It’s been over five years since I first heard about the Jones Act on NPR’s Planet Money podcast – an obscure American law that prohibits foreign vessels from shipping goods between domestic U.S. ports. Every time you want to send something from one American port to another American port, the cargo has to travel on a ship built in America, staffed by Americans, and owned by Americans. The Jones Act is protectionist and greatly increases the costs of shipping domestically.

In Puerto Rico, which is an American territory in the Caribbean, one 2019 study found that the Jones Act increased the cost of living by $375 per capita, adding:

If this is the case, Puerto Rico has 13,250 fewer jobs than it would have were there a free market for ocean freight. These jobs would pay residents $337.3 million more in wages, and would result in over $1.5 billion in increased economic activity. Overall tax revenues would be $106.4 million higher were the island be exempted from the Jones Act’s provisions. In sum, no matter how one looks at it, the Jones Act is a contributor to the poor economic situation in the Commonwealth of Puerto Rico.

NPR spoke to a cattle rancher in Hawaii – part of America but separated by about 4,000km of water – whose market for meat was in the continental United States. All-American ships are expensive to build and run, so he would initially ship cattle via Canada, until he finally settled on flying everything over. When cows fly, it’s a signal that there are some market distortions at work.

The Jones Act doesn’t just affect cattle or dry cargo, it affects everything that’s transported with a vessel. The impact of the act on fuel shipping is apparent (especially with LNG). With Axios writing about the potential growth in electric ferries, I don’t think it’s a coincidence that the new US ships are going to be domestically built. However, how does the Act affect offshore wind? I’ve considered this below.

Offshore Wind

The federal government has taken a wide and liberal understanding of what constitutes a port under the Jones Act. The Maritime Law Center explains:

Essentially the term applies to a voyage that beginning at any point within the United States and delivering a type of commercial cargo to any other point within the United States

This means that any servicing vessels working on installing or maintaining offshore wind farms must be all-American. This can constitute significant challenges where:

  • a specialist boat or crew is required that isn’t available in the US;
  • the offshore wind industry hasn’t been significantly developed for products and services to already be available;
  • there is a large time-specific scramble in building offshore wind, for example if the Federal government were to open competitive auctions on a non-rolling basis.

However, there is a saving grace (and I would be grateful if somebody could provide clarity on this point). The Jones Act only applies up to three nautical miles from the U.S. coast, and in this instance it might incentivise development of deeper sea wind such as floating wind. Beyond this limit the Jones Act is dependent on the Outer Continental Shelf Lands Act (OCSLA), for approximately 200 miles offshore to the seabed of the continental shelf to develop mineral resources. OCSLA applies federal laws, including the Jones Act, to:

“… the subsoil and seabed of the outer continental shelf and to all artificial islands, and all installations and other devices permanently or temporarily attached to the seabed, which may be erected thereon for the purpose of exploring for, developing, or producing resources therefrom.”

The question here is obvious – is wind energy a ‘resource’? If it isn’t, then offshore wind farms aren’t attached to the seabed for the “the purpose of exploring for, developing, or producing resources therefrom”.

Additionally, the US government clarified in 2010 that vessels involved in driving monopiles would essentially be exempt from the Jones Act, opening up construction to foreign vessels providing the materials are transported from a foreign port:

CBP has long held that neither drilling nor pile driving, in and of itself, conducted by a stationary vessel, constitutes coastwise trade or coastwise transportation. See HQ 109817, dated November 14, 1988 and HQ 111412, dated November 28, 1990, respectively. The proposed activity with respect to the driving of a monopile foundation into the seabed is very similar to pile driving and is governed by the same principle. Therefore, we find that the activity of the stationary construction vessel described above, involving driving of a monopile foundation into the seabed and then adding a platform deck, anemometer tower, and other components does not constitute coastwise trade or coastwise transportation. In summary, we find that the engagement in the proposed activity will not result in a violation of 46 U.S.C. § 55102.28

The above was how the Block Island wind farm off Rhode Island was constructed, with the blade and tower sections constructed in Denmark and then shipped alongside French nacelles across the Atlantic in a Norwegian offshore wind installation vessel, the ‘Brave Tern’. Yet using specialist vessels to transport goods from France isn’t ideal, especially as the industry aims to mature. Whilst it would seem to give the greatest benefit to the American economy as a whole to wholly repeal the Jones Act, perhaps the next best thing would be for a waiver for offshore renewable energy projects.

One thought on “How the Jones Act affects the energy transition

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s