This post contains spoilers from The Waterfront season 1 episode 3 from this point forward.
The fiery cliffhanger from episode 2 continues as The Waterfront season 1 episode 3 picks up right were we left off, with Peyton being doused in gasoline and a match lighting a fire toward her. The man puts out the fire before it can reach her, but the threat of being burned alive, a threat that's for Cane, scares Peyton to her core. She's mad at Cane, for good reason, but he and Harlan are certain Owen (Sheriff Porter) was behind the attack.
Harlan pays the sheriff a visit, and he plays dumb, but he seems to show his cards when Harlan refuses to complete more runs until he meets Grady. As Peyton ices out Cane, Bree compares notes with Marcus to plot their next move in the case. Let's not forget about the other cliffhanger that was dropped in episode 2: Shawn is actually Harlan's son. He and Belle talk again. She believes him and gives him photos of her mom, Bebe.
Shawn's mother died from Leukemia before he graduated law school. He has a boyfriend back home, and he's deciding whether he wants to tell Harlan and become a member of the Buckley family. Shawn wants to tell him, but Belle asks him to wait to break the news. She's incredibly kind to Shawn, kinder than she is to her own children. While they have a touching moment, Bree sneaks Marcus onto a boat for recon.
Harlan tracks down the men Owen hired to attack Peyton and he forces Cane to beat them with a tire iron. Cane refuses in spite of his dad's persuasion, but Harlan and his own guys still beat them after Cane rushes away. Ironically, Owen delivers a threat to Belle that's a true scare. Bree and Marcus get a scare, too, when they're nearly caught by Reggie sneaking on the boat. It's a close call, but Marcus makes it out unnoticed.

Harlan makes a deadly decision about Owen
Still torn up about what happened and being ignored by Peyton, Cane visits Jenna's shop to talk and share a drink, which seems counterintuitive to solving his problems. Harlan and Belle are also trying to solve their Owen problem, but they can't come to an agreement. Belle wants Harlan to do whatever he says, but Harlan wants to prove he isn't afraid of Owen and reclaim control. Their problems are only beginning.
Behind the bar, Bree and Shawn bond. He fishes for information about whether Harlan's a good father. She gives her dad a mixed review. Shawn thinks that Bree's hitting on him when she calls him handsome, which is awkward knowing what he knows that she doesn't. There are a lot of questionable decisions happening in this episode, like Belle flirt-texting with Wes Benson, and Cane still drinking with Jenna. He calls her a "sweet distraction."
Harlan pulls up to Owen's home. He decides against bringing his gun, instead opting for a bottle of liquor. They share a drink in the garage as Owen's fixing up a car. While Belle has sex with Wes Benson at his hotel (and immediately regrets it), Bree finds out that Marcus hit a dead end and will be sent back home. He's spiraling and wanting to relapse, but she distracts him with sex. He needs a break in the case soon or he's gone.
Cane returns home from his day out, and Peyton isn't happy with how he's been acting and that he's clearly keeping something from her. He appeases her with a promise to be and do better. Even though Harlan tried to smooth things over with Owen, their conversation goes south. Owen pulls a gun on Harlan, which results in an altercation. To save his life, Harlan impales Owen's throat with a screwdriver. See... bad to worse!
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