H321240

U.S. Department of Homeland Security Washington, DC 20229 U.S. Customs and Border Protection HQ H321240 March 21, 2022 VES-3-02-OT:RR:BSTC:CCR H321240 DMK CATEGORY: Carriers Michael J. Wray, Esq. Svetlana S. Sumina, Esq. Holman Fenwick Willan USA LLP 5151 San Felipe, Suite 400 Houston, TX 77056 RE: Coastwise Transportation; 46 U.S.C. §§ 55102, 55103; Merchandise; Passengers; Vessel Equipment; Oil Well Stimulation; 19 C.F.R § 4.50(b); 19 C.F.R. § 4.80; 19 C.F.R. § 4.80a; 19 C.F.R. § 4.80b. Dear Mr. Wray and Ms. Sumina; This letter is in response to your September 23, 2021, ruling request submitted on behalf of your client, Schlumberger Technology Corporation (“Schlumberger”), regarding whether certain offshore well stimulation operations, contemplated to be conducted by a non-coastwise qualified vessel on the Outer Continental Shelf (“OCS”), as described below, would violate the coastwise laws. Our decision follows. FACTS The following facts are from your client’s initial ruling request and supporting information dated September 23, 2021, letter with additional responses dated January 26, 2022, and further responses to our questions dated February 17, 2022, and March 2, 2022. Your client has requested U.S. Customs and Border Protection (“CBP”) to determine whether certain operations related to well stimulation on the OCS in the Gulf of Mexico would violate the Jones Act, 46 U.S.C. § 55102, and the Passenger Vessel Services Act, 46 U.S.C. § 55103 (“PVSA”). You state the proposed operation is intended to increase the flow of hydrocarbons from the reservoirs to the well bores of various oil and gas facilities on the OCS. As such, Schlumberger has contracted with the operators of these oil and gas facilities to perform the well stimulation operations. Schlumberger proposes to use two non-coastwise-qualified well stimulation vessels, the [] and the [] (individually, “WSV”) to perform the operation which will commence on or about March 2022, and complete on or about December 2026. The WSV will arrive at Port Fourchon, Louisiana, already equipped with a Well Stimulation Plant (“WSP”), consisting of tanks, pumps, electronics, mixing equipment, and hoses. The WSP will not be removed from the WSV during the project. The WSV will be laden with additional mixing equipment, pumps, tanks, tools, and consumables, a complete list of which you have provided. The WSV will be laden with water, sand, and various liquid chemicals and acids that will be mixed in the WSP to make up the well stimulation fluid (“WSF”) which will be used in this operation. The exact composition of the WSF is tailored to the needs of individual wells, and you have provided a list of the chemicals and acids to be used. The WSV will embark additional well stimulation technicians whose jobs will support the well stimulation operation. You have provided a list of the well stimulation technicians and their duties. After loading, the WSV will travel to a well on the OCS, where it will perform the well stimulation operation. Upon arrival at the well’s location, the WSV will blend together the WSF. The WSV will maintain position while operating, using a dynamic positioning system to make small corrections as needed to remain in position. The WSV will then transfer the well stimulation fluid to the well via one of five methods: via Coflexip hose to a second vessel which will in turn interface with a subsea facility; via Coflexip hose to access wells via a fixed platform’s piping; via Coflexip hose to access wells via a tension leg platform’s piping; via Coflexip hose to access wells via a Floating Production Storage and Offloading unit (“FPSO”); and via Coflexip hose to access wells serviced by a Single Point Anchor Reservoir (“SPAR”) platform. The WSV will not take on any fluids discharged from the wells and will not remove any hydrocarbons or petrochemical products from the well at any time during the well stimulation operations. Any WSF not used on an individual well would be considered waste and would not leave the WSV. The waste WSF would be collected in a waste tank aboard the WSV and transported back to Port Fourchon where it would be unladed from the WSV at the same point as it was laded, collected, and disposed of. Schlumberger intends to lade enough components of the WSF mixture to allow the WSV to move between and perform well stimulation operations on multiple wells before returning to Port Fourchon. There, the WSV will replenish components and depart again to service the remaining wells. At the end of the entire operation, the WSV will return to Port Fourchon where the well stimulation crew will disembark the vessel, and any waste fluid will be unladen and disposed of in the manner stated above. In the event that any individual products are not needed or used in the operation, the excess products will be stored in tanks on board the WSV and will be disposed of at the exact same point as they were loaded in Port Fourchon by a tank cleaning company. ISSUES Whether the contemplated well stimulation operation by the non-coastwise-qualified vessel violates the Jones Act, 46 U.S.C. § 55102? Whether the contemplated transportation of individuals onboard the non-coastwise-qualified vessel violates the Passenger Vessel Services Act, 46 U.S.C. § 55103? LAW AND ANALYSIS Generally, the coastwise laws prohibit the transportation of 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. Such a vessel, after it has obtained a certificate of documentation with a coastwise endorsement from the U.S. Coast Guard, is said to be “coastwise qualified.” Issue One: Whether the Well Stimulation Operation Violates 46 U.S.C. § 55102 First, we consider whether the proposed well stimulation operation violates the Jones Act, 46 U.S.C. § 55102. 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. In addition, Section 4(a) of the Outer Continental Shelf Lands Act of 1953, as amended, provides that the Constitution and laws and civil and political jurisdiction of the United States are extended to: the subsoil and seabed of the outer Continental Shelf all artificial islands on the outer Continental Shelf 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, including non-mineral energy resources; or any such installation or other device (other than a ship or vessel) for the purpose of transporting or transmitting such resources. The coastwise law applicable to the transportation of merchandise, often referred to as “the Jones Act,” is found at 46 U.S.C. § 55102, and provides in pertinent part: Except as otherwise provided in this chapter or chapter 121 of this title, a vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the United States to which the coastwise laws apply, either directly or via a foreign port, unless the vessel— is wholly owned by citizens of the United States for purposes of engaging in the coastwise trade; and has been issued a certificate of documentation with a coastwise endorsement under chapter 121 or is exempt from documentation but would otherwise be eligible for such a certificate and endorsement. Pursuant to 19 U.S.C. § 1401(c), the word “merchandise” is defined as “goods, wares, and chattels of every description, and includes merchandise the importation of which is prohibited, and monetary instruments as defined in section 5312 of Title 31.” For purposes of the Jones Act, merchandise also includes “valueless material.” See 46 U.S.C. § 55102(a)(2). CBP has interp