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Jones Act critics say law stands in the way of 'energy dominance'

After a tanker likely filled with Russian liquefied natural gas landed in Boston to help with winter heating and power generation needs, a group of energy and maritime experts said it is time to repeal or amend a nearly century-old law that has prevented LNG produced in Louisiana from landing in New England.

The Jones Act, which requires ships sent between U.S. ports to be built, owned and crewed by U.S. citizens and permanent residents, was signed into law in 1920 with the goal of bolstering America's fleet in case of war. Critics say that national security purpose no longer rings true now that the law is having an adverse effect on U.S. energy consumers and producers.

"It's an absurd system in which American consumers can't benefit from that U.S. energy boom," said James Coleman, a professor at Southern Methodist University's Dedman School of Law who specializes in oil and gas. Coleman spoke Feb. 23 at a panel discussion on the Jones Act hosted by the Heritage Foundation, a conservative think tank based in Washington, D.C.

There are no U.S.-flagged LNG tankers, which are multimillion dollar vessels capable of keeping super-cooled natural gas in its liquid form. And because the U.S. imports less LNG after a big increase in the nation's shale gas production in the last decade, LNG companies are not likely to invest in Jones Act-compliant vessels for the infrequent times when parts of the U.S. have to turn to LNG to supplement pipeline gas, according to Coleman.

The U.S. is predicted to become a net energy exporter in 2022, according to the U.S. Energy Information Administration, spurred by domestic production and a wave of LNG export capacity entering service over the next few years. But while American shale gas makes its way to markets in Europe, Africa and Asia, the U.S. East Coast and Puerto Rico still rely on LNG imports from overseas.

President Donald Trump has repeatedly touted U.S. LNG exports as a way to achieve "energy dominance" while cutting the U.S. trade deficit, but he has not taken a position on the Jones Act. Coleman said the fact that the president has not yet come out in support of the law could open the door for those who want to change or repeal the act. The Jones Act could also fall under Trump's "America first" motto, he added.

"I don't think anybody really knows what the administration wants to do ultimately with the Jones Act," Coleman said. "It's one of those areas where there might be, at a rhetorical level, some tension between an 'America first' approach and an 'energy dominance' approach."

Former President Barack Obama and Trump's opponent in the presidential race, Hillary Clinton, have come out in support of the Jones Act. Those who favor keeping the law in place say encouraging the use of U.S.-built and U.S.-operated ships creates jobs while strengthening America's naval fleet. Federal Energy Regulatory Commission members Robert Powelson, a Republican, and Cheryl LaFleur, a Democrat, have recently emphasized the need to amend the law so U.S. LNG can make it to New England, where gas pipeline capacity is limited.

Rob Quartel, a former member of the U.S. Federal Maritime Commission, said one reason the law still stands is because its supporters, many of whom are in the domestic shipbuilding business, have poured money into campaigns to keep on their side politicians who would otherwise be agnostic on the Jones Act.

"It's money, and I do think it's ignorance," he said. "And this national security [argument] resonates, even if it's completely false."

The oil and gas industry has not seriously opposed the law. Quartel said he thinks that is because the big energy exporters have more burdensome policy issues to worry about than one that ultimately has little impact on their overall business.

"It's a smaller pot, and the benefits go to a smaller [number] of people," he said. "[But] it's a 100-year old law. It's a great time to jump in and do something serious."