq. Liskow & Lewis 701 Poydras Street Suite 5000 New Orleans, LA 70139-5099 RE: 46 U.S.C. App. 883; 43 U.S.C. 1333(a); Coastwise transportation; Outer continental shelf Dear Mr. Robinson: This ruling is in response to your letter of October 19, 1999 on behalf of Amoco Production Company. FACTS: You describe the facts as follows: Our client, Amoco Production Company (“Amoco”) is the Minerals Management Service designated operator in numerous blocks in the deepwater Gulf of Mexico on the Outer Continental Shelf in federal waters adjacent to the coast of Louisiana. The plans for drilling and preparing such blocks for long term production are as follows. At each prospective site, there will be no installation or other devices or artificial islands permanently or temporarily attached to the seabed for the purpose of exploring for, developing, or producing resources therefrom. There may be other partially-completed or completed wells in the general vicinity, but the Discoverer Enterprise [also referred to as “the drilling vessel”] will only conduct drilling, completion, unloading and clean-up activities at sites at which no well has been sunk into the seabed prior to commencement. The vessel will not call at any port of the United States or place within the jurisdiction of the customs laws of the United States. After arriving at a prospective drilling site, the drillship will drill and test an exploratory well, leaving a subsurface well-head approximately ten (10) feet tall. The drillship will have an extended well-testing capability, allowing the unit to store up to 120,000 barrels of produced hydrocarbons in tanks in the hull. After completion of one exploratory well, the vessel may move to another point or points on the OCS for the purpose of drilling other exploratory wells, at which points there will be no installation or other devices or artificial islands permanently or temporarily attached to the seabed of the OCS for purposes of exploring for, developing or producing resources therefrom. When the vessel arrives at the initial point on the OCS, it will be transporting only members of its regular complement, those personnel necessary for the routine functioning of the unit, including crew, industrial personnel and general maintenance and support personnel, and only legitimate equipment, stores and supplies for use in its nautical and drilling operations. Discoverer Enterprise is equipped with the capability for “dual-activity” drilling, which allows for drilling tasks associated with a single well to be accomplished in a concurrent rather than a sequential manner, by utilizing two complete drilling systems under a single derrick aboard the rig. To permit dual-activity capability, the MODU will be equipped with two identical drilling systems which will possess a rotary table, complete set of traveling gear, a top drive, draw works, and a motion compensator. All of this equipment will be fixed on the drilling ship upon arrival to a prospective site. It will not be transporting any passengers or any other equipment and materials as merchandise. The same will apply to the vessel when it moves from point to point on the OCS. In the event that supplies or personnel must be mobilized from the United States to the construction site, Amoco will utilize coastwise-qualified U.S. flag vessels. Amoco anticipates that once the drillship’s hull reaches sufficient quantity of crude oil to warrant off-loading, a coastwise-qualified barge will meet the drillship at a point certain to accomplish the task. The material loaded onto the coastwise-qualified vessel will then return to a Gulf Coast area refinery for processing. ISSUE: The application of 46 U.S.C. App. 883 to the proposed activity. LAW AND ANALYSIS: Statutory and Regulatory Framework Generally, the coastwise laws prohibit the transportation of passengers or merchandise between points in the United States embraced within the coastwise laws in any vessel other than a vessel built in, documented under the laws of, and owned by citizens of the United States. A vessel that is built in, documented under the laws of, and owned by citizens of the United States, and which obtains a coastwise endorsement from the U.S. Coast Guard, is referred to as "coastwise-qualified." 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. 46 U.S.C. App. 883, the coastwise merchandise statute often called the “Jones Act”, provides in part that no merchandise shall be transported 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, documented under the laws of, and owned by citizens of the United States. 19 CFR 4.80b(a) provides, in pertinent part: A coastwise transportation of merchandise takes place, within the meaning of the coastwise laws, when merchandise laden at a point embraced within the coastwise laws (“coastwise point”) is unladen at another coastwise point, regardless of the origin or ultimate destination of the merchandise. 19 U.S.C. 1401(c) defines “merchandise,” in pertinent part, as follows: “goods, wares, and chattels of every description...” The coastwise law applicable to the carriage of passengers is found in 46 U.S.C. App. 289 and provides that: No foreign vessel shall transport passengers between ports or places in the United States, either directly or by way of a foreign port, under a penalty of $200 for each passenger so transported and landed. Section 4.50(b), Customs Regulations (19 CFR 4.50(b)) states as follows: A passenger within the meaning of this part is any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business. Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended (43 U.S.C. 1333(a); "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...to the same extent as if the outer Continental Shelf were an area of exclusive Federal jurisdiction within a state." Under the foregoing provision, we have ruled that the coastwise laws and other Customs and navigation laws are extended to mobile oil drilling rigs during the period they are secured to or submerged onto the seabed of the outer Continental Shelf ("OCS"). We have applied that principle to drilling platforms, artificial islands, and similar structures, as well as to devices attached to the seabed of the outer Continental Shelf for the purpose of resource exploration operations. Application of the Coastwise Laws and Regulations to the Stated Facts The following constitutes our analysis of the coastwise laws within the context of the stated FACTS. You ask “whether the use of a foreign flagged vessel to drill, complete, unload and clean-up such exploratory wells at a prospective site, load production into the hull, and proceed to the next exploratory well site would be a violation of 46 U.S.C. 883?” Once the drilling vessel attaches to the outer continental shelf, it (i.e. the drilling vessel) becomes a coastwise point. The stated FACTS do not describe the transportation of merchandise or passengers by a second vessel from a coastwise point to the drilling vessel once it has attached to the outer continental shelf (a second coastwise point). Thus, there is no prohibited coastwise transportation in that regard. The FACTS indicate that the drilling vessel can “store up to 120,000 barrels of produced hydrocarbons in tanks in the hull.” The produced hydrocarbons would be “merchandise” subject to the prohibition of 46 U.S.C. App. 883. See the definition of merchandise in 19 U.S.C. 1401(a), above. If that merchandise is taken aboard the drilling vessel after it has attached to the outer continental shelf, that would constitute the lading or merchandise at a coastwise point. Under such a circumstance, 46 U.S.C. App. 883 would prohibit the unlading of that merchandise at a second coastwise point. A second coastwise point would be a different location on the outer continental shelf to which the drilling vessel is subsequently attached. Thus, 46 U.S.C. App. 883 would prohibit the drilling vessel from taking on the merchandise while attached to the outer continental shelf at one point and subsequently discharging the merchandise to another vessel while attached to a second point on the outer continental shelf. Similarly, 46 U.S.C. App. 883 would prohibit the drilling vessel from taking on the merchandise while attached to the outer continental shelf at one point and subsequently discharging the merchandise to another vessel at a point within the territorial waters of the United States. However, the drilling vessel is not prohibited by 46 U.S.C. App. 883 from taking on the merchandise while attached to the outer continental shelf and discharging the merchandise to another vessel at a point on the high seas (a point where the drilling vessel is not attached to the outer continental shelf). HOLDING: 46 U.S.C. App. 883 would apply as described above. The FACTS do not describe a violation of 46 U.S.C. App. 883 provided that the produced hydrocarbons taken on the drilling vessel while it is attached to the outer continental shelf are discharged onto the second vessel at a point on the high seas. Sincerely, Jerry Laderberg Chief, Entry Procedures and Carriers Branch