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No Jones Act waiver for Puerto Rico: Trump administration

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No Jones Act waiver for Puerto Rico: Trump administration

Highlights

The Trump administration will not grant a Jones Act waiver for oil, refined products and other commodities being shipped into Puerto Rico as the island works to rebuild following Hurricane Maria, the Department of Homeland Security said Tuesday.

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In a statement, DHS said that it had consulted with other federal agencies and determined there was "sufficient capacity" of US-flagged vessels to move commodities to Puerto Rico and that a Jones Act waiver was unnecessary.

"The limitation is going to be port capacity to offload and transit, not vessel availability," the agency said. "Most of the humanitarian shipments will be through barges, which make up a significant portion (along with tugs) of the US-flagged cargo fleet."

On Monday, eight House Democrats, led by New York Representative Nydia Velazquez, sent a letter to DHS Secretary Elaine Duke, asking for a one-year Jones Act waiver for Puerto Rico, which is an unincorporated territory of the US.



"The island is now facing an unprecedented uphill battle to rebuild its homes, businesses and communities," the House members wrote. "Temporarily loosening these [Jones Act] requirements -- for the express purpose of disaster recovery -- will allow Puerto Rico to have more access to the oil needed for its power plants, food, medicines, clothing, and building supplies."

The Jones Act requires vessels transporting goods between US ports to be US-flagged, US-built and majority US-owned. Critics of the century-old law argue that it increases shipping costs and hinders supply due to the limited capacity of the US fleet.

On September 8, DHS waived Jones Act requirements for one week for gasoline and other refined products shipments from ports in New York, Pennsylvania, Texas and Louisiana to ports in South Carolina, Georgia, Florida, and Puerto Rico. The waiver was aimed at lessening a potential supply crunch following Hurricanes Harvey and Irma.

DHS later extended that waiver to September 22 and broadened it to include shipments from New Jersey, Delaware, Maryland, New Mexico, Mississippi, Alabama and Arkansas to North Carolina, Virginia, and West Virginia, as well as the seven states and Puerto Rico covered by the original waiver.

The waiver expired on Friday.

Related: Find more content about Trump's administration in our news and analysis feature.

In its statement, DHS said that the waiver request for Puerto Rico was different, since any supply issue there would not be caused by lack of available US-flagged vessels.

"After Hurricanes Harvey and Irma, the rationale for a Jones Act waiver was to facilitate movement of petroleum to numerous places along the east coast, and making up for the loss of very high capacity pipelines," DHS said. "The situation in Puerto Rico is much different."

The US exported 270,000 b/d of crude and refined products to Puerto Rico in May, its highest monthly average since November 2015 when 732,000 b/d were exported, according to the US Energy Information Administration.

An average of 318,000 b/d of US crude and products were shipped to Puerto Rico in 2016, down from 1.4 million b/d in 2015 and its lowest export rate to Puerto Rico in decades.

In June 2016, Representative Gary Palmer, Republican-Alabama, unsuccessfully attempted to attach a Jones Act waiver to a bill to restructure Puerto Rico's then-$70 billion debt, arguing that it would give the island access to lower-priced commodities.

"If exempted, Puerto Rico's power companies would be able to replace foreign-sourced oil with cheaper, cleaner, US-sourced natural gas," Palmer said in a statement.

Palmer's effort failed to make it out of committee.

--Brian Scheid, brian.scheid@spglobal.com

--Edited by Jonathan Dart, jonathan.dart@spglobal.com