DRILLBITS
Monthly eNewsletter from the IADC

New CBP Rules Align with IADC’s Jones Act Letter

When the 116th Congress passed the National Defense Authorization Act back in December 2020, the Members of the House and Senate had no idea that a Washington bureaucrat would over-interpret a small amendment in the Outer Continental Shelf Lands Act (OCSLA) to laden a regional economic engine with operational uncertainty, undue process, and unnecessary cost increases during a worldwide economic downturn.

But that’s exactly what happened when the Custom & Border Protection (CBP) issued a ruling, over-extending the Jones Act’s coastwise transportation laws to unnecessarily regulate the installation of scour materials on marine installations.

For companies with mobile offshore drilling units (MODUs), operating on the U.S. Outer Continental Shelf (OCS) would be subject to increased costs in any pre-construction activities, specifically, any “scour protection materials.”

Coastwise laws govern shipment by water of freight, household goods, & passengers, assuring reliable shipping service and the existence of a maritime capability in times of war or national emergency. With the initial CBP ruling, they asserted that the Jones Act extended to the “pristine seabed,” which had no established precedence in more than 40 years of CBP rulings.

Three weeks ago, IADC submitted a letter to the Customs & Border Protection (CBP) requesting the withdrawal of a recent January 2021 ruling, advocating on behalf of sensible offshore regulations.

The Association cited this inconsistency & over-extension in a letter to Lisa Burley, Chief/Supervisory Attorney-Advisor in the CBP’s Office of Trade, Regulations and Rulings:

As this ruling has come to fruition immediately following the passage of the National
Defense Authorization Act of FY 2021, IADC is only able to presume that CBP has somehow
determined that extension of Jones Act provisions to non-mineral energy projects also
amends the manner in which the Jones Act may be applied when determining a point or
place on the U.S. OCS. However, the plain language of the law does not support such a
supposition.

As the Jones Act restricts the movement of vessels from operating in between two points in inland waterways, the CBP has yet to established where these points exist along the OCS, places they initially cited as “pristine.”

The source of the confusion was the Section 9503 of the NDAA. As amended, OCSLA applies federal laws, such as the Jones Act, to:

(iii) 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

With an additional inclusion of “non-mineral energy resources” for offshore wind generation activities.

The lack of a substantive argument for how such a conclusion was derived, particularly in light of previous determinations, dating back to since 1994,” pointed to an arbitrary and capricious application of coastwise laws.

On 25 March 2021, the Ms. Burley issued a letter of response of the CBP’s previous ruling, withdrawing certain portions of their overreach and clarifying others as within their new purview.