U.S. Customs and Border Patrol, the agency tasked with administering America’s cabotage regulations, announced Friday that it has received its first request for a Jones Act waiver related to Hurricane Harvey.
The Jones Act requires the use of U.S.-made, U.S.-crewed vessels for coastwise trade. CBP has the authority to issue waivers under certain circumstances, and in the past it has allowed foreign tankers to carry petroleum between American ports after major natural disasters. The agency granted two-week waivers for shipments from the U.S. Strategic Petroleum Reserve after Hurricanes Rita and Katrina in 2005, and it issued limited waivers again after Superstorm Sandy in 2012.
An application does not necessarily lead to a waiver. The Maritime Administration, the Department of Energy, the Department of Homeland Security and the Department of Defense will all have an opportunity to weigh in before CBP grants its approval. In particular, for the waiver to move forward, MARAD must determine that qualified American vessels are not available – a review process that involves consultation with Jones Act ship operators.
Eric Lee and Michael Cavanaugh of Holland & Knight noted Thurdsay that the extensive refinery outages on Texas' Gulf Coast were likely to spur requests for the use of foreign tankers. They noted that vessel capacity could be more of a problem than in past disasters because America is now producing much more oil, and the shipping backlog at Texas ports will be larger than it would have been ten years ago.
Demand for a waiver could come for fuel shipments from the Gulf to the U.S. East Coast. The Colonial Pipeline normally carries these consignments, but it is operating intermittently due to low production levels in Texas. With the busy Labor Day weekend about to begin, the supply pinch is setting prices soaring on the Eastern seaboard. To fill the gap, energy traders are fixing tankers for European product shipments to the U.S. East Coast, sending fuel prices rising in multiple overseas markets.
This week, Senator Edward Markey (D-MA) called on the administration to release gasoline supplies from the one-million-barrel Northeast Gasoline Supply Reserve (NGSR) to help alleviate the price spike. Similar requests may not be possible in future years: in May, the White House proposed to liquidate the NGSR to raise $70 million for the annual budget. “The NGSR has not been utilized and does not have the operational functionality that was envisioned post-Sandy," the budget proposal said.