Jones Act waivers stirs controversy

There were foreboding whispers when President Barack Obama announced in June that about 30 million barrels of oil in the country’s Strategic Petroleum Reserve would be sold to oil companies.

One week after the announcement, Reuters reported that officials with the Department of Energy hosted a teleconference with a dozen oil companies, and one of the main topics of discussion was how the companies would ship their prospective oil purchases between U.S. seaports.

Department officials informed the companies that they could apply for waivers to the Jones Act, enacted in 1920 to support the domestic maritime industry by mandating U.S. vessels and crews handle shipments between two U.S. ports, and if an American vessel couldn’t be found, the waivers would be granted.

Two months later, Customs and Border Protection, an agency within the Department of Homeland Security, had issued 46 waivers to the Jones Act for the shipment of oil within the nation’s borders, inflaming maritime organizations and politicians, regardless of political standing.

“We are also deeply troubled by the Administration’s lack of transparency in conducting these Jones Act waivers,” read a bipartisan letter authored by U.S. Sen. Mary Landrieu (D-La.) urging President Obama to use domestic vessels for the shipments. “At the very least, the American shipping industry is owed an explanation as to why their vessels are being declared unavailable.”

A spokesman with the White House said the decision to grant the waivers was made because “the U.S. fleet had only small barges available, and the buyers bid on the basis of larger, more efficient tankers,” according to the New York Times.

Don Briggs, president of the Louisiana Oil and Gas Association, said the decision was “disappointing,” and “purely political.” American ships could have been used, Briggs said, if more time would have been allotted.

“Here we are taking oil from our own Strategic Petroleum Reserve and allowing outside flagships to come in and pick it up and deliver within our borders,” Briggs said. “That’s outrageous.

“There is absolutely no need to even pull from the SPR. It has not impacted anything. All that really has benefited is these foreign vessels and countries that are in here delivering our oil to ourselves.”

The belief that the SPR would impact the international oil market was an illegitimate reason to declare the emergency, Briggs said. The only urgency, then, would come from oil companies who made the purchase and knew that the use of foreign vessels would be a cheaper venture.

“Our vessels, in our country, may cost more,” Briggs said. “I don’t disagree with that, because we have insurance. Other flagships don’t have to comply to the environmental rules and guidelines and insurance requirements we have.”

Although the SPR “episode” has all but concluded, preserving the integrity of the Jones Act against future waiver issuances remains a top priority for those who believe it benefits national and environmental security while providing jobs and an incentive to investment in shipbuilding.

“I view this as a temporary situation, one that I think the administration has had the opportunity to learn from, and I would hope that it would never be repeated again,” said Jim Adams, president and CEO of a Louisiana-based mariner trade association and a “promoter” of the Jones Act. “I think there is good reason to believe that if the SPR needed to be opened again, there would be further consideration to put as much product on U.S. hulls as possible.”

Adams oversees Offshore Marine Service Association and approaches the Jones Act in the same vein as a Constitutionalist arguing for due process. Instead of outright opposition, however, it is a managed and calculated measure of the situation to determine if it truly is an emergency and U.S. vessels cannot be used.

“In a legitimate emergency, we don’t view any Jones Act requirements as impediments,” Adams said. “It can be waived, but there is a specific process in regulation that needs to be followed. … When they’re waived in a manner that seems to be haphazard, I think it is our responsibility to question that, and that’s what we did.”

The uproar over the Obama administration granting waivers for domestic transit of oil reserves was well founded, Adams said, because it was “an unnecessary, an unproductive waiver of the Jones Act.”

“We have a domestic industry, and we need to support that industry,” Adams said of the future of the Act, formerly included in the Merchant Marine Act of 1920. “When you make the advantages of the Jones Act clear, and there are national security advantages, there is employment and investment advantages and my mind, security and environmental protection advantages.

“When you put those together and you peel away the misinformation around the Jones Act, I think the Jones Act is safe and secure and is going to be a strong player into the future.”