Economy & Business

Waive the Jones Act

A pump jack operates in the Permian Basin oil and natural gas production area near Midland, Texas, August 23, 2018 (Nick Oxford/Reuters)
America should not have to import natural gas.

The United States is producing beaucoup natural gas — you knew that. But do you really know how much? The United States is now the world’s largest natural-gas producer by far, with No. 2, Russia, nowhere close. The growth alone in U.S. natural gas is equal to about twice the annual production of Iran, which is the world’s third-largest producer.

So why are people in New England importing natural gas from Russia?

Welcome to the batty world of trade protectionism.

The United States has on the books and enforces an antediluvian piece of legislation known as the Jones Act, signed into law by that great malefactor of his day, Woodrow Wilson. The Jones Act forbids the transportation of goods, commodities, or people between U.S. seaports unless the vessels used are manufactured, registered, flagged, and owned in the United States — and owned and crewed by U.S. citizens or permanent residents. It’s the reason why a cruise ship picking up passengers in Fort Lauderdale can’t disembark them in Key West — and also the reason why we can’t get natural gas from the Gulf Coast to users in the Northeast and in Puerto Rico.

Thanks to our environmentalist friends, we do not have the pipeline capacity to take U.S-produced natural gas from the places where it is processed to the places where the people are. This has some pretty serious consequences: Con Ed has just announced that it cannot get enough gas to serve new customers in the New York City suburbs, which has meant in effect a moratorium on much new residential construction, which obviously can’t happen without utility connections. One workaround has been to put liquified natural gas (LNG) on containers to take it where it is needed.

And that’s where the Jones Act is a problem. The number of tankers equipped to handle U.S.-made LNG that satisfy all of the conditions of the Jones Act is — here, the math gets pretty easy — zero.

There are Americans producing previously undreamt-of amounts of natural gas and eager to sell it. There are other Americans eager to buy it. And in the middle of all that? Russians. Why? Because economic protectionism is moronic, a consistent failure of a policy.

The Jones Act is a sop to a small slice of U.S. shipbuilders and operators — and a gigantic tax on people and companies who transport things and use electricity. It is one of the bone-dumbest laws on the books, pure corporate welfare from a time before penicillin.

There is a very useful concept in political economy: concentrated benefits vs. dispersed costs. The people who benefit from the corporate welfare — whether it’s the Jones Act, farm subsidies, or the U.S. Export-Import Bank — benefit bigly. Everybody else pays, but it’s spread around thin, so people don’t notice it as much — except when there’s an unusual cold snap in New England and those poor dumb frozen Yankees are having to bring in fuel from Siberia.

Making energy more expensive is bad for everybody — consumers, manufacturers, farmers. (Yes, farmers: It takes a lot of power to run those irrigation pivots.) The Trump administration has made ramping up U.S. energy production a centerpiece of its domestic economic agenda. The president himself has a phobia about trade deficits. That’s the wrong thing to worry about, but if you are worried about it, then it’s worth noting that petroleum imports have been one of the largest contributors to our trade deficits over the years — often the single largest contributor. And we’re hampering the distribution of U.S.-produced natural gas for purely political reasons.

There are some very capable people on Trump’s economic-policy team, and there are also some neo-mercantilist cranks. The president is considering issuing a Jones Act waiver to enable the freer flow of U.S.-produced natural gas. He should do himself and the country a favor and remember that when it comes to energy, more is more.

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