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Testimony: Kudos to Maui County resolution seeking Jones Act waiver

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration April 1, 2022, by the Maui County Council.

_______________

To: Maui County Council
      Alice Lee, Chair
      Keani Rawlins-Fernandez, Vice-Chair

From: Grassroot Institute of Hawaii
            Ted Kefalas, Director of Strategic Campaigns

RE: Resolution 22-90 — “URGING THE UNITED STATES SECRETARY OF HOMELAND SECURITY TO TEMPORARILY WAIVE JONES ACT REQUIREMENTS FOR OIL IMPORTED TO HAWAII”

Comments Only

Dear Chair and Council members:

The Grassroot Institute would like to offer comments on Resolution 22-90, which would urge the U.S. Secretary of Homeland Security to temporarily waive the federal maritime law known as the Jones Act for oil imported to Hawaii.

The background for this resolution is that President Joe Biden banned in early March the importation to the U.S. of Russian oil, liquefied natural gas (LNG) and coal, in response to the Russia-Ukraine conflict, leaving parts of the U.S., and Hawaii especially, highly vulnerable to fuel shortages. 

Our islands already are suffering from a run up in fuel prices; AAA Hawaii reported yesterday that the average regular unleaded gas price for Hawaii is $5.20, which is 11 cents higher than last week and a new record for the state. 

On Maui and throughout Hawaii, such fuel prices will reverberate throughout the economy, increase the cost of many goods and services and threaten our future well-being. 

One of the reasons for this price spike is because Russia typically supplied a quarter to a third of all oil imported to Hawaii. The state’s only refinery, Par Hawaii, has said it will turn to alternative sources to replace the imports from Russia, but because of the Jones Act, accessing oil from the U.S. mainland is too expensive — which is why Hawaii is almost wholly dependent on foreign fuel imports to begin with.

This 1920 law requires all goods shipped between U.S. ports to be on ships that are U.S. flagged and built, and mostly owned and crewed by Americans — and that has resulted in significantly higher build and operating costs for Jones Act vessels.

Ironically, the Jones Act was supposed to protect America’s national security, but it is precisely because of the Jones Act that Hawaii is almost wholly dependent on foreign fuel sources and  especially vulnerable among U.S. states to fallout from the crisis in Ukraine.

A waiver of the Jones Act would give Hawaii much-needed purchasing flexibility and help ensure its energy security. This would allow Hawaii to access less expensive oil from other U.S. states as opposed to foreign countries.

The Grassroot Institute of Hawaii and U.S. Rep. Ed Case recently wrote letters to President Biden requesting a one-year Jones Act exemption for Hawaii. 

In addition, U.S. Rep. Case has proposed HR6974 in the U.S. House of Representatives to exempt certain vessels transporting crude oil, petroleum products and LNG from the Jones Act for the duration of the ban on Russian imports.

We appreciate the work done by the Maui County Council to address this issue and offer only one slight amendment to the resolution. 

We suggest the Maui County Council strike any instance of “United States Secretary of Homeland Security” in this resolution and replace it with “President of the United States.” 

That’s because a Jones Act waiver from the Secretary of Homeland Security is limited by law to 10 days and can only be extended to a maximum of 45 days. Meanwhile, there is precedent for the president to waive the Jones Act for a longer period of time through an executive order. 

Otherwise, this resolution excellently conveys the severity of the current situation to our congressional delegation, and would be a good start toward increasing Maui’s energy security.

Thank you for the opportunity to submit our comments.

Sincerely,

Ted Kefalas
Director of strategic campaigns
Grassroot Institute of Hawaii
__________

4-1-22 Ted Kefalas oral testimony to the Maui County Council

Ted Kefalas: Aloha Chair [Alice] Lee and Council members. My name is Ted Kefalas. I’m the director of strategic campaigns at the Grassroot Institute.

My internet is a little spotty right now, so if I drop out, please bear with me, or I can try to call back in.

We’d like to offer our comments on Resolution 22-90. Our organization has studied the Jones Act extensively and commissioned an independent study in July 2020 by John Dunham & Associates. This study concluded that the Jones Act costs the Hawaii economy $1.2 billion annually.

As a result of the Jones Act, Hawaii has typically imported several million barrels of Russian crude oil every year. It’s estimated that Russian oil previously accounted for at least 25% of Hawaii’s supply.

‘That means that local residents in Hawaii are left to bear a disproportionate share of the burden as a result of president Biden’s recent ban on Russian oil, liquid natural gas, and coal.

A waiver of the Jones Act would give Hawaii a much-needed purchasing flexibility and help ensure our energy security. This would allow Hawaii to access less expensive oil from other U.S. states, as opposed to foreign countries.

In addition to Congressman Ed Case’s letter that was attached to the resolution, the Grassroot Institute also wrote a letter to President [Joe] Biden, requesting a one-year exemption of the Jones Act for Hawaii.

We appreciate the work done by Councilman [Mike] Molina to address this issue. We would like to offer a few slight amendments to this resolution.

First, we suggest the … [signal breaks up]

Lee: Repeat your recommended amendments.

Kefalas: Can you hear me now?

Lee: Yes.

Kefalas: Our first recommended amendment is to replace the instance of the “United States Secretary of Homeland Security” with the “President of the United States.”

That’s because the Jones Act waiver from the secretary of Homeland Security is limited by law to only 10 days and can only be extended for a maximum of 45 days. Meanwhile, the president can waive the Jones Act for a longer period of time through an executive order.

In addition, HR6974, which was introduced by Rep. Case in the U.S. House, would apply to all petroleum movements. We think this resolution could be stronger if it included similar language rather than just in talking about oil.

Finally, it may be helpful to request a government task force to study this issue and examine the source of all of the state’s petroleum imports, as well as the various factors that determine sourcing like anchor costs.

Otherwise, we feel this resolution excellently conveys the severity of the situation to our congressional delegation. Mahalo for your time and consideration.

Lee: Thank you, Mr. Kefalas. Members, questions? Member [Gabe] Johnson.

Johnson: Here. Good morning, Ted. Nice to see you. It’s very rare that I agree with Grassroot. I give you shout out for that.

You said one year is the recommendation. Does your institute think that a longer term than one year, like, would you go as far as permanently saying that?

Kefalas: I’m sorry, you cut out there for a second.

Johnson: I beg your pardon, Ted. Let me try to rephrase that, ask it again.

You mentioned one year was how long you would like to have the Jones Act suspended. Do you or your institute feel that permanently suspending the Jones Act would be helpful as well?

Kefalas: … We originally asked for a one-year waiver. I’m not sure if you can hear me right now, but we originally asked for a one-year waiver. We are really asking for a waiver for as long as the Russian oil ban is going on.

Johnson: Thank you for that clarification, Ted. Chair, I have no further questions.

Lee: Other questions? Member [Tamara] Paltin.

Paltin: Thank you, Chair. I agree with Mr. Johnson. Thank you, Mr. Kefalas, for your testimony.

I just wanted to know if you could clarify what you said about being able to access oil source from America. Is it that currently American ships can’t come from America to Hawaii, or we would be using foreign flagships from America to come to Hawaii? I just didn’t understand that part.

Kefalas: The biggest thing that we’re advocating for [is] the ability for a foreign vessel to transport oil from the mainland to Hawaii. Right now, foreign ships are transporting oil previously from Russia, but from Libya and from other countries because it’s cheaper to import that oil from a foreign country as opposed to shipping it on a Jones Act-compliant ship, of which there are limited amounts.

Shipping it on a Jones Act ship from the mainland to Hawaii is much more expensive. That’s why we previously sourced from mostly foreign sources.

Paltin: Thank you.

Lee: Any more questions? Member Molina.

Molina: Yes. Thank you very much Madam Chair, and good morning, Mr. Kefalas. Thank you for your testimony and for your work in the Grassroot Institute on this matter.

Just for clarification, can you cite where on the resolution we should make that change to, I guess, have the reso directed to President Biden instead of the Homeland Security official, Mr. [Alejandro] Mayorkas?

Kefalas: I’m sorry, Councilmember, you keep cutting out. My internet is pretty spotty.

I believe you were asking about where we should include the change from Secretary of Homeland Security to the president.

Molina: Correct. …

Just a thought, maybe instead, Mr. Kefalas, what might make it easier, if you could send those recommended changes in writing to the Council, if possible, and then we’ll take a look at it and find out where best to consider those amendments on the resolution.

Kefalas: Sounds good. Sorry about that as well. Sorry about that, everybody. Thank you for the opportunity to testify this morning.

Molina: Thank you very much, Mr. Kefalas. Thank you, Madam Chair.

Lee: Thank you. Member [Kelly Takaya] King.

King: Thank you, chair. Aloha Mr. Kefalas. Thank you for your testimony.

I just wanted to ask a question about the — because the Grassroot Institute, you’re listed as a conservative and libertarian institute — are you at all funded by the petroleum industry or is it independent?

Kefalas: No, mam, we have close to 400 independent donors. We’re not funded by any one petroleum institute or anything like that. We are an independent organization.

King: Great.

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