President Trump is considering granting waivers to bypass the Jones Act, a century-old law law regulating domestic maritime commerce, to ease the transport of natural gas to the Northeast and Puerto Rico.
Enacted in 1920, the Jones Act prohibits tankers from hauling goods and commodities, such as oil or natural gas, between U.S. ports unless the ships are American made, owned, and crewed. The Jones Act was designed to protect American maritime interests and shipbuilders, and the industry has repeatedly fended off attempts in Congress to repeal it, with coastal lawmakers stepping in to save it. Jones Act boosters warn waivers would harm American jobs.
But some oil and gas industry officials argue the law is hampering Trump’s “energy dominance agenda” by effectively prohibiting areas of the country that lack energy resources, and suffer from high prices, from receiving U.S.-produced natural gas.
“Jones Act waivers are a commonsense solution to meet the energy needs of Americans in Northeast and Puerto Rico,” said Dan Eberhart, CEO of the oil services firm Canary and a Trump donor. “There’s no good argument for not granting waivers, except for the protests of special interest, which often win out in swampy D.C.”
For Trump, who has not decided what to do, the debate over the Jones Act presents a conflict between his instinct to loosen restrictions on infrastructure and energy development and his promise to support American jobs and traditional U.S. industries.
The problem with the current situation is twofold, according to supporters of waivers for natural gas.
There is a shortage of pipelines from gas-rich Pennsylvania to the Northeast, partly because of opposition to fossil fuel infrastructure in New York. Puerto Rico cannot be reached by pipeline.
A workaround to this problem could be using ships along U.S. coasts to transport liquefied natural gas, or LNG — the chilled, liquid form to which gas must be converted for shipment across seas — to the Northeast and Puerto Rico.
But there are no Jones Act-compliant tankers that can transport liquefied natural gas, so U.S. companies must turn to importing higher-priced LNG from overseas.
In an extreme situation often cited by industry and the Trump administration, the New England area during a cold snap in January 2018 was forced to import natural gas from Russia at the Everett LNG terminal near Boston.
“The Jones Act is economic protectionism, pure and simple,” said Tom Pyle, president of the free-market American Energy Alliance and Trump's former Energy Department transition team leader. “A waiver for LNG vessels would enable the citizens of New England to work around New York Gov. [Andrew] Cuomo’s pipeline embargo with domestic natural gas instead of shipments of Russian LNG.”
The Puerto Rican government has requested the Trump administration grant a 10-year waiver to allow foreign-flagged ships to deliver natural gas to the U.S. territory, in order to help combat high energy prices after Hurricane Maria destroyed the country’s electric grid.
Bipartisan leaders of the House Transportation and Infrastructure Committee have called on the Department of Homeland Security to deny Puerto Rico’s request, because waivers are intended to be given for national security reasons, not economic ones.
Billionaire oil executive Harold Hamm, the chairman of Continental Resources Inc. and a former Trump energy adviser, is among those pushing the White House to grant Jones Act waivers for the Northeast, according to industry sources.
Charlie Riedl, the executive director of the Center for Liquified Natural Gas, is also calling for a waiver.
"Both Puerto Rico and the Northeast need our LNG to help relieve demand for power and heat while they wait for pipelines and infrastructure to be built," Riedl told the Washington Examiner. "It’s absurd to let this situation continue and punishes the Americans who need it the most.”
A waiver, supporters say, would enable the shipment of natural gas from Gulf Coast export facilities to Northeast receiving terminals, such as the Everett LNG terminal near Boston.
Carol Churchill, a spokeswoman for Exelon, the company that runs the Everett terminal, told the Washington Examiner that Exelon currently sources its LNG from Trinidad because of the Jones Act limitations. She did not say whether Exelon supports a Jones Act waiver, but, she added, “we are exploring all options for ensuring our facilities continue to provide New England energy consumers with reliable electric and natural gas service.”
Other oil and gas industry trade groups, meanwhile, are not explicitly endorsing the need for a Jones Act waiver.
Reid Porter, a spokesman for the American Petroleum Institute, said the Trump administration should focus first on streamlining approvals of new pipelines, which the president sought to do with a recent executive order intended to limit states’ power to block projects.
“While API supports the administration’s goal of providing clean, affordable and reliable natural gas to New England, the real issue is the lack of pipeline infrastructure to bring this abundant source of energy to all Americans,” Porter told the Washington Examiner.
Don Santa, the president and CEO of the Interstate Natural Gas Association of America, expressed a similar sentiment, saying that LNG delivered by tanker is only a "short-term solution."
Darrell Conner, a registered lobbyist with the American Maritime Partnership, said U.S. shipping companies have not been incentivized to build and operate a Jones Act-compliant ship for LNG because the market has not demanded it.
"The market has not required the need for such a ship,” Conner said. “Shipping companies haven’t found interest in those tankers, whether for Puerto Rico, the Northeast, or anywhere."
"The administration should put the commercial players in the room, have a conversation and if there is a real market to develop, the market will develop,” Conner added. “You don't need government intervention to create that marketplace."