Latest news with #MerchantMarineActof1920
Yahoo
05-04-2025
- Business
- Yahoo
Puerto Rico Pays More For American Energy Than Its Neighbor
Crowley Maritime, an American shipping company, recently announced that it raised the U.S. flag on a 31-year-old French-built LNG carrier to comply with the Jones Act—a 100-year-old law—finally allowing for U.S. LNG to be shipped from the U.S. mainland to Puerto Rico through a loophole in the protectionist law. Over 100 years ago, Congress passed the Merchant Marine Act of 1920, better known as the Jones Act, requiring all goods transported between U.S. ports to be carried on ships that are built in the United States, owned by U.S. citizens, crewed by Americans, and flagged under the United States. While support for the Jones Act was built on maintaining a strong U.S. maritime industry and protecting national security, it has failed to live up to these promises. Due to absurdly strict requirements, the Jones Act increases the cost of shipping and ship manufacturing by limiting competition in domestic markets and even inspiring collusion. These inflated costs have historically made it impossible for Puerto Rico to import LNG from the United States. Unlike the mainland, Puerto Rico can't import LNG via trucking or rail and must instead import LNG using Jones Act carriers (which, until recently, didn't exist). There is, however, a minor workaround. The U.S. Coast Guard Authorization Act of 1996 grants coastwise authorization (which is required for transportation of U.S. LNG to Puerto Rico) to foreign ships built before October 19, 1996, so long as they meet the remaining Jones Act requirements. This technical exception allowed Crowley Maritime's recently purchased American Energy, an LNG carrier built in France in 1994, to finally start supplying LNG to Puerto Rico. This technicality offers a raindrop of relief to Puerto Rico, but it does little to address the financial costs of the Jones Act. While Puerto Rico's economy is strangled by inflated costs because of the Jones Act, the Dominican Republic is free from its restrictions, and it imports U.S. LNG at a fraction of the cost. Global markets are much more competitive and have access to modern, efficient LNG carriers. As a result, shipping prices are dramatically cheaper. In the most recent Maritime Administration operating cost report, it was revealed that "U.S.-flag crewing costs were roughly 5.3 times higher than foreign-flag vessels in 2010" and a recent post on X by Sen. Mark Kelly (D–Ariz.) shows that the cost of operating a U.S. flagged vessel is 4.3 times higher than foreign ships—$8.5 million more. The Dominican Republic is able to use more efficient and cheaper foreign LNG carriers that have had transportation prices as low as $3,500 per day in 2025. Even their most recent estimated operating costs of $15,000 per day pale in comparison to the estimated $64,500 per day in operating costs alone for the U.S.-flagged LNG carrier. Puerto Rico is also forced to pay more for the product itself as a result of the Jones Act. A 2020 contract between the Puerto Rico Electric Power Authority (PREPA) and Naturgy (a major energy company in Puerto Rico) includes a provision that states, "If the Jones Act is repealed, or amended such that it does not apply to shipping LNG from the US mainland to Puerto Rico, or a waiver of the Jones Act is granted that permits shipping from the US mainland to Puerto Rico without complying with the Jones Act," would result in an 8 percent unit price reduction. Crowley's new ship is not a long-term solution. The vessel is old, has a smaller than average shipping capacity, and is only Jones Act-approved because of a loophole. This is not innovation; it's desperation and it shows to what extent Puerto Rico has to go to receive relatively cheap American energy. Rather than modernizing our maritime fleet to be competitive on a global scale, we're instead buying unwanted vessels from other countries and celebrating them as innovative solutions. In truth, American Energy is a reminder that the United States citizens in Puerto Rico are being exploited because of a century-old law that has done nothing good for us. The problem is the Jones Act, and the answer is repealing it. It's time to stop patching holes in a sinking ship. The Jones Act is a policy failure that has harmed the people of Puerto Rico for over a century. The truth is that Puerto Rico should not have to rely on legal loopholes to access American goods. Foreign nations should not have cheaper access to American products just because they aren't bound by U.S. laws. Repealing the Jones Act isn't radical—it's necessary, and it provides immediate benefit to the Americans in Puerto Rico. The post Puerto Rico Pays More For American Energy Than Its Neighbor appeared first on
Yahoo
26-03-2025
- Business
- Yahoo
Alaska Poised To Beg for Relief From Crippling Federal Shipping Restrictions
Alaska is a cold state where residents need energy to keep the chill at bay. Fortunately, the state is blessed with natural resources, including abundant oil and natural gas that can help satisfy that need. Unfortunately, as I've written before, a nationalistic, century-old law requires that shipping between American ports be conducted only by U.S.–built and –flagged ships. And there aren't any liquid natural gas tankers that satisfy the requirement. Now Alaska officials are seeking a waiver so they can use their own resources to resolve a growing energy crunch. "Alaska is facing an acute energy shortage," state Sen. Robert Myers (R–Fairbanks) told a State Senate Transportation Committee hearing on his proposed waiver resolution on March 20. "The Alaska Department of Natural Resources has projected shortfalls in the Cook Inlet natural gas supply beginning in the very near future. As such, various utilities are now discussing liquefied natural gas imports to solve the crisis. Alaska is in a unique quandary in which it prides itself on its oil and gas resources yet is unable to utilize its own natural gas from the North Slope gas fields." Myers' statement was meant more for the record than for his fellow lawmakers. Alaskans are well aware of the problem and have been trying to overcome it for years. As it stands, the gas Alaskans use comes not from the abundant supply in the vast North Slope reserves, but from closer to home in the Cook Inlet. Interest in drilling there has waned, though, leaving one company, Hilcorp, as the main producer. Going forward, Hilcorp has warned that it may not be willing or able to supply gas at the same rate as in the past. That should be fine, given all that North Slope gas. But the North Slope is far from Alaska's population centers. A new pipeline was approved in 2020 but is still struggling to find investors willing to foot the estimated $44 billion cost. South Korean companies seem interested (the gas will also be shipped overseas), but that still leaves completion of the project years in the future. But liquid natural gas (LNG) is shipped all over the world. There's no practical reason the gas can't be transported by tanker from the North Slope wells to the users in the state's populated areas. But there's a big legal barrier. Over a century ago, Congress passed the Merchant Marine Act of 1920, better known as the Jones Act, mandating that "No merchandise…shall be transported by water…between points in the United States…in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States." There's more to it, but the nationalistic law, intended to protect American shipping, effectively barred transporting goods between American ports in foreign-built and foreign-flagged vessels. That means North Slope natural gas can be transported to Alaska's populated south only in American tankers. If you can find any. You can't. "LNG carriers have not been built in the United States since before 1980, and no LNG carriers are currently registered under the U.S. flag," the U.S. Government Accountability Office (GAO) reported in 2015. And, while you'd think that demand—not just in isolated states like Alaska and Hawaii, but also territories like Puerto Rico—would drive supply, there's a huge hurdle. "U.S. carriers would cost about two to three times as much as similar carriers built in Korean shipyards and would be more expensive to operate," the GAO added. The GAO created its report at a time when Congress was considering extending the Jones Act to require that exports of natural gas be carried only in U.S.-flagged shipping. The GAO concluded that such a law would "increase the cost of transporting LNG from the United States, decrease the competitiveness of U.S. LNG in the world market, and may, in turn, reduce demand for U.S. LNG." Congress wisely dropped the idea of extending the Jones Act, but Alaskans are still stuck with the original law, waiting for nonexistent domestically-built LNG tankers to show up with loads of North Slope natural gas. If they don't wait but instead try to ignore a law with which it's impossible to comply, they risk millions of dollars in fines, since the federal Department of Justice vigorously enforces the Jones Act. In 2017, the feds fined an energy company $10 million for transporting a drill rig from the Gulf of Mexico to Alaska's Cook Inlet in a foreign-flagged vessel. The company planned to bring more natural gas to the resource-rich but energy-starved state. As Myers pointed out in his statement to the Alaska Senate, the federal government does permit waivers of the Jones Act, from time to time, and has done so for Alaska in the past. In an email to me, he mentioned that Crowley, an American shipping company that has defended the Jones Act, is now transporting LNG to Puerto Rico from the Gulf Coast in a French-built tanker. The company is permitted to do so through a narrow legal carve-out to the Jones Act that allows tankers built overseas before 1996 to be reflagged as American for the purposes of serving Puerto Rico. That won't help Alaska. What will help Alaska in the short term is another waiver. In his proposed resolution, Myers points out that Alaskans face shortfalls in the natural gas supply beginning in 2027; that "in 2024, 39 percent of the electricity generated in the state was from natural gas, and nearly half of households in the state use natural gas to heat their homes"; and that U.S. military bases in the state, such as Joint Base Elmendorf-Richardson, will also suffer from the crunch. The resolution, which is still in committee, continues: BE IT RESOLVED that the Alaska State Legislature respectfully urges the United States Congress to recognize the imminent and acute need to stabilize the state's energy supply and enact a Jones Act waiver that facilitates the urgent transportation of domestic liquefied natural gas between ports in the state until Jones Act-compliant vessels are available. If Congress goes along with the request, Alaska will get a temporary breather. But U.S. states and territories shouldn't have to beg permission of the federal government for companies to be able to transport abundant goods and resources between American ports in the ships that actually exist and are available instead of a fantasy fleet that has failed to materialize after 125 years of bad law. Alaska should get its waiver in the short term. But the whole country should be relieved of the crippling burden that is the Jones Act. The post Alaska Poised To Beg for Relief From Crippling Federal Shipping Restrictions appeared first on
