It is well known that the 101-year-old Jones Act US-build requirement severely limits the size of the deepsea US Merchant Marine and the cadre of American mariners.
It also inadvertently harms the environment by:
- Keeping trucks on highways rather than using ships for coastwise shipments.
- Preventing the Jones Act fleet from being modernised with new, carbon-neutral ships.
- Forcing longer voyages on foreign-flag ships.
1. There is a clear market for using container feeder vessels rather than trucks on the US east coast. But US-built ships cost too much to switch from trucks.
The expansion of the Panama Canal allows larger ships to transit. Only a handful of US east coast ports can handle these larger ships, meaning the containers have to be transshipped up and down the coast, mostly by trucks, which emit much more pollution than ships, while at the same time clogging and beating up roads.
Trucks vs ships = more pollution.
2. Harvey Gulf International Marine recently announced that it was “first in the world to operate a carbon-neutral platform supply vessel”.
According to Offshore Engineer, Harvey Gulf chief executive Shane Guidry said these vessels are the “only ones that will ever be operating in the US, unless our competitors want to build new dual-fuel LNG vessels, or tri-fuelled like these at a cost of $113m per vessel.
“I don’t see that happening, as you will never get a dayrate from the end user that will support the $113m construction cost.” So no more carbon-neutral Jones Act PSVs.
It is unlikely that existing Jones Act ships will be replaced soon, or that carbon-neutral vessels will be built under the current US-build requirement. The high cost of building ships in the US leads to them being kept in service much longer than foreign-built ships, so they are not as modern, safe or environmentally friendly.
Witness El Faro, an obsolete 40-year-old steam-powered ship that foundered in 2015, killing all 33 mariners aboard. El Faro was kept in service because it would cost too much to replace her with a US-built ship, until it was too late.
Older ships = more pollution.
3. Because of the high cost of building Jones Act vessels in the US, shippers use foreign-flag vessels to transport cargoes to and from the US on much longer sea passages. The longer the voyage, the more pollution. As an example, below is a map showing what happens every day.
Foreign-flag ships deliver gasoline from US refineries to Canada and foreign-flag ships deliver gasoline from Canada to the US, carrying the same cargoes going in opposite directions. This makes no common or environmental sense.
The US is a major exporter of LNG, while at the same time it imports LNG because there are no Jones Act LNG carriers in service. Large LNG carriers would cost close to $1bn each to be built in the US, and no domestic shipyard has the experience needed to build a large LNG carrier. So, the US will continue to send its natural gas resources overseas in foreign-flag ships.
Longer voyages = more pollution.
No one is proposing eliminating the Jones Act, but it should be amended to allow foreign-built ships, just as all other forms of intra-US transport can be foreign-built: aeroplanes, trucks, railroad equipment.
The arguments for continuing the US-build requirement include that shipyards would be available if needed for national defence and that they provide many jobs.
On national defence, it takes several years to build a deepsea ship and there are hundreds of existing US-owned, foreign-flag ships that could be used/converted to US flag in times of crisis. Although it could be good to have domestic yards available for maintenance and repair.
Shipyards do support many jobs. But this argument is like saying Americans should be required to use only US-made computers, mobile phones or trucks and they should subsidise less efficient domestic industries such as making clothing, TVs or household appliances.
American shipyards build excellent ships ... they just do not have the economies of scale to compete. A US yard may deliver three to five deepsea vessels in a good year. The big three South Korean yards each deliver 20 times that number. These economies of scale allow foreign yards to invest in cost-saving technologies that US yards simply cannot afford.
The US is committed to reducing carbon emissions. Amending the Jones Act to allow foreign-built ships would contribute to this effort. The environment is more important than protecting a handful of uncompetitive deepsea shipbuilders.
This would also increase the size of the US merchant fleet, raise the number of American mariners available to the country in times of crisis and would save consumers billions of dollars each year in freight costs.
Bob Curt is principal at Westbrook Marine Advisors. He is the former chief executive at MLR Petroleum and managing director at Nakilat, and spent 30 years at ExxonMobil, where he held senior shipping and supply positions.
