Friday, May 17, 2019
Bloomberg reports that President Donald Trump is seriously considering waiving the requirement that only U.S.-flagged vessels can transport liquefied natural gas (LNG) from American ports to Puerto Rico and the Northeast. The news service cites unnamed people familiar with the deliberations.
The issue is said to have been debated during an Oval Office meeting in late April following requests from Puerto Rico and pressure from energy industry leaders to ease the nearly 100-year-old cabotage statute. The act requires goods shipped between U.S. ports to be transported on vessels built, owned, and crewed by U.S. citizens or permanent residents. It is also known as the Merchant Marine Act of 1920. Although top administration officials are reported to be divided on the issue, Trump is leaning in favor of some kind of waiver, said two anonymous sources.
The move, which would be opposed by U.S. shipbuilding interests and their allies on Capitol Hill, has been promoted as essential to lower the cost of energy in Puerto Rico and ease the flow of American natural gas to the U.S. Northeast. But even within the Trump administration, there are fierce defenders of the Jones Act. The law was originally designed to protect the domestic shipping industry and the country’s maritime might. Supporters argue that it is as essential today to ensure ships are made in the U.S. Efforts to weaken or waive Jones Act requirements threaten the U.S. shipbuilding industry and jobs tied to it, they argue.
Puerto Rico is seeking a 10-year waiver to allow LNG to be delivered to the island on foreign-flagged ships. Meanwhile, the energy industry is pressing for changes to facilitate natural gas and petroleum product shipments between U.S. states. Industry leaders argue that Jones Act restrictions undermine American energy dominance by encouraging imports of foreign oil and gas despite abundant supplies inside the U.S. Russian LNG was delivered to Massachusetts last year to help supply consumers in the Northeast U.S., and inland oil refiners argue requirements to use U.S.-flagged vessels boosts the cost of obtaining crude oil, effectively subsidizing foreign competitors.
“The Jones Act is completely contrary to the president’s energy agenda, in large measure because it encourages the importation of energy—diesel from Europe, LNG from Russia—rather than the use of energy made in America and developed and refined by American workers,” said Mike McKenna, an energy strategist. “If you’re in favor of the Jones Act, you’re in favor of damaging consumers and helping very specific interests line their pockets at consumers’ expense.”
Although no large LNG carriers comply with Jones Act requirements today, federal law provides an exemption for foreign tankers built before 1996 to transport LNG to Puerto Rico, as long as they are brought under the U.S. flag. American shipbuilders are also reported to be constructing new LNG bunker barges capable of refueling ships and delivering fuel to other facilities. Further, long-term contracts to supply LNG would spur vessel construction, said Darrell Connor, a lobbyist for the American Maritime Partnership, which defends the Jones Act. “The domestic maritime industry is capable of responding with the vessels needed to meet market demand, including the building of new vessels.”
(SOURCE: The Weekly Propane Newsletter, May 20, 2019)
The issue is said to have been debated during an Oval Office meeting in late April following requests from Puerto Rico and pressure from energy industry leaders to ease the nearly 100-year-old cabotage statute. The act requires goods shipped between U.S. ports to be transported on vessels built, owned, and crewed by U.S. citizens or permanent residents. It is also known as the Merchant Marine Act of 1920. Although top administration officials are reported to be divided on the issue, Trump is leaning in favor of some kind of waiver, said two anonymous sources.The move, which would be opposed by U.S. shipbuilding interests and their allies on Capitol Hill, has been promoted as essential to lower the cost of energy in Puerto Rico and ease the flow of American natural gas to the U.S. Northeast. But even within the Trump administration, there are fierce defenders of the Jones Act. The law was originally designed to protect the domestic shipping industry and the country’s maritime might. Supporters argue that it is as essential today to ensure ships are made in the U.S. Efforts to weaken or waive Jones Act requirements threaten the U.S. shipbuilding industry and jobs tied to it, they argue.
Puerto Rico is seeking a 10-year waiver to allow LNG to be delivered to the island on foreign-flagged ships. Meanwhile, the energy industry is pressing for changes to facilitate natural gas and petroleum product shipments between U.S. states. Industry leaders argue that Jones Act restrictions undermine American energy dominance by encouraging imports of foreign oil and gas despite abundant supplies inside the U.S. Russian LNG was delivered to Massachusetts last year to help supply consumers in the Northeast U.S., and inland oil refiners argue requirements to use U.S.-flagged vessels boosts the cost of obtaining crude oil, effectively subsidizing foreign competitors.
“The Jones Act is completely contrary to the president’s energy agenda, in large measure because it encourages the importation of energy—diesel from Europe, LNG from Russia—rather than the use of energy made in America and developed and refined by American workers,” said Mike McKenna, an energy strategist. “If you’re in favor of the Jones Act, you’re in favor of damaging consumers and helping very specific interests line their pockets at consumers’ expense.”
Although no large LNG carriers comply with Jones Act requirements today, federal law provides an exemption for foreign tankers built before 1996 to transport LNG to Puerto Rico, as long as they are brought under the U.S. flag. American shipbuilders are also reported to be constructing new LNG bunker barges capable of refueling ships and delivering fuel to other facilities. Further, long-term contracts to supply LNG would spur vessel construction, said Darrell Connor, a lobbyist for the American Maritime Partnership, which defends the Jones Act. “The domestic maritime industry is capable of responding with the vessels needed to meet market demand, including the building of new vessels.”
(SOURCE: The Weekly Propane Newsletter, May 20, 2019)
