Don’t Blame Poor Energy Policies On Jones Act
A short while ago, we predicted that the Biden administration’s tolerance of Jones Act waivers for Puerto Rico—even though the reasons given were spurious—was a signal that would open the floodgates for attacks on the Jones Act.
Now some New England governors are exploiting anxiety over energy supplies and prices this winter to push for open-ended waivers to Jones Act requirements.
According to news sources, the general manager of a Massachusetts electric utility told customers earlier this month that the electric grid has been deteriorating for years, and if New England experiences “an extended cold snap, there is a high probability of rolling blackouts” because “this year is even worse.” In July, six New England governors sent a letter to Energy Secretary Jennifer Granholm requesting that the Biden administration “work with the New England states to alleviate the unique fuel challenges that the region faces, including beginning to explore the conditions under which it might be appropriate to suspend the Jones Act for the delivery of LNG for a portion or all of the winter of 2022-2023.”
Let’s get one thing out of the way: the Jones Act has nothing to do with high energy and heating oil prices in New England. Those are the direct results of many factors, some beyond the control of either the New England states or the U.S. government. U.S. refineries downsized their capacity during the COVID lockdowns and have not yet fully ramped up again. The East Coast has not fully replaced the loss of refinery capacity when a major Philadelphia refinery, with a capacity of 335,000 barrels per day, closed in 2019 after a devastating fire. That closure alone reduced total U.S. refining capacity by 2 percent. And now that refineries are increasing capacity, more demand from Europe is driving up prices.
Among these other factors, though, are policies pushed for years by New England states themselves, especially opposition to oil and gas pipelines and anti-carbon initiatives that have resulted in higher electricity and energy costs. New England is at the terminus of pipeline systems, which is already a physical constraint, and opposition to new pipelines hasn’t helped. The low density of pipelines means that the region imports some of its heating oil and natural gas by sea. Pipelines are the cheapest method of oil and gas transportation, so relying on imports by sea is always going to raise prices. The region is disproportionately exposed to the volatility of international oil and gas spot markets. The U.S. as a whole relies on natural gas for about 39 percent of its heating, but it’s more like 53 percent in New England. Russia’s invasion of Ukraine and the resulting disruption to energy markets only worsened the picture. A New Hampshire newspaper, warning its readers that ratepayers could see their heating costs double this winter, said, “Blame the energy markets.” Jones Act waivers can’t do anything about those.
A November 29 letter sent to New England governors by Ku’uhaku Park, president of America’s Maritime Partnership, calls their arguments “flatly wrong” and expresses surprise at the request, “given that your states rank among the top U.S. states in per capita domestic maritime industry jobs.” Park points out that “neither maritime transportation in general nor the Jones Act in particular is the problem, and a waiver of the Jones Act will not reduce energy prices in your states. The real cause of the high energy prices is the lack of natural gas pipelines, the most efficient form of transportation for gas within and into New England; the lack of LNG storage capacity in New England, making long-term energy preparation impossible; inadequate LNG receiving facilities and other infrastructure in New England; and the region’s risky reliance on short term ‘spot market’ LNG purchases, which are more expensive, not long-term contracts traditionally employed by other LNG buyers.”
The Jones Act is not to blame for the flawed energy policies of the New England states, a waiver will not address them, and the short-sighted scapegoating of the maritime industry does not serve the populations of those states.
