by R. Lee Vail

Floating oil and gas production facilities, such as the Single Point Anchor Reservoir (“SPAR”), are designed to operate in deep water environments where construction of a traditional fixed platform is not feasible. Unlike a fixed platform, floating production facilities are constructed on a floating hull.  Fields v. Pool Offshore, Inc., 182 F.3d 353 (5th Cir. 1999).  The hull is typically moored to the seabed with wire or synthetic rope attached to suction piles and/or anchors.  The structures are typically capable of limited movement by manipulation of mooring lines.  Although it is typically a complicated, expensive, and time-consuming endeavor, floating production facilities are capable of being detached from the seabed and towed from one location to another. 

The 2005 U.S. Supreme Court decision in Stewart v Dutra Construction Company, 543 U.S. 481 (2005) caused many to question whether floating production facilities (traditionally not considered a vessel) may qualify as a vessel under maritime law.  Due to certain language in the decision, Stewart provided what some consider a more expansive definition of which structures may qualify as a “vessel” for purposes of maritime law.   The Stewart Court analyzed the vessel status of the Super Scoop dredge, a floating platform with a bucket that removes silt from the ocean floor and dumps it onto adjacent scows. The Super Scoop is in some ways similar to a SPAR because it has limited means of self-propulsion, but can navigate short distances by manipulating its anchors and cables.  In Stewart, the Court concluded that the Super Scoop’s practical capability of transporting equipment and people over water rendered it a vessel. 

Despite the apparent similarities between some floating production facilities and the Super Scoop, the overwhelming majority of district courts that have addressed the issue concluded that such facilities do not qualify as a vessel.  See “District Courts Continue to Agree that Production SPARs Are Not Vessels”, Louisiana Law Blog, December 28, 2010.  Those courts typically minimize the structure’s limited ability to move within its mooring spread and instead focus on the significant expense and time required to move the structure to an entirely new location.  It has frequently been held that floating production facilities lack the required “practical capability” of transportation across water due to the magnitude of the task of detaching and moving to new location (unlike, for example, a more mobile semi-submersible drilling unit).

Yet another vessel status case from the U.S. Supreme Court – Lozman v. Riviera Beach, 133 S.Ct. 735 (2013) – has revived the question of whether a floating production facility may qualify as a vessel.  In 2013, the Court in Lozeman considered whether a home constructed on a barge qualifies as a vessel.  The Court noted that, although not determinative, the houseboat had no means of self-propulsion or steering.  Ultimately, the Court held that “a reasonable observer, looking into the home’s physical characteristics and activities, would not consider it to be designed to any practical degree for carrying people or things over water.”  Thus, the floating home at issue in Lozeman lacks vessel status.

The effect of Lozeman on the vessel status of floating oil and gas production facilities was recently addressed by Judge Vance of the U.S. District Court for the Eastern District of Louisiana in Warrior Energy Services Corporation v. ATP TITAN, 2013 WL 1739378 (E.D. La. April 22, 2013).  Specifically, the court addressed whether a “hybrid semi-submersible/spar” – the ATP TITAN – qualified as a vessel.  The plaintiffs, creditors who sought to assert a maritime lien against the ATP TITAN because its owner had filed for bankruptcy protection, pointed to several vessel characteristics in arguing that the TITAN qualifies as a vessel under Lozeman.  In particular, the TITAN, which is a triple-column floating production facility moored in 4000 feet of water, has a “wave-rider” hull, navigational lights, life boats, crew quarters, an onboard generator, and a drinking water plant.  The TITAN is also classified as an “industrial vessel” by the U.S. Coast Guard.  The TITAN, which was moored in 2010, is designed to be moved to different oil and gas fields during its approximately 40 year useful life.  Its owners estimated that it would be moved to a new field in approximately 5 to 8 years (contrary to typical SPARS, which remain in place much longer).  The structure has been described as a “first-of-its-kind floating drilling and production platform that combines the mobility of a semi-submersible with the stability of a three-column spar.”  The TITAN even contains a manual that details procedures for moving the facility in emergency situations.   

Notwithstanding the vessel characteristics of the TITAN (and its unique capacity for movement as compared to traditional SPARS), Judge Vance held that it does not qualify as a vessel under U.S. Fifth Circuit jurisprudence and, further, that Lozeman does not change this result.  In particular, the court noted that “in characterizing drilling rigs as vessels, the Fifth Circuit has emphasized the use of the rigs on many different sites in a short period ….”  Unlike these drilling rigs, which are clearly vessels, the TITAN will remain in its current location for approximately 5 to 8 years.  Further, to move the TITAN will take approximately 15 – 29 weeks after 12 months of preparation and will cost between $70 and $80 million.  Turning to Lozeman, the court found that its “reasonable observer test” does not disturb Fifth Circuit precedent concerning floating platforms.  The court pointed held that “[a] reasonable observer, in considering the infrastructure affixing the ATP TITAN to its present location, its function as a production platform, the way in which it was brought to its current location, and the enormous expense anticipated if it was moved, would likely find that the ATP TITAN is not practically capable of carrying people or things over water.”

The ATP TITAN decision and others like it,[1] if upheld, confirm that floating production facilities will continue to be treated as platforms, not vessels, under the law. 

 

 


[1] See, e.g., Mooney v. W&T Offshore, 2013 WL 828308, at *3-5.