Americans need federal policy-makers to repeal the Jones Act now more than ever.
NRPLUS MEMBER ARTICLE I n a rare moment of energy clarity, the Biden administration ruled out a ban on natural-gas exports this winter, which would have resulted in less supply in global energy markets to meet growing demand, subsequently inflating prices back home. This is welcome news, but more can and should be done to reduce prices for consumers. Repealing the Jones Act would be a great place to start.
The Merchant Marine Act of 1920, also known as the Jones Act, requires any goods being shipped between two U.S. ports to be carried on an American vessel manned by a majority-American crew. For over a century now, this law has hurt U.S. competitiveness in the modern global economy while making domestic goods and energy more expensive for Americans.
Even as the U.S. has become the global leader in oil-and-gas production, residents of the Northeast and East Coast still depend on foreign energy because of the Jones Act. Analysts estimate that it costs three times more to ship oil from Texas refineries to the East Coast than it does to ship oil from Canada. Shifting oil supply has significant economic implications, with one study finding that Jones Act requirements cost the U.S. petroleum industry $298 million a year, after adjusting for inflation.
Liquefied natural gas faces similar Jones Act–related challenges. In regions such as New England, where pipelines are not readily available, it is cheaper to import natural gas from Norway or Trinidad and Tobago than Texas. Likewise, Puerto Rico is unable to import any liquefied natural gas from the U.S. mainland because there are no liquefied-gas carriers that meet Jones Act requirements.
Beyond inducing higher energy costs, the Jones Act causes delays that become a matter of life and death. After Hurricane Maria struck Puerto Rico in 2017, American aid faced challenges in reaching the island until President Trump granted a ten-day Jones Act waiver, which allowed several foreign-flagged ships to deliver critical supplies from the U.S. mainland.
More recently, after Hurricane Fiona devastated the island, a BP tanker with 300,000 barrels of diesel fuel remained idle off the coast because it was not legally allowed to unload. The Biden administration eventually granted a temporary waiver of its own, allowing the ship to deliver the energy necessary to power hospitals, homes, and generators.
Renewable-energy development has also been hindered by Jones Act red tape. During the construction of the Coastal Virginia Offshore Wind O&M in Virginia Beach, for example, Dominion Power had to operate out of Halifax, Canada because no Jones Act–compliant ships were available. As a result, turbine blades were ferried back and forth from Canada to Va., dramatically increasing the cost and time to complete the project. As the Washington Post reported, eventually these hurdles prompted Dominion to pay $500 million to build a Jones Act-compliant vessel in Brownsville, Texas, which won’t be ready until 2024.
And the Jones Act has failed to support the one industry that it was intended to protect: U.S. shipping. Indeed, the average age of commercial U.S. vessels is now nearly three times that of the rest of the world, and in the past four years, 25 of America’s largest 110 shipyards have closed. Why? As of 2010, Jones Act–compliant ships were 2.7 times more expensive to operate than their foreign competitors. Artificially inflated, these high shipping costs have held the industry back and kneecapped its ability to innovate.
In other words, the Jones Act is a self-inflicted wound holding America’s energy sector back. With winter on its way, and higher energy prices close behind, Americans need federal policy-makers to repeal the Jones Act now more than ever. Indeed, after months of increased drilling, OPEC now plans to cut production, straining energy markets that are already in short supply. Moreover, this decision comes at a time when gas prices remain uncomfortably high, and experts are forecasting home heating costs in America to be 28 percent more expensive this winter than they were last year.
Biden made a good call on natural-gas exports, but it’s just a stopgap measure. To provide lasting relief to consumers and reduce economic hurdles for our nation’s energy suppliers, federal policy-makers should repeal the Jones Act.
Correction: A previous version of this article misstated the effects of the 2017 Jones Act waiver after Hurricane Maria. Materials did reach the island before the waiver, but at higher cost and with fewer vessels. And several ships, not just one, made deliveries under the waiver.