As new year dawns, old maritime law still a problem

from Grassroot Institute of Hawaii, December 29, 2023

The outdated Jones Act is blamed for increasing East Coast fuel costs, killing a massive wind farm project and crippling LNG tranport

In 2020, the Grassroot Institute of Hawaii commissioned a study that found the federal maritime law known as the Jones Act costs Hawaii about $1.2 billion a year, or about $1,800 per average Hawaii family.

Jones Act lobbyists quibbled with the numbers, but economic logic alone confirms that you will drive up transportation costs if you restrict shipping competition between U.S. ports to only vessels that are flagged and built in the U.S. and mostly owned and crewed by Americans.

And now we have more evidence that this is true.

A December 2023 paper from two researchers at the National Bureau of Economic Research found that the 104-year-old protectionist law is costing East Coast consumers about $769 million per year by adding 63 cents, 80 cents and 82 cents per barrel, respectively, for gasoline, jet fuel, and diesel.

Meanwhile, the Jones Act was also cited as one reason for the failure of a massive wind farm planned for the New Jersey coast. According to Reason magazine, managers of the project pointed to vessel-availability issues — namely, there are no Jones Act-complaint wind turbine installation vessels in operation.

Past U.S. offshore wind projects have used foreign-flagged turbine installation ships that came with complicated legal loopholes. Meanwhile, the single Jones Act turbine installation vessel that is under construction in a U.S. shipyard ran into delays that bumped its completion date from 2023 to possibly 2025. Combined with inflation and supply chain issues, the wind farm developers threw in the towel.

But the Jones Act doesn’t just make it more expensive to move petroleum or build wind farms. Now, thanks to a recent U.S. Customs and Border Protection ruling, it is even harder to move liquified natural gas.

The Competitive Enterprise Institute reports that foreign-flagged LNG tankers often pick up fuel at several U.S. ports before carrying it abroad. In the process of connecting to pipes from the onshore fuel terminal to collect LNG, tankers let off a small amount of gas into the pipes for safety reasons. Customs decided this “venting” of gas equals a transportation of goods between U.S. ports under the Jones Act and banned the practice.

To read more about how the Jones Act messes with the transport of LNG, go here.