How Efficient Is Your Hybrid?

How Efficient Is Your Hybrid?

L

l

d R

l t

C

Legal and Regulatory Consequences

of Deploying Undersea

Telecommunications Cables with

Telecommunications Cables with

Additional Energy- or Scientific

Research-Related Functions

Kent Bressie

13 April 2011

Overview

• Technological advances and commercial imperatives have made undersea cables with a combination of telecommunications transport, energy or power-transmission, and/or scientific research functions

Overview

The Benefits of Hybrids…

• Infrastructure supporting multiple uses or crossing industry sector boundaries allows a cable owner to:

– Take advantage of technological advances with fiber-optics;

Recover infrastructure and maintenance – Recover infrastructure and maintenance

costs across a broader user base;

– Diversify revenue streams; and/or

– Secure revenue from a dedicated customer.

Overview

…and the Risks

• Nevertheless, in a world where regulatory regimes and treaty protections assume that undersea cables will be dedicated to a

particular use or function—and afford different rights and protections to those

individual activities—are hybrid cables really so efficient?

a Telecommunications cables

a. Telecommunications cables

connecting energy-related facilities

• These cables provide commercial

telecommunications services to or among energy-related facilities, such as offshore oil and gas

platforms.

• In some cases, they are owned and operated by energy companies; in others, they are owned and energy companies; in others, they are owned and operated by telecommunications providers for the benefit of a single customer.

Telecom Cables Connecting Energy Facilities

CAT Telecom-Chevron

Energy Facilities

• In 2010, CAT Telecom and Chevron Thailand announced a fiber-optic project

connecting Chevron’s connecting Chevron’s

offshore central processing platforms in the Gulf of

Thailand to onshore operations centers; this

system is due to enter service in 2012 or 2013.

• CAT will build and operate this system for Chevron under a services contract.

Telecom Cables Connecting Energy Facilities

CAT Telecom-Chevron (cont’d)

Energy Facilities

• The system is designed to improve real-time communications and monitoring.

• The system will initially link 8 platforms and displace • The system will initially link 8 platforms and displace

existing terrestrial microwave and satellite facilities. • The project is supported by Thailand’s Ministry of

Communications and Information Technology Communications and Information Technology,

BP Gulf

Telecom Cables Connecting Energy Facilities • In 2006, BP announced th t it h d t t d ith

BP Gulf

Energy Facilities

that it had contracted with Tyco Telecom (now TE SubCom) to build the BP Gulf of Mexico Fiber

Gulf of Mexico Fiber

Optic Project, connecting drilling platforms off the southern coast of the southern coast of the United States.

• The FCC licensed the system in 2007; BP’s application noted that it might sell capacity on the system to third parties though it appears

Source: BP plc

might sell capacity on the system to third parties, though it appears that BP has not done so.

b Energy-Related Sensing and

b. Energy-Related Sensing and

Monitoring

• With these kinds of projects, fiber-optics are

deployed to measure temperature pressure flow deployed to measure temperature, pressure, flow rate, liquid and gas phase fractions, strain, and seismic waves.

They often consist of segments inserted into wells • They often consist of segments inserted into wells,

as well as segments connecting the well to a platform or a platform to the shore.

Energy-Related Sensing & Monitoring

Petrobras Jubarte

Monitoring • In 2010, Petrobras

announced that it had signed an agreement with

Petro-Geo Services to install a Geo Services to install a fiber-optic seismic

monitoring system in the

Jubarte field off the Brazilian coast.

• Petrobras will use the

system to map the flow of fluids in deep-water

reservoirs and improve

connectivity with Petrobras’s onshore geophysics team

Source: Petrobras

c. Cables with power transmission and

p

telecommunications transport

capabilities

p

• Increasingly, undersea cables contain both power-transmission and telecommunications transport transmission and telecommunications transport capabilities.

• Usually, the fiber optics are used in connection with the power transmission related functions of the cable the power-transmission-related functions of the cable or for the energy-company owner’s own corporate communications needs.

• In some cases telecoms regulators are unaware that • In some cases, telecoms regulators are unaware that

power transmission cables are used to provide telecommunications transport services for third parties

Dual Power-Telecom Cables

Basslink Interconnector

• Basslink is a 290 km-long dual g power-telecoms cable

connecting the Australian states of Victoria and Tasmania, with a high-voltage direct current power transmission and unrepeatered fiber-optics.

• Basslink commenced power transmission services in 2005 transmission services in 2005 and telecom services in 2009. • Initially, Basslink obtained only

state and Commonwealth environmental permits and energy-related licenses.

S

Dual Power-Telecom Cables

Basslink Interconnector (cont’d)

• Although installed as dark fiber, the telecoms

capabilities were developed later as the business case evolved.

• Basslink did not obtain a cable permit from the Australian Communications and Media Authority (“ACMA”) (in this case, for location outside a cable protection zone)

protection zone).

• In 2008, Basslink Telecoms obtained a telecom carrier license and later lit 40 Gbps of capacity

i E i DWDM i t using Ericsson DWDM equipment.

d. Cabled Observatories

• These scientific research cables provide data and electrical power connections for scientific research instruments located in the deep sea.

• To date, most of these observatories have not extended beyond the EEZ or continental not extended beyond the EEZ or continental shelf of a single country.

MARS Observatory

Cabled

Observatories

MARS Observatory

• MARS includes a 52-km cableMARS includes a 52 km cable connecting to a "science node" on the deep seafloor in Monterey Bay, California.

• Science experiments can be attached to the science node using underwater data/power using underwater data/power connectors and extension cords up to four kilometers long.

e Commercial Telecommunications

e. Commercial Telecommunications

Cables with Scientific Sensors

• An increased focus on climate-change

research, recent natural disasters, and the need for more cost effective means of

monitoring oceans have generated

significant interest in combining undersea telecommunications cables with remote sensing capabilities.

Telecom Cables with Scientific Sensors

Multipurpose Repeater Proposal

Sensors

• In a proposal advanced by Yuzhu You,

Bruce Howe, and others (with the support of the International Telecommunications

Union), commercial undersea cables would be deployed with sensors in repeaters,

aiding in climate change research and tsunami warnings.

• The concept is meant to replace the expensive and inefficient Deep-Ocean Assessment and Reporting of Tsunamis (“DART”) system.

Multipurpose Repeater Proposal

Telecom Cables with Scientific Sensors

p

p

p

p

(cont’d)

• Repeaters would Sensors Repeaters would contain sensors to measure changes in pressure/wave amplitude, temperature, and salinity. • Commercial operators would recover their costs by charging for data/access.

2. Compartmentalized Legal

2. Compartmentalized Legal

Compartmentalized Licensing

Legal &

Regulatory

Regimes

Compartmentalized Licensing

Regimes

Regimes

• Many coastal states have regulatory regimes that issue separate licenses for

telecommunications, energy, and scientific research facilities, even where

environmental reviews are integrated. Some projects fit more clearly into a single

category, while others do not.

• Moreover, telecommunications and energy regulators have bureaucratic incentives to protect their regulatory turf.

UK: licensing regime depends on

Legal & Regulatory

Regimes

UK: licensing regime depends on

operator’s status and location

Regimes

• All cable projects require consent from the

Department for Environment, Food and Rural Affairs (“Defra”).

• A telecommunications “code operator” requires authority from Ofcom pursuant to the Electronic Communications Code.

– In most cases, Defra’s jurisdiction extends only to the edge of the UK territorial sea, pursuant to the Telecommunications Act 1984.

– But if the cable extends beyond the UK territorial sea and passes within 500 meters of an offshore installation, then Defra has jurisdiction over the

Legal & Regulatory Regimes

UK (cont’d)

Regimes

• A non “code operator” requires authority pursuant to the Coast Protection Act 1949.

D f ’ j i di ti t d t th d f th UK – Defra’s jurisdiction extends to the edge of the UK

continental shelf.

– Certain activities are subject to licensing under the F d d E i t l P t ti A t l

Food and Environmental Protection Act, unless specifically authorized under the Petroleum Act 1988.

Regulatory Presumptions Based

Legal & Regulatory Regimes

on Commercial or Non-Commercial

Nature

Regimes

• Some coastal states also have regulatory regimes that favor research cables while disfavoring or prohibiting commercial telecommunications cables in the same geographic region.

• The U.S. National Oceanic and AtmosphericThe U.S. National Oceanic and Atmospheric Administration provides the best example of this phenomenon, with differential licensing and fees for commercial vs. non-commercial cables transitting national marine

Compartmentalized Treaty Rights

Legal &

Regulatory

Regimes

Compartmentalized Treaty Rights

and Protections

Regimes

• The freedoms accorded to submarine cable installation and maintenance activities by articles 58 (EEZ), 79 (continental shelf) and 87 (high seas) of UNCLOS are absolute. • Energy-related facilities, however, are

subject to much greater regulation on the subject to much greater regulation on the continental shelf. And marine scientific research—which is not even defined in

UNCLOS—is subject to significant national regulation.

UNCLOS Allows Significant

Legal &

Regulatory Regimes

Regulation of Energy-Related

Activities in the EEZ

Regimes

• A coastal state has “sovereign rights for purposes of

exploring, exploiting, and conserving natural resources” and “with regard to other activities for the economic

l it ti d l ti f th h th

exploitation and exploration of the zone, such as the production of energy from the water, currents and winds.” (art. 56(1)(a))

• A coastal state has the “A coastal state has the exclusive right to construct andexclusive right to construct and to authorize and regulate the construction, operation and use of” artificial islands, energy-related installations and structures described in art. 56, installations with

th i d i t ll ti d

other economic purposes, and installations and

structures which may interfere with a coastal state’s exercise of its rights in the EEZ. (art. 60(1))

UNCLOS Allows Significant

Legal &

Regulatory Regimes

Regulation of Energy-Related

Activities on the Continental Shelf

Regimes

• A coastal state has the right to approve the “delineation of the course for the laying of such pipelines on the continental shelf.” (art. 79(3))

• As with the EEZ, a coastal state has the

exclusive right to construct and to authorize and regulate the construction, operation and use of” artificial islands, energy-related

UNCLOS Allows Significant

Legal &

Regulatory Regimes

Regulation of (Ill-Defined) Marine

Scientific Research

Regimes

• A coastal state has the right to regulate,

authorize, and conduct marine scientific research

(“MSR”) within its EEZ and on its continental h lf ( t 246(1))

shelf. (art. 246(1))

• UNCLOS, of course, does not define MSR.

– Disagreement among drafters led to muddled compromise.

– Coastal states have asserted that they have the right to define the scope of MSR.

• Consent required in “normal circumstances” for

peaceful MSR conducted to increase scientific knowledge. (art. 249(3))

Legal & Regulatory Regimes

UNCLOS and MSR (cont’d)

Regimes

• UNCLOS art. 249(5) allows the coastal state to withhold consent in “exceptional

circumstances,” including:

– Direct significance for the exploration and exploitation of natural resources, whether living or non-living,

“Drilling” into the continental shelf the – Drilling into the continental shelf, the

use of explosives, or the introduction of harmful substances into the marine

environment, and

– Construction, operation or use of artificial islands, installations and structures

3 Consequences

3. Consequences

Regulatory Confusion Duplication

Consequences

Regulatory Confusion, Duplication,

and Costs

• As hybrid cables do not fit neatly into existing regulatory regimes, they may be subject to delays as regulators determine how to treat such facilities—thereby

imposing delays and further expense on operators.

• Hybrid cables may also be subject to expensive, duplicative licensing and permitting requirements, thereby

undermining the efficiency benefits of a hybrid.

Consequences

Jurisdictional Creep

• Coastal states already make increasingly aggressive jurisdictional claims over

undersea cable-related activities in their EEZs and on their continental shelves, ranging from permitting requirements to assessments of customs duties, taxes, and royalty payments to preferences for local vessel owners.

• Hybrid cables make even more attractive targets where certain characteristics could expose them to particular jurisdictional assertions.

Possible Erosion of Protections for

Consequences

Pure Telecommunications

Transport Facilities?

• Undersea telecommunications cables have historically enjoyed a unique status under historically enjoyed a unique status under international law, afforded rights and

protections accruing to no other activity on the sea bed.

• Attempts to exercise these rights and

protections for more varied activities could, however, lead to their erosion.

4. Project-Specific Strategies

and Possible Institutional

Solutions

Strategies and Solutions

No Easy Solutions

• Underlying problems with regulatory and treaty regimes.

• Nevertheless cable operators should focus

• Nevertheless, cable operators should focus on the hybrid scenarios presenting the

greatest risks:

Telecoms projects touching on the – Telecoms projects touching on the

energy industries.

– Commercial cables with scientific sensors.

Strategies and Solutions

Markets May Address Some Issues

• Basslink scenario likely to remain rare, given technical and commercial challenges for a dual power transmission-telecoms cable covering a

l di t

longer distance.

• The market for scientific sensors on commercial cables remains uncertain, as it is not clear if the sensors or sensing data are commercially viable sensors or sensing data are commercially viable or if governments or scientific organizations

would fund them.

• For energy-centric projectsFor energy centric projects, energy companiesenergy companies may care a lot less about legal or regulatory consequences, given expansive regulation of energy exploration and exploitation.

Short Term: Distinguish

Telecommunications from Power

Strategies and

Solutions

Telecommunications from Power

Transmission, Science, and

Sensing

g

• So long as existing regulatory and treaty regimes remain in place cable operators regimes remain in place, cable operators should work within them to distinguish primary cable functions.

Many projects have individual components

• Many projects have individual components

that may require differential treatment or regulation (e.g., oil platform vs. well sensor vs platform connectivity)

vs. platform connectivity).

• Ultimately, cable operators should seek to

Long-Term: Treaty-Based

Strategies and Solutions

Long-Term: Treaty-Based

Solutions?

• UNCLOS already insufficient in its protection of undersea cables.

• Given global concerns regarding climate • Given global concerns regarding climate

change and preparedness for natural disasters such as earthquakes and

tsunamis, the use of scientific sensors on tsunamis, the use of scientific sensors on commercial cables is appropriately the subject of an international agreement. • Prospects for success highly uncertain • Prospects for success highly uncertain,

given challenges of any treaty negotiation and unresolved issues with status of MSR.

Kent Bressie

WILTSHIRE & GRANNIS LLP

1200 18th Street, N.W., Suite 1200, , Washington, D.C. 20036-2516 U.S.A. +1 202 730 1337 office +1 202 460 1337 mobile +1 202 730 1301 fax [email protected] www.wiltshiregrannis.com © 2011 Kent Bressie