Report: White House Considering Jones Act Waiver for LNG

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Published Apr 23, 2019 7:15 PM by The Maritime Executive

President Donald Trump and top White House aides are discussing the possibility of issuing a Jones Act waiver for coastwise transportation of LNG, according to Bloomberg. The president is said to favor granting the waiver, which would allow the use of foreign-flag vessels for this purpose. Presidential waivers are typically used for temporary national security purposes, like disaster relief.

Currently, there are no Jones Act-qualified oceangoing LNG carriers, and Puerto Rico and (seasonally) New England purchase LNG from foreign suppliers to meet their energy needs. Puerto Rico's governor has petitioned the federal government for a waiver from the Jones Act for LNG cargoes in order to source the fuel from the U.S. mainland instead.

Others who are said to support a waiver include Harold Hamm, a former Trump adviser and the chairman of oil company Continental Resources, and Larry Kudlow, the president's chief economic advisor. 

The American Maritime Partnership, which represents America's domestic vessel operators, told Bloomberg that "we are confident President Trump, who has championed and supported our American shipyards, mariners and industrial base, would not start us down a path now that would cripple our national security.’’

Jones Act vessels must be built in the United States. The last LNG carriers constructed at an American shipyard were delivered in the 1970s, when 16 of the specialized vessels were built at Newport News, Avondale and General Dynamics Quincy under a federal incentive program. All have since been flagged out, and most have been broken up or converted. 

It is possible that one of the remaining American-built LNG carriers could be returned to the U.S. flag for Jones Act coastwise trade, if it complied with other requirements. At least one of these vessels, the 1977-built LNG Aquarius, remains in active service in Indonesia today, and at least three more - the Gulf Energy, Bering Energy and Ocean Quest - are in long-term layup. 

The market price of a new LNG carrier at a South Korean yard is approximately $180-200 million, and based on research and consultations with American shipbuilders, the Government Accountability Office has estimated that constructing these vessels in America would be two to three times more expensive. There may be a political alternative: through legislation, Congress can allow an existing vessel to bypass U.S. build requirements and serve in the Jones Act trade, with a U.S. crew, a U.S. flag and a U.S. owner. In a recent case, lawmakers provided coastwise certification specifically for the fishing vessel America's Finest: though constructed in Washington, the new trawler did not meet the Coast Guard's standard for "U.S.-built," and she was therefore not a Jones Act ship - until Congress intervened. American mariners are now sailing her out of Dutch Harbor.