Editorial: Jones Act Changes Worthy Of Passage

The U.S. Customs and Border Patrol (CBP) is proposing to modify 20 rulings to restore the original intent of the Jones Act as it applies to offshore operations. (See article in this issue.) Customs is “taking important steps to help enforce the Jones Act more effectively and protect American maritime jobs,” said the Offshore Marine Service Association (OMSA). The CBP administers the Jones Act as it applies to offshore energy operations.

The CBP announced on July 1 its intent to modify the rules, but the comment period runs only through mid-August, and those desiring to do so need to act swiftly. Ken Wells, OMSA president, said this is the sort of landmark decision that could create new jobs and result in new American shipbuilding and port activity. To oppose it, he said, would be the same as saying “we don’t want Americans to work in offshore energy” at a time when we are arguing that expansion would create jobs.

The purpose of the original Jones Act was to protect American mariners, shipyard workers and towing companies from unfair competition from cheap foreign labor or foreign vessels using that cheap labor. It is particularly troublesome when the offshore marine industry is experiencing its worst downturn in nearly 30 years.

The impact of cheap foreign vessels and labor might seem readily apparent, but the spinoff from these circumstances causes various problems. The issue is important because the labor required for installation and upkeep of offshore production facilities is enormous, “largely,” says Wells, “ due to changes in technology and techniques offshore.” Today companies may have one central production facility that connects to multiple wells spread out over several miles. Wells said that in the near future, the industry will change again, “doing away with the need for large, permanently moored production facilities.” This means that in the next few years, 85 percent of the projects will take place subsea, he said.

If the proposals pass, U.S. vessels already available would be put back to work, some perhaps immediately. The price undercutting by foreign vessels whose costs are low for a number of reasons, including foreign subsidies, will be reduced. Offshore operators don’t want to pay the higher rates, partly because they may have long-term charters with foreign boats.

The benefits of the rule changes will not be immediate, other than to put to work some U.S. boats that have been tied up. When business improves enough to support the use of American vessels, U.S. operators will be able to invest in new, larger boats, Wells said. They have been building vessels already, and these boats are in operation now. But because of the looseness of Customs rulings, operators have been reluctant to invest the $100 million or more that a construction vessel may cost. A change in the rules “should give them the confidence to build more boats in the U.S.”

Wells said the offshore industry has word that a number of foreign boats are poised to flood the U.S. market once things pick up again. Presently the industry is tracking about 50 foreign vessels operating in the Gulf of Mexico, with about half of them not affected by any rules change for one reason or another. The ruling would, however, limit the influx of new foreign boats.

As much as 80 to 90 percent of the vessels servicing ultradeep offshore energy operations work out of Port Fourchon in South Louisiana. The impact of new port activity and building new American bottoms is no small consideration. The increased operation of boats means higher employment in the maritime industry. The building of new boats preserves shipyard jobs and potentially creates new ones. The entire region would benefit. Then too, some yards build both offshore and inland vessels.

For many years Customs and Border Patrol rulings have allowed foreign vessels to carry cargo to subsea oil and gas locations as long as the vessel also installed it. The new rules would change that. Wells said the changes proposed by CBP represent an “important step” and Customs “is to be applauded” for taking it.

Anyone seeking additional information or assistance in commenting on the proposals can reach Wells at 504, 734-7622 or email kenwells@offshoremarine.org.

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