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The Obscure Shipping Law Leaving New Englanders in the Cold

January 18, 2019 in Economics

By Colin Grabow

Colin Grabow

Winter is upon New England, and with it an inevitable spike in
heating bills. Fortunately, legislators in Washington can ease some
of the financial pain. While members of Congress can’t control the
weather, they most certainly have the power to rid the country of
costly laws. And one surefire means of keeping money in the pockets
of the region’s families would be to scrap an obscure provision
called the Jones Act.

Passed more than 98 years ago, the Jones Act mandates that the
transportation of goods between two U.S. ports be performed by
vessels that are U.S.-flagged, U.S.-owned, U.S.-crewed, and
U.S.-built. Meeting these conditions isn’t cheap. It is commonly
estimated that oceangoing commercial vessels built in the United
States are 3-5 times costlier than their foreign-built
counterparts. And according to the U.S. government they are
nearly three times more expensive to operate
too.

At the same time the
United States has emerged as one of the world’s largest exporters
of liquified natural gas, by law, none of it can be transported by
ship to New England — or anywhere else in the
country.

All of this translates into higher transportation costs and
higher prices for consumers.

But sometimes ships aren’t available at any price because they
simply don’t exist. Such is the case with liquified natural gas
(LNG) carriers that transport the primary energy source relied upon
by more than half of Massachusetts’ households to heat
their homes. Almost unbelievably, there is not a single ship that
complies with the Jones Act’s requirements. At the same time the
United States has emerged as one of the world’s largest exporters of LNG, none of it
can be transported by ship to New England — or anywhere else
in the country. Instead every LNG carrier that arrives is from a
foreign port on international voyages not subject to Jones Act
restrictions.

And don’t expect this situation to change anytime soon.
According to a government study the construction of an LNG
carrier at a U.S. shipyard — something that hasn’t happened
since before 1980 — would cost anywhere from $400 to $675
million. That’s 2-3 times more expensive than one built in South
Korea. With LNG export opportunities abounding that make use of
cheaper foreign-flagged and built ships, the economic case for
building such a Jones Act-compliant ship is non-existent.

As a result, Americans will continue to import LNG, sometimes
from great distances, that is more expensive than the domestic
supply. In 2017 Massachusetts even imported some of its LNG
from Russia, which is perhaps ironic given the
law is often justified on national …read more

Source: OP-EDS

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