U.S. Customs Revokes Recent Offshore Wind Ruling; Maintains Uncertainty Whether the Jones Act Applies to Wind Farm Installations on the OCS

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On July 15, 2020, the Unites States Customs and Border Protection (“CBP”) issued a ruling (HQ H309672) in connection with the installation of an offshore wind farm located off the coast of Rhode Island and Massachusetts in U.S. territorial waters (the “July 15 Ruling”).  CBP determined that activities to be conducted in connection with the installation of offshore wind turbine generator (“WTG”) units using a non-coastwise-qualified jack up vessel (i.e., not a Jones Act compliant vessel) (the “Installation Vessel”) did not violate the Jones Act (46 U.S.C. § 55102) (or the Passenger Vessel Services Act (46 U.S.C. § 55103)).

Specifically, after an analysis of the particular facts of the project, and in accordance with its notice of modification and revocation of certain ruling letters applying the Jones Act (issued December 19, 2019, effective February 17, 2020) (the “2020 Notice”), CBP determined that (1) other than incidental movement of the Installation Vessel with respect to crane lifts, the Installation Vessel itself was to remain stationary; (2) all transportation of merchandise and passengers between coastwise points and the Installation Vessel and between the 2 construction sites were to be conducted by other coastwise qualified vessels; and (3) certain tools on board the Installation Vessel to be used in connection with the installation of the WTG units were held to be vessel equipment. As such, CBP determined that the Installation Vessel served no transportation function.  Insofar as the July 15 Ruling was in line with previous rulings addressing wind farm installations in U.S. territorial waters and CBP’s 2020 Notice concerning vessel equipment and crane operations, the result was as expected.  However, less than 1 month later, on August 3, 2020, CBP revoked the July 15 Ruling (the “Revocation”), effective immediately (HQ H312773).

The rationale provided by CBP in support of the Revocation was that it was not provided with the exact coordinates of the installation of the WTG units and therefore could not determine whether the activities and operations would be subject to the Outer Continental Lands Act (“OCSLA”).  The Jones Act applies to activities and operations, such as the installation of a wind farm, in U.S. territorial waters located within 3 nautical miles from the U.S. coastline (“JA Territorial Waters”).  Beyond the JA Territorial Waters, the Jones Act applies to activities and operations on the outer continental shelf (“OCS”) by virtue of OCSLA, which extends U.S. law “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 . . .” (343 U.S.C. § 1333(a)(1). We understand that the actual installation of the WTG units was to occur outside of the JA Territorial Waters on the OCS; however, given the specific facts and proposed use of the various vessels at issue in the July 2015 Ruling, the result should have been the same.  If the activity passed muster under an analysis assuming a location within the JA Territorial Waters, it should have passed muster for an activity on the OCS if the Jones Act were implicated.

Nevertheless, CBP has so far avoided directly addressing questions of whether OCSLA extends the Jones Act to any wind farm activities and operations on the OCS.   As such, the question that will need to be ultimately determined by CPB is whether OCSLA extends U.S. laws, including the Jones Act, to installations attached to the seabed for the production of resources from that installation (which would encompass wind resources), as opposed to production of resources from the seabed itself (which would not encompass wind resources). The general assumption has been that the Jones Act does apply to wind farm installations on the OCS, but, CBP’s outright revocation of the July 15 Ruling, instead of a modification or a correction, indicates that CBP is not yet willing to make this ruling.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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