Posted April 7, 2017
Raise a hand if you’ve heard of the Jones Act. Extra credit if you know the law’s connection with U.S. offshore oil and natural gas; a gold star if you’re aware that proposed changes in the law’s interpretation could kill U.S. jobs, decrease energy output and lead to other negative economic impacts.
Enacted in 1920, the Jones Act requires that merchandise transported between U.S. points be carried on U.S.-flagged vessels that are built in the U.S., owned by U.S. citizens and crewed by U.S. citizens and U.S. permanent residents. Yet, historically, the Customs and Border Protection Agency (CBP), which administers the law, interpreted the act to not restrict certain oil and natural gas activities in the Gulf of Mexico and other offshore areas. Basically, CBP rulings have made possible efficient U.S. energy production – benefiting American consumers and boosting national security.
Earlier this year CBP proposed modifications and revocations to approximately 30 identified rulings under the act, as well as an unspecified number of other rulings. An economic study by energy consulting firm Calash says these changes could lead to decreased offshore oil and natural gas development and, as a result, a number of significant negative impacts:
- In the range of a 23 percent decrease in oil and natural gas production.
- Losses in the range of 30,000 industry-supported jobs in 2017, and as many as 125,000 jobs lost by 2030. Gulf states are projected to be most affected.
- Decrease in offshore oil and gas spending in the range of $5.4 billion per year.
- Cumulative $91.5 billion in lost GDP from 2017-2030.
- Decrease in government revenue from energy development of more than $1.9 billion per year from 2017-2030.
API Upstream Group Director Erik Milito:
“President Trump’s recent executive order on energy independence was an important step toward increasing American competitiveness, and these proposed changes completely undermine the order’s purpose by placing unnecessary and harmful burdens on domestic energy production. These proposed changes to the rulings should be immediately withdrawn in order to protect U.S. energy security and allow for consumers and businesses to continue benefitting from America’s energy renaissance.”
Some charts from the Calash report illustrate the potential impacts of these Jones Act changes. The report says CBP proposals could lead to a 20 percent decline in the number of energy projects coming online:
The result could be lower offshore oil and natural gas production, compared to U.S. Energy Information Administration projections:
Projected job losses by state:
And projected lost GDP by state:
These are potentially severe setbacks, for the region and for the U.S. as a whole. Calash:
While some of the proposed modifications and revocations to Jones Act rulings are projected to have minimal impacts on U.S. OCS activity, the study concludes that others will, in their current forms, seriously limit the ability of operators, installation contractors, and service providers to safely, effectively, and economically operate in U.S. offshore areas, as well as decrease the domestic U.S. content of equipment and services used in offshore oil and natural gas activities. This decrease in activity and U.S. content would further damage an important industry that is already dealing with the repercussions of a volatile and challenging commodity price environment and may seriously impact the overall U.S. economy.
Again, the CBP proposals are at odds with the new administration’s early efforts to advance domestic energy production. They should be withdrawn.
ABOUT THE AUTHOR
Mark Green joins API after spending 16 years as national editorial writer in the Washington Bureau of The Oklahoman newspaper. In all, he has been a reporter and editor for more than 30 years, including six years as sports editor at The Washington Times. He lives in Occoquan, Virginia, with his wife Pamela. Mark graduated from the University of Oklahoma with a degree in journalism and earned a masters in journalism and public affairs at American University. He's currently working on a masters in history at George Mason University, where he also teaches as an adjunct professor in the Communication Department.