The water-transportation industry has one of the most effective lobbying operations in Washington. Here’s an illustration.
“Regulatory capture” is the term that describes when an administrative agency works for the benefit of the industry it is supposed to regulate. Rarely is there such a clear case of regulatory capture as in U.S. water transportation.
Documents obtained by the Cato Institute through the Freedom of Information Act show the Maritime Administration (MARAD), a Department of Transportation agency, working with the water-transportation industry to try to thwart Jones Act waivers for liquefied natural gas (LNG) shipments. “These documents suggest that, at least in matters concerning the Jones Act, MARAD is properly regarded as a taxpayer‐funded lobbyist for the U.S. maritime industry,” Cato’s Colin Grabow writes.
As the invention and widespread use of fracking increased U.S. natural-gas output, the U.S. began exporting more LNG. The Jones Act doesn’t cause any problems for exports to other countries, but it can cause problems for exports to other states. There are currently zero LNG tankers that comply with the Jones Act, which applies to shipments between U.S. ports.
That causes problems for New England, which lacks sufficient pipeline infrastructure to get natural gas from where it’s produced domestically. There’s nothing inherently wrong with New England purchasing foreign natural gas, but there is something wrong with a U.S. law encouraging New England to do so, and that’s effectively what the Jones Act does. New England was in discussions about waiving the Jones Act so it could purchase U.S. natural gas that was shipped on foreign vessels.
But Grabow writes that MARAD officials worked with water-transportation lobbyists to discourage state officials from pushing too hard for a waiver. Richard Balzano, the deputy administrator of MARAD, warned of a “devastating impact” on the water-transportation industry if the waiver was granted in an email to two of Secretary of Transportation Elaine Chao’s staffers.
How there can be a “devastating impact” on an industry that does not exist remains a mystery. Again, there are currently zero LNG tankers that comply with the Jones Act.
Balzano then emailed a staffer of Massachusetts governor Charlie Baker and said that any waiver would be nearly impossible to achieve because “you would receive Non-concur from MARAD, the WH, DOD, DHS and most likely DOE.” That means Balzano was suggesting that if Massachusetts formally requested a waiver, the entire federal government would be against it. This is contrary to what we know about the positions of President Trump and Secretary of Energy Rick Perry, who were both reportedly open to a waiver at the time, Grabow writes. According to Bloomberg reporting, Larry Kudlow and Harold Hamm, two men whose opinions Trump valued highly, were in favor of a waiver.
Though talk of the “deep state” can turn into conspiracy theorizing, it is true that the bureaucracy can have a will of its own and use official channels to push for certain decisions. The emails suggest there was some of that going on in this case, with MARAD officials apparently going behind the backs of Trump and Perry by telling Massachusetts officials that they would oppose the state’s waiver request if it made one, even though Trump and Perry had not made up their minds at that point.
For the cherry on top of this regulatory-capture sundae, Balzano sent an email to a water-transportation lobbyist asking for his input on a document containing talking points for Chao.
It all worked out well for the water-transportation industry, and the Washington revolving door made another turn. Grabow writes:
MARAD’s efforts to deny Americans access to American energy—not the first time it has done so—were ultimately successful. President Trump, after initially indicating his support for a Jones Act waiver for LNG shipments, ultimately backed off (further details here). Shortly after the waiver’s failure, Secretary of Transportation Elaine Chao—whose department oversaw MARAD—was named an American Maritime Hero by the American Maritime Partnership, a pro‐Jones Act advocacy group. Richard Balzano, meanwhile, left MARAD in December 2020 to become the CEO and Executive Director of the pro‐Jones Act Dredging Contractors of America.
A study from AEI last year found that the water-transportation industry had one of the most effective lobbying operations in Washington. This 2019 episode that Cato uncovered is one example of how that operation works.