Industry hopes to stop Jones Act waivers for strategic oil moves

While the Obama administration has given assurances that it will strive to use U.S.-flag vessels for movements of oil from the nation’s strategic reserves, industry representatives remain worried about a repeat of 2011 when U.S. vessels were all but shut out during a significant drawdown of the reserves.

Testifying before Congress in June, Deputy Secretary of Transportation John D. Porcari said that the U.S. Maritime Administration (MarAd) is working with other agencies “to achieve the maximum use of suitable U.S.-flag vessels” in any future drawdowns of the United States’ Strategic Petroleum Reserve (SPR).

Those words did not alleviate concern in the industry about a repeat of what happened in 2011. During that year, 29.7 million barrels of oil from the reserve were sold. Most of it — 25.2 million barrels — was carried by non-Jones Act vessels that received waivers; 5.4 million barrels went by pipeline. Only one delivery was made by a Jones Act vessel, which carried 150,000 barrels, according to the House Subcommittee on Coast Guard and Maritime Transportation, which held the June 27 hearing.

Thomas Allegretti, of the American Maritime Partnership, testified before the subcommittee that the 2011 SPR drawdown process effectively excluded U.S.-flag tank vessels that were available.

“The entire American vessel availability process undertaken by MarAd was a sham,” said Allegretti, who is president of the American Waterways Operators. “There were more than 25 American-flag tank barges that were capable of lifting SPR oil during that drawdown and not a single one of them got any work.”

According to the committee, the Department of Energy indicated there would be a blanket waiver, allowing foreign-flag vessels to carry the oil. That plan spurred protests from American carriers, so the next day the decision was modified with oil to be sold in 500,000-barrel lots. The notice of sale set minimum delivery lot sizes at 300,000 barrels for vessels and 40,000 barrels for barges. But the committee said there was no requirement that the oil be transported in the smaller amounts. As a result, almost all U.S. vessels with a capacity of less than 500,000 barrels were effectively left out. American tankers that could carry 500,000 barrels were fully employed in Alaska and elsewhere, according to Allegretti.

Members of Congress have made it clear they don’t want to see a repeat of those events.

Rep. Rick Larsen (D-Wash.), the ranking member of the subcommittee who had requested the June hearing, said after the session, “U.S. mariners have the capacity to move U.S. strategic oil reserves on U.S.-flagged ships. The administration made a misguided decision to waive the Jones Act last year. I’m confident that members of Congress on both sides of the aisle agree that we can’t let that happen again.”

Allegretti observed that Porcari, in his testimony for the Obama administration, “never actually said, ‘We will work to make sure that we don’t waive the Jones Act and provide these cargoes to American-flag vessels.’”

After the hearing Allegretti said, “I’m not optimistic that the administration has made a decision to not repeat its actions should there be another drawdown.”

But he added that he was hopeful legislators would take action to try to solve the problem. “I think they’ve been quite clear through their legislative action … and letters to the administration and most recently their commentary at the hearing that they’re quite serious about not letting this happen again.”

One union official expressed concern that whatever Congress did, it might not be enough to prevent the administration from issuing more waivers to the Jones Act.

Masters, Mates & Pilots spokesman Klaus Luhta said, “The changes that are being made only matter to the degree that the administration is willing to enforce them. This is what got us into the problem in the first place. There are rules for transporting oil.  Yet the Department of Energy found a way to skirt around the requirements and transport the oil on foreign-flagged vessels.”

“We’re hopeful that it will be better,” he continued, “but based on past practice, it’s going to require some vigilance on the part of the maritime industry to make sure that they adhere to the requirements.”

By Professional Mariner Staff