Why does this steam engine fail to run?

The problem is the boiler cannot connect to the offshore pump using the third pipe on the side. It has to be one of the other two.

This is because the third pipe has an output only. This output is meant to produce steam. You can see which direction the pipes output/input if you press Alt, like below:

Boiler Picture 2

The other two pipes are bidirectional and are suppose to input/output water, allowing you to connect multiple boilers to power multiple steam engines, such as this:

Boiler Picture 3

You're putting the water into the steam output. Water goes into one of the two inputs on the side, and the pipe in the middle is used to pipe out steam to engines. Rotate the boiler 90 degrees or so, rearranging the steam engine.