The Jones Act: Balance Between Special Interests and Renewable Energy
October 16, 2017
The Jones Act has received a lot of press in the wake of Hurricane Maria for inhibiting aid to Puerto Rico in their time of need. Nearly a decade after being signed into law, the Act has become the target of scrutiny, with politicians such as Senator McCain (R-AZ) calling for the amendment of the “antiquated” law . In addition to its controversial role in disaster relief, many organizations (such as the National Renewable Energy Laboratory) have drawn attention to the bill’s consequences for offshore wind energy production – an area in which the US has traditionally been lacking .
. The last 25 years have seen the construction of nearly 4,000 offshore turbines producing a combined 15,000 gigawatts of clean energy. This decades-long push for a source of efficient renewable energy has been led predominantly by the European nations, which now possess approximately 88% of global offshore wind capacity with the far east (including China, Japan, and Korea) making up most of the difference . With new construction projects beginning around the world every year, one country that is concerningly (though perhaps unsurprisingly) missing from the list is the United States .Since the first offshore wind turbine was constructed in Denmark in 1991, the offshore renewable energy industry has experienced substantial and sustained growth
Despite the potential of capturing over 2,000 gigawatts of offshore wind energy (more than enough to satisfy the nation’s energy demands) with existing technology, the United States has only a spattering of offshore turbines providing a negligible amount of energy for the population centers of the east coast . While this relative lack of offshore energy production is partly attributable to several social factors resisting change, one little known law–the Jones Act–plays an outsized role in restricting and complicating offshore wind production in the United States.
What is the Jones Act?
The Merchant Marine Act of 1920, more commonly called the Jones Act, is a maritime statute that outlines the laws and restrictions that govern shipping in the United States. The Act requires that all goods shipped between US ports must be carried by vessels owned, operated, and constructed by Americans . In many ways, this has been a successful law. It has protected and expanded the American maritime industry, led to the creation of a fleet of nearly 40,000 American vessels, and represents a total of $48 billion dollars in domestic investment. Even more, the building and maintaining of this massive fleet sustains about 150,000 American jobs and has ensured a productive naval manufacturing industry for nearly a century .
Yet despite this historical success, this 1920 law has, at times, struggled to keep up with a changing global economic structure. In response to the budding offshore fossil fuel industry in 1953, for example, the Outer Continental Shelf Lands Act (OCSLA) was passed to broaden and modernize the Jones Act to apply to any structure permanently or temporarily attached to the continental shelf .
How Offshore Wind Construction is Affected
Though the OCSLA was specifically created in response to fossil fuel drilling, it has been interpreted to apply equally to offshore wind energy, and there have even been legislative efforts to formally include renewable energy in these restrictions . The inclusion of wind power into the OCSLA (and therefore the Jones Act) regulation wouldn’t necessarily pose an issue if the US were capable of undertaking the development of extensive offshore turbines with their own Jones-Act compliant ships. However, due to the technical complexity and difficulty of erecting these monumental turbines, only very specific and advanced vessels are suitable for construction–and those vessels exist almost exclusively in Europe. In fact, plans for the construction of the very first Jones Act-compliant offshore wind turbine installation vessel were only unveiled in mid 2017 .
Because it doesn’t involve the transportation of merchandise, it is true that the nuances of the Jones Act and OCSLA allow for a foreign ship to begin construction on a turbine. However, due to the OCSLA’s authority over any point affixed to the continental shelf, as soon as the foreign ship drills into the ground, it technically becomes a “point” in the US and subject to full regulation. Therefore, once drilling begins, these foreign ships will be unable to move materials or people between land and those points, or even between two independent turbines. Because this nuance implies that if foreign vessels were used for construction (out of necessity), then developers would still need to charter US ships just to move people and materials to and between work sites. Clearly, this hurdle makes any effort to use a foreign ship infinitely more complicated and expensive. In fact, according to the US Department of Energy’s own National Offshore Wind Strategy, “A lack of dedicated assets and experience makes cost-effective, Jones Act-compliant strategies for installing, operating, and maintaining offshore wind farms challenging.” Without a sufficient supply of US ships capable of installing offshore turbines, there will be “supply chain bottlenecks” that inhibit offshore production .
This leaves the US with two options: build a fleet of US-made turbine installation vessels (TIVs), the kind of ships that Europe has been using to build their wind farms, or amend the Jones Act to allow for turbine construction using European vessels. Though the first option is straightforward and without legal hurdles, it is also extremely costly and time-consuming, requiring a significant financial investment as well as a few years of construction to complete. For example, Zentech Manufacturing and Renewable Resources International announced their plans for the construction of the first Jones-Act-compliant, US-made TIV recently in June 2017. They anticipate that the construction cost of a new TIV falls in the $300-350 million range, and that this one vessel will not be completed and ready for use until late 2018 . Because of this timeframe and large upfront costs, construction of a large US-made fleet of TIVs would be very difficult and time consuming, pushing back the possible start date of large-scale offshore wind production.
The second viable option of amending the Jones Act to allow for European ships to aid in the construction of wind turbines off the eastern coast of the US, would be faced with large legal barriers. Currently, the Act is only allowed to be waived in instances of emergencies pertaining to national defense when there are no other US-operated vessels available as options. Historically, these blanket waivers have been issued to encourage more fuel transportation during catastrophic events like hurricanes (most recently Hurricane Maria), but there have also been numerous instances where waivers were granted outside of these security emergencies on a case-by-case basis to allow for more efficient transportation of crude oil . Given this history, allowing foreign ships to be involved in the construction of wind turbines would be unprecedented and likely be met with fierce opposition, as it would reduce protectionism. However, it would allow the US to gain access to over 75 fully-functioning European vessels, avoiding the waiting time and cost necessary for construction of a whole new US-made fleet .
Since 1920, the Jones Act has been largely successful at protecting the US naval industry. However, in recent years, it has prevented the United States from fully realizing its offshore wind energy potential. If the Act is left untouched, the US will have to expend large amounts of time and money to be able to expand the wind energy industry to its full potential. However, amending or waiving the Act is likely to be met with fierce backlash, since it would reduce the protection of US maritime jobs and ships. Either way, the matter of turbine construction must be at the forefront of consideration in debates about the Act if the US wants to pursue an investment in a more sustainable future.
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 https://www.nrel.gov/docs/fy10osti/40745.pdf (P. 43)