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Lawmakers, maritime sector decry notion of Jones Act waivers for US LNG

Highlights

Puerto Rico request pending, discussion of New England

Warnings of harm to investment, nascent shipbuilding

Washington — Maritime industries pushed back against emerging proposals to waive Jones Act restrictions to encourage shipments of US LNG to Puerto Rico or elsewhere in the US, warning during congressional testimony this week that such steps would hurt the sector and national security.

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Calls have surfaced for LNG shipments from the growing US natural gas export sector to New England, where constrained pipeline infrastructure has contributed to tight supplies for power generation during winter peak demand days. And in December, Puerto Rico asked the Trump administration for a 10-year waiver of Jones Act restrictions in order to import LNG on foreign flagged tankers.

The Jones Act requires cargo moved between US ports to be transported on vessels that are US-flagged, US-built and US-crewed. It is strongly defended by the maritime sector and its allies in Congress.

LAWMAKERS' DEFENSE

Recent discussions of waivers to allow movement of US LNG to Puerto Rico or other US locations are "exactly the kind of pernicious and thoughtless proposals that accomplish little but fill the coffers of the oil and gas industry at the expense of developing new markets for our coastwise traders," said House of Representatives Transportation and Infrastructure Committee Chairman Pete DeFazio, Democrat-Oregon, at a hearing Wednesday.

At a Senate Commerce Committee hearing, the chairman and ranking member also voiced strong support of the act.

"The American shipbuilding industrial base is capable of building the vessels necessary to carry the nation's abundance of energy resources -- such as LNG and other fossil fuels -- anywhere in the world," said committee chairman Senator Roger Wicker, Republican-Mississippi, noting he and others had written to President Donald Trump to express support for the Jones Act.

LNG SECTOR SEES COST FACTORS

The US LNG sector maintains that the intermittency of the US domestic market's need for LNG cargoes, combined with the high cost of building US vessels, have made it cost-prohibitive to look toward US-flagged vessels that meet all the Jones Act requirements to move the commodity to markets such as Boston.

Massachusetts state energy officials made a similar case in a report released in late 2018.

The administration of Massachusetts Governor Charlie Baker has discussed working with New England governors to ask the federal government about changing the Jones Act to facilitate shipping of LNG from domestic sources, according to local news reports. And at a trade conference in January, Continental Resources CEO Harold Hamm also argued the US should exempt LNG shipments to the US Northeast from the Jones Act.

Matt Woodruff, president of the American Maritime Partnership, told the Senate commerce panel Wednesday that suggestions of altering the act can rock the certainty needed by the industry.

"When there's talk of Jones Act repeal, long-term waivers and the like, it has a chilling effect on the willingness of people to commit to this industry and invest in assets that last for 30 years or more," he said. There are no precedents for granting a waiver on economic grounds, as sought by Puerto Rico to lower electricity prices, he said in written testimony.

Matthew Paxton of the Shipbuilders Council of America said a long-term waiver would have severe, immediate impacts on a nascent shipbuilding market.

In written testimony, he said the potential for 11 additional domestic LNG facilities to come online in the next five years has resulted in inquiries in US shipyards about building vessels to meet domestic demand.

"Gas customers in the Northeast will not receive any advantage and there are ships in the world today that could serve a coastwise trade to Puerto Rico if there was a market to justify it," he said.

He stressed the act ensures an adequate number of ships and mariners are available to meet national security needs.

-- Maya Weber, maya.weber@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com