Offshore operations within state territorial waters and on the Outer Continental Shelf (OCS) are subject to complex and comingled state, federal, and maritime legal issues. The regulatory agency oversight of offshore operations is dependent on the location, status, and nature of offshore facilities and their operations.
JURISDICTIONAL AUTHORITY
As exploration for energy moved offshore, the Submerged Lands Act of 1953 allowed states to exercise sovereignty within three nautical miles of their shoreline. By proclamation, President Truman asserted jurisdiction over the continental shelf, which was codified in 1958 under the Outer Continental Shelf Lands Act (OCSLA). In 1983, the 200-nautical-mile exclusive economic zone for national resources was established. Given international territorial treaties and disputes, Congress extended the OCS in 2023 beyond 200 nautical miles in seven geographic areas, including the Arctic and other coastlines, to conserve and regulate living and nonliving resources. Although the United States extended territorial jurisdiction beyond its economic zone, it has not adopted the United Nations Convention on the Law of the Sea addressing OCS operations. Jurisdiction is important because it establishes not only authority to regulate but also the applicable laws.
STATE, FEDERAL, AND MARITIME LAW
Maritime law applies to vessels, maritime commerce, and maritime personnel. However, what a “vessel” is and who a “seaman” is in the offshore energy context is not readily apparent. Although 1 USC 3 describes everything that floats as a vessel, floating platforms such as spars, tension-leg platforms (TLPs), and floating production units that are fixed and anchored to the seabed for extended periods are not considered vessels engaged in maritime commerce and thus subject to OCSLA for determining rights and remedies. OCSLA applies federal law, which may be supplemented by the law of the adjacent state when inconsistent. Maritime law applies to lift boats, jack-up rigs, and various offshore service vessels engaged in maritime commerce. In the offshore context, not everything that floats is a vessel and not every offshore worker on a vessel is a seaman.
The applicable law for offshore operations is important because land-based workers engaged in the exploration and production of energy who are injured on either a platform, jack-up rig, or mobile offshore drilling unit — and who perform discrete tasks but do not further the navigation of a vessel and owe no allegiance to a vessel — are not seamen for Jones Act remedy purposes. OCSLA provides remedies for these offshore workers under the Longshore & Harbor Workers’ Compensation Act.
Many contracts involving intermodal transportation and offshore services are mixed, involving both maritime and non-maritime activities. Following the US Supreme Court decision in Norfolk Southern Railroad Company v. Kirby, 543 US 14 (2004), and the en banc US Court of Appeals for the Fifth Circuit decision in In re Larry Doiron (5th Cir. 2018), a two-part inquiry has been developed for determining the applicability of maritime law to “mixed contracts”:
Was the contract related to work on navigable waters or maritime commerce?
If so, does the contract provide or do the parties expect that a vessel will play a “substantial” role in “completing the contract”?
The applicable law involving offshore commercial contracts is guided by situs and status. If the focus of a contract involves a vessel, then maritime law generally applies. If not, the law of the adjacent state likely applies as a surrogate federal law under OCSLA. This is important because while maritime law favors contractual indemnities, many states prohibit or limit contractual indemnities. Insurance coverage is also affected, depending on whether facilities are vessels and the work is maritime. A careful analysis of a typical master service contract in light of the particular offshore operations is important. Choice of law provisions may not always be enforceable.
THE PALFINGER EXAMPLE
A recent example of the complexity and effect of situs and status on the applicable law is Earnest v. Palfinger Marine USA (5th Cir. 2024). In Palfinger, the simple question was whether a contract to inspect and repair lifeboats affixed to a TLP located on the OCS was a maritime contract. Factually, after the lifeboats were inspected and repaired by Palfinger Marine on a Shell TLP, a corroded lifting cable failed during a drill, causing a lifeboat to fall from the platform and cause injury and death. Contractual indemnities and choice of law provisions in the master service contract would be void if state law applied and enforceable if maritime law applied. The Fifth Circuit addressed the many complex issues and held that the TLP was not a vessel; that the platform lifeboats were vessels (following Lozman v. City of Riviera); that OCSLA provided federal question jurisdiction; and that, under a Kirby/Doiron analysis, the focus of the repair and maintenance contract involving a lifeboat, whether affixed or not, was maritime even if the lifeboat was not engaged in maritime commerce. This is because a contract to repair a vessel is maritime in nature. The Palfinger decision provides a prime example of the unique nature of offshore operations, where situs and state status are intertwined to determine both jurisdiction and applicable law.
