Oil prices jumped after Iran targeted two ships recently, highlighting the power hostile regimes have over energy supplies. Iran isn’t the only one: Russia is among the world’s largest producer of oil and gas, with some Americans relying on Russian natural gas to heat their homes. It’s clear why that leverage is a problem. The good news? There’s a solution, and it’s not in the Middle East.
It’s in Congress.
US natural gas production has exploded in recent years. But although the technology for extracting it has advanced, the methods of transporting it haven’t. Pipeline capacity is insufficient, and new construction often gets blocked by the courts. That leaves shipping as an alternative; unfortunately, there’s a federal law standing in the way.
The Merchant Marine Act was signed in 1920. More commonly known as the Jones Act, it stipulates that all vessels transporting goods between American ports must be built, owned, and crewed by Americans. Unfortunately, the cost of building and crewing ships domestically now far outstrips the price of doing so overseas, with the result being that it’s cheaper to import natural gas from Russia than it is to deliver gas produced here at home. The law is killing jobs, and not just in the energy industry.
Thanks to the Jones Act, rock salt is purchased from Mexico and Chile instead of American producers. It's also cheaper for East Coast farmers to buy foreign livestock feed than it is to ship grain from Iowa through the Great Lakes. Given their geography, the economies of Hawaii, Alaska, and Puerto Rico are particularly hard hit by excessive shipping costs, but they aren't the only ones to suffer. A 2002 study by the US International Trade Commission estimated that the Jones Act represents a $5 to $15 billion drag on the economy--and that was a decade before the fracking boom. Others suggest the costs could be far higher.
Special interests that benefit from the legislation argue it's necessary for national security. However, the military is exempt from having to use Jones Act-compliant ships, and only one such vessel was used to support military operations in Iraq. Others will claim that the Jones Act is keeping foreign vessels from going up the Mississippi, but that isn't true either since they're already allowed to deliver cargo from other countries. And if there is a need to keep out ships from specific nations, then the Jones Act is a very impractical way to do that.
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The president can waive Jones Act provisions on national security grounds, but a better move would be to scrap it altogether. Utah's Sen. Mike Lee has written a bill to do just that. Called Open America’s Water Act, it would allow all qualified vessels to operate in US waters. Doing so would give less money to unfriendly regimes and put more in the pockets of American workers.
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