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For the third time since the year 2010 and only twelve months since his last effort, U.S. Senator John S. McCain (R-AZ) submitted on January 28, 2016, legislation to eliminate certain domestic build requirements of Section 27 of the Merchant Marine Act of 1920 as amended commonly known as the Jones Act.

Sen McCain’s instant amendment proposes to exempt petroleum tankers from the Jones Act cabotage requirement that those vessels be constructed in the U.S. in order to be eligible inter alia (among other things) to engage in the domestic coastwise trade.

Sen McCain’s latest effort to reform Jones Act cabotage came in the form of a proposed amendment to Senate Bill 2012 Energy Policy Modernization Act of 2015 (S. 2012).

Energy Policy Modernization Act of 2015 (s. 2012)

The draft bill — Energy Policy Modernization Act of 2015  (EMPA) — was unveiled by the sponsors on July 23, 2015 and marked up in the Senate Committee on Energy and Natural Resources on July 28 – 30, 2015.

According to the Committee’s website, “The Committee considered 59 amendments, of which 34 were adopted, nine were rejected, and 15 were offered and withdrawn. The Committee on Energy and Natural Resources met in open business session on July 30, 2015 to consider the draft, and ordered an original bill favorably reported.”

At the time, it was reported by the American Institute of Physics, “On July 30, the Senate Energy and Natural Resources Committee approved, by a bipartisan vote of 18 to 4, omnibus energy policy legislation, sending the bill to the full Senate for consideration.”

The original bill (S. 2012) was introduced September 9, 2015, by sponsor, U.S. Senator Lisa Ann Murkowski (R-AK), Chairwoman of the Senate Committee on Energy and Natural Resources, with the stated purpose to provide for the modernization of the energy policy of the United States and other purposes (see the bill Report).

The legislation was brought to the Senate floor for debate as a legislative bill Managers’ Amendment, Senate Amendment 2953 (SA 2953), which substitutes for the original.  The managers’ amendment was submitted by Sen Murkowski on Tuesday, January 26, 2016, and proposed on Wednesday, January 27th to commence debate on the Senate floor.  A substitute amendment makes changes desired by the sponsor and serves as a legislative vehicle to which other floor amendments are made.

A total of 190 amendments have been submitted to the Secretary of the Senate including the Managers’ Amendment.  The other 189 amendments are known as “second degree” amendments and are made to the managers’ amendment (as opposed to the original bill).  Of the 189 second degree amendments 11 were disposed of (meaning they were agreed to) and three were pending as of the close of business Friday, January 29, 2016.

As of Monday, February 01, 2016, Sen McCain’s proposed Jones Act amendment was not among the second degree amendments brought to the floor for consideration and is still pending.

Several conservative organizations have expressed their opposition to the EMPA including the Heritage Foundation.

To waiver the Jones Act restrictions for oil and gasoline tankers (SA 3079).

Sen McCain’s instant Jones Act reform proposal is much simpler than his previous legislation and focuses solely on petroleum tank vessels as a germane amendment to an energy policy bill.  It was submitted on January 28, 2016, as  Senate Amendment 3079 (SA 3079) with the purpose,” to waiver the Jones Act restrictions for oil and gasoline tankers.”

The amendment proposes to change a key provision of the Jones Act as codified in the United States Code at Title 46 Shipping, Subtitle II, Section 12111 Coastwise endorsement (46 U.S.C. §12111).

The several maritime cabotage laws of the United State including the Jones Act are formally known in U.S. jurisprudence as the “coastwise laws of the United States” and a “coastwise endorsement” on a U.S. vessel’s federal registration document entitles it to engage in domestic waterborne commerce.

The McCain amendment would qualify 46 USC §12111 (a) 2 (A) that currently states coastwise eligibility requires a vessel “was built in the United States” with the exemption, “The requirements of subsection (a) shall not apply to an oil or gasoline tanker vessel and a coastwise endorsement may be issued for any such tanker vessel that otherwise qualifies under the laws of the United States to engage in the coastwise trade.’’  This would make foreign built tank vessels eligible for domestic trading providing that it qualifies in all other respects with the coastwise laws.

We understand that additional votes on the Senate floor regarding the various pending second degree amendments to SA 2953 are anticipated throughout the week of Monday, February 1, 2016. The fate of Sen McCain’s Jones Act amendment should be known by Friday, February 5, 2016.  If Sen McCain cannot obtain a vote on his amendment during the week, we are informed he may seek to amend a future bill.

Previous McCain Jones Act legislation

Sen McCain previously introduced two identical pieces of legislation proposing to entirely eliminate the domestic build requirement for all coastwise eligible vessels from tug boats to large crude oil tankers; once as a standalone bill and the other an amendment.

These previous two pieces of legislation also repealed several long standing exemptions to the U.S. build requirement for vessels captured in war, forfeited for a breach of U.S. law, and wrecked on a U.S. coast.  Eliminating the domestic build requirement would have made these exemptions superfluous and properly repealed.

The standalone bill “Open America’s Waters Act” (S. 3525, 111th Congress, 2nd Session) was introduced on June 23, 2010, during the events surrounding the Macando Prospect well blowout and the Deepwater Horizon drilling rig explosion in April 2010.  The bill was not acted upon and died at the end of that Congress.

Subsequently, Sen McCain submitted on January 13, 2015, an amendment to the Senate version of The Keystone XL Pipeline Act.  The language in the amendment was the same as in the standalone bill of 2010.  The amendment was not taken up by the Senate.

For a complete explanation of Sen McCain’s prior legislation see “McCain challenges Jones Act build and ownership requirements,” January 20, 2015.

Conclusion

The Jones Act industry is wholly opposed to eliminating or modifying the domestic build requirement for several reasons.  The most important is the added layer of protection afforded to them by the build requirement especially for oceangoing ships.

The cost of building oceangoing ships in the U.S. is now approximately five times the cost of building comparable ships in South Korea and Japan. The extraordinarily high cost of shipbuilding in the U.S. creates a nearly insurmountable barrier to entry for new entrant competitors to enter the domestic shipping market.

Because foreign competition in the coastwise trades is strictly prohibited, the vessel owners and operators do not bear the cost of high domestic ship construction costs; rather they pass it along to their customers – the cargo owners known as shippers – and ultimately the broader economy and consumers.

We feel this most acutely in the noncontiguous jurisdictions – Alaska, Guam, Hawaii and Puerto Rico – due to our complete reliance on ocean shipping for interstate surface transportation, and are disproportionately affected as compared to those in the contiguous U.S.

 


 

References:

Congress.gov

Senate Bill 2012 Energy Policy Modernization Act of 2015
https://www.congress.gov/bill/114th-congress/senate-bill/2012/text

Report [To accompany S. 2012]
https://www.congress.gov/114/crpt/srpt138/CRPT-114srpt138.pdf

Senate Amendment 2953 to S 2012
https://www.congress.gov/amendment/114th-congress/senate-amendment/2953

Amendments introduced to S. 2012
https://www.congress.gov/bill/114th-congress/senate-bill/2012/amendments?page=3
Total 190
Sen McCain SA 3037

To waiver the Jones Act restrictions for oil and gasoline tankers
Senate Amendment 3079
Submitted by U.S. Senator John S McCain (R-AZ)
January 28, 2016
https://www.congress.gov/amendment/114th-congress/senate-amendment/3079

Heritage Foundation
“NO” on Energy Policy Modernization Act (S. 2012)
http://heritageaction.com/key-votes/key-vote-no-on-murkowski-cantwell-energy-policy-modernization-act-s-2012/

Senate Committee Approves Major Energy Bill with Science Provisions
American Institute of Physics
Publication date:  1 September 2015
Number:  115
https://www.aip.org/fyi/2015/senate-committee-approves-major-energy-bill-science-provisions

On July 30, the Senate Energy and Natural Resources Committee approved, by a bipartisan vote of 18 to 4, omnibus energy policy legislation, sending the bill to the full Senate for consideration.

Jul 30 2015
Business Meeting on 20 Agenda Items (Continued)
366 Dirksen Senate Office Building 10:00 AM
http://www.energy.senate.gov/public/index.cfm/hearings-and-business-meetings?ID=17a3a637-d168-43ab-a293-5667f0da3715

On Thursday, July 30 at 10:00 a.m., the Committee on Energy and Natural Resources will continue its business meeting that started on Tuesday, July 28 to continue consideration of the following items on the agenda:

Jul 22 2015
2012 – The Energy Policy Modernization Act (EPMA)
A BIPARTISAN BILL FOR A NEW ERA OF ENERGY IN AMERICA
http://www.energy.senate.gov/public/index.cfm?p=legislation&id=87D9E1CF-1B96-4815-9D05-387798EFAEA7

Subsequently, on July 22, 2015, the Chairman and Ranking Member circulated to Members of the Committee a draft of an original bill drawn from a combination of approximately 50 of the measures considered during the legislative hearings.

The Committee marked up the draft bill over the course of three days in an open business meeting starting on July 28, 2015 and continuing on July 29, 2015 and July 30, 2015. The Committee considered 59 amendments, of which 34 were adopted, nine were rejected, and 15 were offered and withdrawn. The Committee on Energy and Natural Resources met in open business session on July 30, 2015 to consider the draft, and ordered an original bill favorably reported.

Managers’ Amendment to S. 2012
In the nature of a substitute
http://www.energy.senate.gov/public/index.cfm?a=files.serve&File_id=9EC8A0A5-CA3F-434D-85C3-EAD30B040925

McCain challenges Jones Act build and ownership requirements
Michael N Hansen
Hawaii Free Press
January 20, 2015
http://www.hawaiifreepress.com/ArticlesMain/tabid/56/ID/14399/categoryId/103/McCain-challenges-Jones-Act-build-and-ownership-requirements.aspx