Another domestic energy crisis, another waiver of the Jones Act. –
In response to the ransomware attack on the Colonial Pipeline, which delivers about 45 percent of the fuel for the Eastern Seaboard, President Joe Biden’s administration said that it would allow two exemptions to the 101-year-old act, which restricts waterborne commerce between U.S. ports to ships that are built, crewed and owned by Americans. Citgo Petroleum Corp. and Valero Energy Corp. now have permission to use foreign vessels to transport oil products between the Gulf Coast and the East Coast
Hurricanes forced previous presidents to suspend the law to ensure deliveries of food, fuel and other goods. This time, Biden should face reality and bury it under the waves.
As with most protectionist measures, the Jones Act harms the very people it purports to help. Because oceangoing Jones Act-compliant ships are more expensive, and there aren’t that many of them, the law leads to higher prices for goods, more congested roadways and pipelines, and additional pollution from greater reliance on carbon-intensive transportation.
Its market-bending distortions could scarcely be exaggerated. As a direct result of the law, refineries on both coasts can find it cheaper to import foreign oil than to use domestic sources. Refineries in the Gulf Coast choose to send their products to Latin America instead of the East Coast. The U.S. may be a natural gas powerhouse, but it has no Jones Act-compliant liquefied natural gas carriers, which would cost two to three times as much as equivalent ships from South Korea. So Puerto Rico and Hawaii source their LNG from overseas, northeast ports look to Trinidad and Tobago, and U.S. natural gas goes abroad.
The act is even undermining the Biden administration’s vaunted green-energy plans. Offshore wind projects need Jones Act-compliant turbine-installation vessels. Right now, the U.S. has one — under construction, that is, and due to launch in 2023 at a cost of $500 million. Hitting the administration’s goal of 30 gigawatts of offshore wind-energy production by 2030 will require more vessels, which the law will only make more expensive.
It would be one thing if the Jones Act met its stated goal of sustaining a robust merchant fleet. But the number of Jones Act-eligible U.S. vessels in 2019 was 99, versus 193 in 2000. From 1960 to 2014, even as U.S. output more than quadrupled, the tonnage of domestic contiguous coastal shipping dropped by 44 percent. America’s few remaining commercial shipyards are expensive and superannuated: Indeed, some companies that shamelessly defend their Jones Act monopolies send their ships to China for repairs, which is cheaper even with the 50 percent tariff that they pay the U.S. government for the privilege.
The Jones Act survives because it supports the narrow interests of a handful of shipping companies and maritime unions, which pump out a reliable stream of campaign cash to the Congressional Shipbuilding Caucus. Never mind the costs to all Americans — especially those in Alaska, Hawaii and Puerto Rico, who depend heavily on maritime commerce.
There are better ways to build up coastal commerce and the maritime industry, from investing in neglected port infrastructure and public shipyards to changing the tax treatment of U.S.-flagged ships. Yet the Biden administration seems committed to preserving the Jones Act, whatever the consequences. Here’s a question for the White House to ponder: If this law is so successful and so vital, why does it so often need to be waived in cases of emergency?
