The Jones Act and the Crude Export Ban

The Jones Act and the Crude Export Ban

The energy information website E & E Publishing Inc. reports on the linkages between lifting the 1970’s crude petroleum oil export ban and Jones Act relief for the oil industry. The author predicts based upon those whom he interviewed, that as the US Congress comes closer to serous consideration of lifting the crude export ban, the linkages to the Jones Act will become more apparent. Key excerpts: With a growing body of research backing their economic and security arguments, supporters of ending the crude export ban are growing increasingly confident about the legislative prospects of repealing what they call an antiquated policy. But there’s another aspect of the export debate that has gotten less attention — one that requires lawmakers to tread carefully to avoid stirring up long-simmering discontent over a statute that predates even the 1970s-era crude export ban. That law is the Jones Act, which was signed in 1920 by President Woodrow Wilson and requires that commodities move between U.S. ports only on American-built and -owned vessels operated by crews that are three-quarters U.S. citizens. A host of industry sectors have long complained about the costs the Jones Act imposes on intra-country shipments, but the clout of the domestic shipbuilding industry and coastal lawmakers has kept the law intact. With the domestic oil and gas boom, the familiar Jones Act complaints have resurfaced in recent years, exacerbated by the lack of infrastructure for moving energy supplies to market. The Jones Act prompted a mini war of words last year between refiners and shipbuilders, when Charles Drevna, who was then president of the American Fuel & Petrochemical Manufacturers,...
Barreling the Poor

Barreling the Poor

One of the tax increase bills that is still afloat at our legislature concerns the environmental response, energy, and food security tax, which we refer to as the barrel tax. This tax started off as the environmental response tax, imposed at 5 cents a barrel of imported petroleum product as a way to create a fund for environmental cleanup in case of an oil spill in Hawaiian waters. It was hoisted to its present rate of $1.05 in 2009, and the difference was used not only to shore up our general fund, but also to feed various special funds that pay for environmental conservation programs, energy and food security, and related activities. As a result of all of the additional responsibilities placed upon the fund, it was given its new and much longer name. Now, faced with the prospect that Hawaiian Electric Industries will be fueling its power plants with liquefied natural gas (LNG) instead of oil, our legislature is thinking of extending the barrel tax to all forms of fossil fuel including coal and LNG. The bill currently in the legislature would impose tax at the “British thermal unit (BTU) equivalent” for energy generated by these other fossil fuels. So what kind of a tax increase are we talking about? Statistics from the U.S. Energy Information Administration (www.EIA.gov) tell us that Hawaii consumed 42.4 million barrels of oil in energy production in 2012. Multiply that by $1.05 and we are talking about $44.5 million in barrel tax. The same agency tells us that our total energy consumption in that same year was 280 trillion BTUs.House Bill 1471, now...
Does My Lyft Driver Hold the Key to Hawai‘i’s Energy Crisis?

Does My Lyft Driver Hold the Key to Hawai‘i’s Energy Crisis?

I’ve been using Lyft—the disruptive, peer-to-peer rideshare service—for a few weeks now and have been quite amazed with the diverse backgrounds of the drivers. I’ve met musicians, Marines, and perhaps most surprising, a nuclear engineer during my last trip. After going through the usual routine of telling my Lyft driver about my internship at the Grassroot Institute, he asked me if I knew anything about Community Choice Aggregation (CCA), a relatively new type of energy policy. At this point he also mentioned that he was a nuclear engineer and I knew I was in for an interesting ride. As my Lyft driver explained, Community Choice Aggregation is a system adopted at the city or county level that allows citizens to pool buying power when choosing an electric supplier for their jurisdiction. Energy firms make different contract offers, competition is introduced, and communities can choose their supplier of energy based on their preferences: local jobs, renewable energy, cheaper cost, flexible contracts, allowances for personal energy provision. Citizens that prefer not to use CCA can use an opt-out provision that allows them to remain with their original energy supplier. The CCA system allows an alternative to the conventional, government-sanctioned energy monopoly. However, while “CCA’s generally take over the existing utility’s role as provider, [they still rely] on the previous infrastructure and maintenance of the existing investor owned utility (IOU)” (ThinkProgress). Tufts Univeristy, when evaluating potential CCA implementation in Massachusetts in 2013, outlined some key advantages and disadvantages of CCA. Salient among the potential advantages are lower rates, rate stability, and greater ability to utilize renewable energy sources. Among potential disadvantages, administrative...
Trade Talks, the Jones Act, and the International Cost of Protectionism

Trade Talks, the Jones Act, and the International Cost of Protectionism

For years now, the US has been involved in two important trade talks: the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). Both seek to provide new market access, expand existing markets, and provide regulatory transparency and consistency among European and Asia-Pacific markets. Many different industries and policies are being discussed in the TPP and TTIP negotiations. One policy that is often mentioned in such trade talks is the Jones Act, more formally known as the Merchant Marine Act of 1920. While the TPP and TTIP are unlikely to reform the Jones Act due to a strong pro-Jones Act lobby, the these trade talks remind one of the great domestic and international cost of the Jones Act and protectionism in general. The Jones Act is a protectionist policy that restricts foreign competition from domestic coastal shipping and, in doing so, keeps prices artificially high, especially in America’s non-contiguous states and territories. For goods shipped between US ports, the Jones Act requires that ships be 1) built in the US, 2) crewed largely by American citizens 3) owned largely by Americans, and 4) be registered US vessels. With up to 90% of goods transported by sea,1 protectionism in the shipping industry can have massive, widespread costs. For America alone, the Jones Act costs “at least $2.8 billion [$4.37 billion in 2014 inflation-adjusted dollars] annually and its removal would lower domestic shipping prices by 26%,”according to a 1995 report from the U.S. International Trade Commission.2 More recent research by Justin Lewis of Tulane University has shown that “a full repeal of the Jones Act would yield economic benefits...
The Jones Act and Crude Oil

The Jones Act and Crude Oil

With the recommendation from the Hawaii Refinery Task Force and the push to persuade Gov. Abercrombie to work towards a Jones Act exemption, we might have finally found the Act’s Achilles heel …oil. It may be  frustrating that the other economic woes the Act causes Hawaii’s citizens don’t have quite the same influence, but if this is what finally causes people to demand reform, then we can only be grateful. In fact, we’re seeing more and more efforts to quantify the effect of the Jones Act. Below is an excerpt from the Congressional Research Service’s report of May 5, 2014 in which they discuss the Jones Act as part of a bigger investigation into US Transportation of Crude Oil.   U.S. Rail Transportation of Crude Oil: Background and Issues for Congress Congressional Research Service 7-5700 R43390 May 5, 2014 https://www.fas.org/sgp/crs/misc/R43390.pdf   The Jones Act [Excerpt from pages 9-10] The Jones Act may have a profound impact on where crude oil is sourced and how it is transported. The Jones Act requires that vessels transporting cargo between two U.S. points be built in the United States, as well as crewed and at least 75% owned by U.S. citizens.27 The domestic build requirement for tanker ships, in particular, has been identified as contributing to higher costs in moving domestic crude oil along the coasts.28 Domestically built tankers are about four times the price of foreign-built tankers,29 and there is limited capacity in U.S. shipyards to build them. Much of the existing crude oil tanker fleet was built since 2000 to meet Oil Pollution Act of 1990 (P.L. 101-380) requirements that tankers calling at...