New England Governors Seek Jones Act Relief as Spike in Winter Heating Bills Looms

By Colin Grabow of Cato.

"Concerned by high and volatile global energy prices, New England’s six governors dispatched a letter to Secretary of Energy Jennifer Granholm last month asking for assistance. At the top of their wish list: exploring the conditions under which the Jones Act might be suspended to allow the region expanded access to U.S. natural gas. It’s an eminently reasonable request that Congress and the White House should embrace.

Although geographically part of the U.S. mainland, in terms of energy New England is almost an island. Lacking pipeline connections to refining centers outside the region, it also has insufficient pipeline capacity to transport natural gas—New England’s dominant fuel for electricity production—from other parts of the United States during wintertime spikes in demand. Instead, the region must turn to marine deliveries of liquefied natural gas (LNG) to meet its needs. That means imports. While U.S. natural gas is both plentiful and substantially less expensive than elsewhere, there are no ships to transport it to New England.

More accurately, there are no ships to transport it that comply with the Jones Act.

Of the world’s nearly 600 LNG tankers, none are U.S.-flagged, U.S.-built and mostly U.S.-crewed and owned as required by the 1920 law to transport goods within the United States. And such a vessel isn’t likely to appear anytime soon, if ever. With U.S.-built LNG tankers estimated to cost over $500 million more than those from foreign shipyards—although no one knows for sure, since no such vessel has been constructed in this country since before 1980—the economic case for building and operating one is non‐​existent.

The result is that the Jones Act has effectively placed U.S. LNG off‐​limits to New England (and Puerto Rico). While bulk quantities of U.S. LNG have been exported to 37 countries since 2016, they cannot be sent by ship to other parts of the United States.

Hence the New England governors’ letter.

While the inability to access domestic LNG has been an irritant to the region for years resulting in some absurd outcomes, addressing it has now taken on a new sense of urgency amidst turmoil in global energy markets. As the governors’ letter pointed out, global LNG prices—the prices New England must contend with given their limited access to domestic natural gas—have increased by almost 300 percent over the last year. Contracts for gas this winter in the region are already hitting record highs.

At a time when New England needs maximum flexibility to reliably meet its energy needs at the lowest possible cost the Jones Act effectively ties one hand behind its back.

Unfortunately, prospects for a waiver or suspension of the Jones Act appear remote. Congress has shown no appetite for such a move, with a Senate amendment proposed earlier this year to permit the domestic transport of LNG on foreign vessels defeated on a 26–2 committee vote. Secretary Granholm, meanwhile, made no apparent mention of the Jones Act suspension request in a letter to New England governors last week urging them to stock up on oil ahead of the coming winter and hurricane seasons.

In other words, Washington appears more interested in maintaining protectionism for a non‐​existent service—the domestic waterborne transport of LNG—than in providing relief to its citizens’ energy bills. New Englanders better hope for a mild winter."