New England governors are clamoring for Energy Secretary Jennifer Granholm to support waivers to the Jones Act, a law requiring that cargo shipped between two U.S. ports be transported on vessels that are American-made, -built and -crewed, to “do something” about what promises to be a winter season of skyrocketing energy bills.
Politicians’ habitual effort to focus blame on the Jones Act is predictable — and little more than political misdirection to distract from energy policies that have made New Englanders vulnerable to current supply chain disruptions in global energy markets.
In the United States, natural gas and oil move predominantly by pipeline. Pipelines provide the most cost-efficient, safe and sustainable means to move fuels to communities across the country. New England states have persistently refused to invest in the new pipelines and storage facilities necessary to address expanding retail and industrial fuel demand. Instead, over-reliance on “spot-market” deliveries from foreign sources, including Russia, has become the default “easy button” to make up for energy shortfalls. This purposeful dependence on spot-market deliveries leaves New England perennially vulnerable to seasonal supply shortages.
A clearer understanding of energy prices in New Hampshire needs to recognize two contrasting business models used in delivering energy to those who need it — one built on reliable and stable long-term contracts, the other dependent on unpredictable spot markets subject to extremes of volatility in both price and supply. A precise “pay me now or pay me later” dynamic needs to be acknowledged in the choices made on which business model is the more appropriate.
For years, policymakers have rolled the dice on the spot market instead of creating a more robust energy infrastructure designed to offer consistent and predictably priced supply for their constituents. Outsourcing the supply of necessities like heating fuel may seem a good strategy when goods flow easily at cheap prices. This solution looks less attractive when markets are disrupted and New Hampshire is left bidding in a tight global market for energy to power electrical plants and heat homes.
New England governors should consider events in Puerto Rico as a harbinger of what to expect when hoping a waiver of the Jones Act is the holy grail to energy salvation. The Biden administration recently granted a “targeted waiver” of the Jones Act to allow U.S.-sourced LNG to be transshipped from the Dominican Republic to Puerto Rico. Jones Act critics heralded the waiver as an example of the benefits of a foreign response to spontaneous market needs. Yet, anyone believing that consumers in Puerto Rico benefited from paying a substantial premium for fuel from a foreign energy trader is naïve. New England governors hoping to be the recipients of similar waivers in the weeks ahead should take note.
The high price of natural gas expected in New England this winter is not a derivative of expensive Jones Act ships. With LNG selling in Europe at a price five times that in the Gulf of Mexico, any available LNG this winter will head overseas — on tankers currently charging as much as $500,000 per day — unless New England states match the price paid in Europe. There will be no home country discount, irrespective of a Jones Act waiver.
Calling for a Jones Act waiver is a soundbite, not a solution. Waivers are a reflexive political smokescreen making U.S. ship owners a suitable scapegoat for poor energy policy decisions. Waivers undermine our national, homeland and economic security and put foreign energy traders ahead of the nearly 30,000 men and women in New England who work in American maritime.
