Decision No. 93-W-2017

September 22, 2017

APPLICATION by Maersk Supply Service Canada Ltd. (Maersk), pursuant to the Coasting Trade Act, S.C., 1992, c. 31, for a licence.

Case number: 
17-03585

SUMMARY

[1] Under the Coasting Trade Act, the Minister of Public Safety and Emergency Preparedness issues a coasting trade licence authorizing a foreign ship or a non-duty paid ship to conduct a commercial activity in Canadian waters for a maximum period of 12 months once the Canadian Transportation Agency (Agency) has determined that no suitable Canadian ship or non-duty paid ship is available to perform the activity described in the application.

[2] Maersk applied for a licence to use either the “MAERSK WINNER”, the “MAERSK NOMAD” or the “MAERSK ACHIEVER all subsea vessels registered in the Isle of Man, to perform quayside loading, transportation and offshore deployment of equipment, commencing on September 25, 2017 and ending on November 25, 2017.

[3] Horizon Maritime Services Ltd. (Horizon Maritime) filed an objection to the application and offered a Canadian-registered ship, the “HORIZON STAR”, to perform the activity described in the application.

[4] After considering the pleadings, the Agency determines, pursuant to subsection 8(1) of the Coasting Trade Act, that there is a suitable Canadian-registered ship available to perform the activity described in the application.

BACKGROUND

[5] On July 21, 2017, Maersk applied for a coasting trade licence to use either the “MAERSK WINNER”, the “MAERSK NOMAD”, or the “MAERSK ACHIEVER”, depending on their availability, all subsea ships registered in the Isle of Man, to perform quayside loading, transportation to the worksite and offshore deployment of equipment to be installed at precise locations in close proximity to existing subsea oil well at 350 km east of St. John’s, Newfoundland and Labrador. The activity is to commence on September 25, 2017 and end on November 25, 2017.

[6] On that same day, Agency staff issued a Notice of application to the Canadian marine industry. The notice sets out timelines for the filing of an offer, an answer and a reply.

[7] On August 2, 2017, Horizon Maritime filed an objection to the application.

[8] On August 10, 2017, Maersk requested an extension of the timeline to file an answer to the objection, on the basis that Horizon Maritime had not simultaneously copied Maersk on the submission of its offer to the Agency, as required by the Canadian Transportation Agency Guidelines Respecting Coasting Trade Licence Applications (Guidelines).

[9] On August 14, 2017, the Agency advised Maersk that it had until August 17, 2017 to file an answer. Horizon Maritime had until August 21, 2017 to file a reply to Maersk’s answer.

[10] On August 17, 2017, Maersk filed its answer to Horizon Maritime’s objection. On August 21, 2017, Horizon Maritime filed its reply.

ISSUE

[11] Is there a suitable Canadian ship available to perform the activity described in the application?

LEGISLATIVE CONTEXT

[12] The intent of the Coasting Trade Act is to allow foreign ships to be used in Canadian waters when there is no suitable Canadian ship available for a proposed activity. The Agency must determine whether, on a balance of probabilities, there is a suitable Canadian ship available to perform the activity.

[13] In carrying out its responsibilities, the Agency relies on the applicant to provide detailed information about all relevant facts and circumstances that are pertinent to a proposed activity and to the foreign ship to be used. The Agency also relies on Canadian operators to provide detailed information about the offered ship and how a Canadian ship that has been offered would be able to meet the requirements, as described by an applicant. The Agency’s process is set out in the Agency’s Guidelines.

[14] The Guidelines state that where an applicant has submitted evidence to challenge the suitability and/or availability of the offered ship, the evidentiary burden will shift to the offeror to produce evidence to counter or contradict the applicant’s evidence and to prove that it is more likely than not that the Canadian-registered ship is technically and/or commercially suitable and available to perform the activity described in the application. Should the offeror fail to provide evidence to support its position that it is more likely than not that the offered ship is suitable and available to perform the proposed work, the Agency will determine that there is no suitable Canadian ship available to perform the activity.

POSITIONS OF THE PARTIES

Suitability

APPLICATION

[15] In its application, Maersk states that the ship will be used to perform quayside loading, transportation to the worksite and offshore deployment of:

  • Four clump weights
  • XT Christmas trees
  • Flowbases
  • Chain inspections
  • Gas lift jumper install

[16] Maersk states that all the equipment is to be installed at precise locations in close proximity to an existing subsea oil well. It indicates that all the equipment is purpose built to support drilling equipment used by the Terra Nova contracted Mobile Offshore Drilling Unit Transocean Barents or Terra Nova FPSO.

[17] Maersk states that two work class remote operated underwater vehicles (ROV) are to be used simultaneously during the operations for the installation, release and monitoring of the equipment.

OBJECTION BY HORIZON

[18] Horizon Maritime offers the Canadian-registered multi-functional platform supply ship, the “HORIZON STAR”, which it states is capable of performing the scope of work as outlined in the application.

[19] Horizon Maritime states that it is very familiar with the scope of work, as it is the same in scope and similar in specification to that proposed by DOF Subsea Canada in June 2017 (Case No.17 02942). Horizon Maritime indicates that, at that time, it communicated with DOF Subsea Canada, which reviewed the HORIZON STAR’s specifications and found the Canadian ship fully capable of performing the work. The “HORIZON STAR”, however, was not available in Canada to perform the activity based on the original timeline.

ANSWER BY MAERSK

[20] Maersk states that, in an attempt to evaluate the suitability of the “HORIZON STAR” for the proposed activity, requests were made to Horizon Maritime to understand its ship’s technical characteristics, its installed equipment (ROV, crane), and its crew’s experience and ability to perform the activity described in the application. Maersk indicates that despite its request for a timely response (driven by the Agency’s process timeline), at the time of filing its answer, the request was still under review by Horizon Maritime.

[21] Maersk further states that it is a contractor to an Oil and Gas operator in Canada and the ultimate decision maker as allowing the activity to be performed (technically and safely) lies with the field operator.

[22] Maersk maintains that the field operator determined that Horizon Maritime did not prove that it has the capability to perform the activity, which is not simply to transport equipment offshore but also involves a complex installation within a producing oil and gas field, and that therefore, it would not accept a substitution.

[23] Maersk states that it has contacted Horizon Maritime in an attempt to allow the field operator to vet and verify the suitability of the objector’s ship to perform the activity. Maersk submits that Horizon Maritime has not demonstrated such capability, either by itself or with Suncor as the field operator. Further, Maersk states that Horizon Maritime has not provided a method statement on how it intends to perform the activity described in the application.

REPLY BY HORIZON MARITIME

[24] Horizon Maritime reiterates that it has a suitable Canadian-owned, flagged, duty paid ship that is crewed with experienced Canadian seafarers. It adds that Maersk’s answer proffers no facts or evidence that challenge the suitability of the “HORIZON STAR” to perform the scope of work provided in the application.

[25] Horizon Maritime states that the specifications of the “HORIZON STAR” are included in its offer, which specified that its vessel fully meets the requirements laid out in the scope of work provided in the application, as follows:

  • A large clear deck space to transport the intended equipment, equal to, or greater than the ships proposed by Maersk;
  • “Craneage” that has a greater capacity than the heaviest indicated piece of equipment;
  • The latest state of the art redundant dynamic positioning system to ensure that loads can be placed on the seabed safely and precisely; and,
  • Exceeds the requirement for accommodation for marine personnel and project personnel.

[26] Horizon Maritime submits that a second ROV, through TechnipFMC, would be installed on the “HORIZON STAR” prior to commencement of the work.

[27] Horizon Maritime states that the “HORIZON STAR” is a 2017 build and includes the latest technology and equipment to allow for a safer and more efficient operation.

[28] Horizon Maritime states that it has “specifically placed on the “HORIZON STAR” personnel from within its labour pool" that have many years of experience in local and international subsea construction projects and that are familiar and certified to operate and maintain the specific equipment installed on the “HORIZON STAR”.

[29] Horizon Maritime maintains that the “HORIZON STAR” is currently engaged in a subsea project for a major international oil company and has completed “company specific vetting” to attest to the vessel’s capabilities, including those of its crew.

[30] Horizon Maritime submits that Maersk’s statement that the suitability of the “HORIZON STAR” is determined by the field operator that has alleged that it was “not possible to use the substitute company” is entirely unsubstantiated and unsupported by evidence.

AVAILABILITY

[31] In its answer, Maersk draws the Agency’s attention to the timeline of the process, whereby the installation of the equipment is scheduled in the last part of September 2017. Maersk indicates that this timeline is being driven by the weather window allowing for the safe installation of the sub-sea equipment.

[32] In its reply, Horizon Maritime states that the “HORIZON STAR” is currently working on a subsea project for a major oil company within the general area of this intended activity and that this work would be completed prior to the end of August 2017. Therefore, Horizon Maritime submits that the “HORIZON STAR” would be available in the local area in plenty of time for Maersk’s project.

[33] Horizon Maritime maintains that there would be little time required for the mobilization of the “HORIZON STAR” as it will be in the area on the required dates.

ANALYSIS AND FINDINGS

Agency’s Coasting Trade Application Process

[34] The Agency notes that the onus is on the applicant to complete the coasting trade application to provide information in sufficient detail to permit the Canadian industry to assess and respond to the application. These principles are in keeping with the intent of the Coasting Trade Act, which recognizes the interests of Canadian ship operators by permitting foreign ships to temporarily engage in coasting trade activities, in Canadian waters, only if no suitable Canadian ship or non-duty paid ship is available to perform the activity.

[35] While the offering party has the responsibility to establish that its ships are suitable and available to perform the activity, the ultimate burden of proof rests, on a balance of probabilities, with the applicant to demonstrate that the offered ships are not suitable and available.

[36] With respect to the terms “suitable” and “available”, the Coasting Trade Act does not define these terms. The Agency thus uses its discretion in making its determinations based on the merits of each application, particularly as there are no unique criteria or standards to determine whether a Canadian-registered ship is suitable.

[37] With respect to the burden of proof, the Agency has been consistent in its opinion that while the offering party has the responsibility to establish, in response to allegations to the contrary made by the applicant, that its ships are suitable and available to perform the activity, the ultimate burden of proof rests, on a balance of probabilities, with the applicant to demonstrate that the offered ships are not suitable and/or available.

SUITABILITY

[38] The Agency notes that in its application, Maersk submitted information about the proposed activity that would need to be performed by one of the proposed foreign ships, as well as the equipment required on board the ship.

[39] The Agency notes that the proposed activity, as described in the application, is to transport and install subsea equipment in an Eastern Canada oil field, in a safe and efficient manner.

[40] The Agency also notes that, as part of its offer, Horizon Maritime maintains that its ship fully meets the requirements laid out in the scope of work provided in the application, including a second ROV.

[41] The Agency has considered Maersk’s submission and notes that Maersk has raised arguments that were not supported by any evidence to demonstrate that the “HORIZON STAR” is not suitable to transport and install the subsea equipment in a safe and efficient manner.

[42] The Agency also notes that Maersk’s allegations concerning the unsuitability of the “HORIZON STAR” rely mainly on its end-customer’s assessment without providing any specific details. These allegations were not supported by evidence that demonstrates any restriction that would prevent the “HORIZON STAR” from performing the activity. For example, the Agency notes that Maersk maintains, on behalf of the field operator, that Horizon Maritime did not prove that its ship has the capability to perform the activity described in the application, and therefore that it would not accept a substitution. The Agency concurs with Horizon Maritime that Maersk has not filed substantiating evidence supporting that the offered ship cannot perform the complex installation of the equipment within a producing oil and gas field.

[43] As indicated in the Guidelines, where an applicant, bearing the burden of proof, provides sufficient evidence to make its argument persuasive, the evidentiary burden will shift to the offeror. In this case, the Agency is of the opinion that Maersk did not provide any evidence to raise doubt as tothe “HORIZON STAR” not being suitable, and, as such, no evidentiary burden shifted to Horizon Maritime to justify its position with supporting evidence.

[44] In light of the foregoing, the Agency finds that Maersk has not established that the “HORIZON STAR” is not suitable to perform the activity described in the application.

AVAILABILITY

[45] With respect to the availability, the issue is whether there is a Canadian ship available to perform the activity described in the application during the period specified by the applicant.

[46] As Maersk has not challenged the availability of the Canadian ship offered, the Agency finds that the Canadian ship offered by Horizon Maritime is available to perform the proposed activity.

DETERMINATION

[47] In light of the foregoing, the Agency determines, pursuant to subsection 8(1) of the Coasting Trade Act, that there is a suitable Canadian ship available to perform the activity.

[48] The Agency will provide this determination to the Minister of Public Safety and Emergency Preparedness.

Member(s)

P. Paul Fitzgerald
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