Biden Approves Second Jones Act Waiver to Address Fuel Shortage

Citgo's Lake Charles refinery. The refiner is reported to be one of the two waiver recipients (Citgo file image)

Published May 14, 2021 3:45 PM by The Maritime Executive

The Department of Homeland Security has approved temporary Jones Act waivers for two Gulf Coast refiners, allowing them to ship cargoes of fuel aboard foreign-flag vessels to areas on the East Coast that have been affected by the Colonial Pipeline shutdown. 

The recipients of the waivers have been identified as Valero and Citgo. According to Reuters, Citgo will use the waiver to transport 200,000 barrels of petroleum products from Louisiana to New Jersey. Valero is said to be making a comparable shipment. 

Last week, a ransomware attack on midstream company Colonial Pipeline resulted in a shutdown for the East Coast's most important fuel supply line. The Colonial Pipeline transports about half of the gas, diesel and jet fuel used along the eastern seaboard. While the attack was isolated to the company's IT system, it took down its operating system computers as well in order to ensure that the spread was limited. 

Widespread gasoline shortages have been reported in the Southeast, where the supply chain is most dependent on the Colonial Pipeline. Shipping is one of the primary alternatives to the pipeline, but this requires sourcing immediately-available tonnage. In the U.S., coastwise transport is legally limited to vessels that are built, flagged, owned and crewed in the United States. When such vessels are not available when there is a pressing need, the Department of Homeland Security has the authority to temporarily waive this requirement for national defense purposes. 

In an address on Thursday, President Joe Biden said that limited Jones Act waivers had been issued "as part of an effort to use every possible means to accelerage fuel deliveries."

"We’ll grant additional waivers if necessary. These steps are temporary, but they will remain in place until full service is fully restored," Biden said.  "This is a whole-of-government response to get more fuel more quickly to where it is needed and to limit the pain being felt by American customers."

Waiver response

The Jones Act shipping industry has responded to the administration's waiver decisions with cautious approval, while warning against fuel traders or refiners attempting to "game the system."

According to the American Maritime Officers (AMO), industry stakeholders have been regularly consulted and kept updated as the U.S. Maritime Administration evaluates the availability of Jones Act-qualified tanker tonnage. The administration's decision to use targeted, company-specific waivers - not a blanket waiver - has been particularly welcomed by maritime unions and by the leading Jones Act industry association, the American Maritime Partnership.

Cybersecurity improvements 

The attack has highlighted the vulnerability of key U.S. infrastructure to cyberattacks by state actors and sophisticated criminals. It follows just months after the discovery of the sprawling SolarWinds intrusion, a highly sophisticated cyber-espionage attack on major U.S. government agencies and industry targets. 

On Wednesday, President Joe Biden issued an executive order that requires the Commerce Department to issue tough cybersecurity standards for all software vendors used by the federal government. "It is the policy of my administration that the prevention, detection, assessment, and remediation of cyber incidents is a top priority and essential to national and economic security," wrote Biden. "The federal government must lead by example."

The requirement will likely have a welcome "cascading effect" in the software industry, improving the security of services used by the private sector as well, predicted former cybersecurity official Christopher Krebs in an interview with CBS.