API: Meddling with Jones Act will lead to job, production cuts

American Petroleum Institute, a U.S. industry body representing oil and gas companies’ interest, has slammed the recently proposed changes to the U.S. Jones Act claiming that, if adopted, they would negatively affect the country’s offshore oil and gas industry, and lead to job cuts.

The Jones Act, passed in 1920, prevents foreign-flagged ships from shipping merchandise between points in the United States. The U.S. Customs and Border protection in mid-January issued a document in which it proposes to revise several rulings and amendments to the Jones Act.

While the foreign-built and flagged ships have been prevented from transporting merchandise between the U.S. coastwise points, over the years some exceptions have been made for construction vessels working in the offshore oil and gas industry.

The foreign construction vessels have been allowed to carry aboard pipeline repair material; anodes; pipeline connectors; wellhead equipment, valves, and valve guards; damaged pipeline; and platform repair material. This was not seen as a Jones Act violation because the goods have been seen as a necessary equipment.

However, if the proposal made by U.S. Customs and Border Protection is materialized, foreign-flagged vessels would not be able to carry any of the “items” listed above, and would be violating law if they did.

Study: 30.000 jobs could be lost

 

In response to the proposed changes, API commissioned advisory firm Calash to study the economic impact of the modificiations to the Jones Act.

According to the study, the adoption of the proposal is projected to lead to a loss of up to 30 thousand jobs in 2017 and average decreased employment of over 80 thousand jobs from 2017 to 2030.

The report also projects a decreased Gulf of Mexico offshore oil and natural gas spending in the range of $5.4 billion on average per year between 2017 and 2030; An average reduction in oil and natural gas production in the range of 0.5 Million Barrels per day from 2017 to 2030; An average loss of more than $4.3 billion of GDP from 2017 to 2030; An average loss of more than $1.9 billion of government revenue per year from 2017 to 2030.

“This report projects that the proposed changes to these long-standing rulings would have widespread negative impacts on American jobs and the national economy, as well as a damaging effect on our national energy security,” said API Upstream and Industry Operations Group Director Erik Milito. “The study also concludes that these changes would have an abrupt negative impact on oil and natural gas development and investment in the Gulf of Mexico, further impacting consumers and businesses and substantially decreasing government revenue.”

“These proposed changes to the rulings should be immediately withdrawn in order to protect U.S. energy security and allow for consumers and businesses to continue benefitting from America’s energy renaissance.”

Calash has said that these projections are conservative, as the study has excluded the impacts of activity in the Alaskan, Pacific, Eastern Gulf and Atlantic OCS regions.

IMCA: U.S. needs foreign vessels

 

Coinciding with the release of API’s report, International Maritime Contractors Association has issued its own study on the potential impacts of the proposed changes on the marine construction vessel market, in which it has found that, should the changes take effect, this could effectively stop deepwater developments (in the U.S.) because there would be no domestic capacity to install the facilities.

In its report, the IMCA found that the U.S. fleet in its current size and capacity is incapable of supporting the deepwater Gulf of Mexico construction market on its own.

“This has always been the case and unlikely to change,” the IMCA said.

The U.S. fleet has been referred to as “coastwise fleet,” while the foreign-flagged ships are “non-coastwise qualified” fleet.

According to the IMCA’s findings, the coastwise fleet cannot meet the needs of the GoM for deepwater construction activities beyond 1,000 meters (3,280 feet).

“There are no coastwise qualified pipelay vessels, no coastwise qualified heavy lift vessels, and only one coastwise qualified well servicing vessel. Despite plenty of opportunity, historically the coastwise sector has not invested in larger, higher value deepwater capable construction and IRM assets outside of the Light Construction Vessel segment,” the IMCA said.

“Should the proposed CBP modifications and revocations take place, the impact on business in the Gulf of Mexico could be catastrophic, simply because there would be no capacity to install the production facilities offshore. The resulting impact on the whole oilfield supply chain in the USA could cause a collapse in industry confidence and countless job losses onshore and offshore. A strategy intended to support a limited number of vessel owners could well have enormous unintended consequences for the whole US offshore oil and gas industry,” the IMCA added.

 

All those in favor…

 

While the IMCA and API are against the changes to the Jones Act, the American Maritime Partnership (AMP) – which describes itself as the voice of the U.S. maritime industry – feels U.S. Customs & Border Protection (CBP) move would “restore American jobs by correcting previous letters of interpretations of the Jones Act.”

In a statement in January, reacting to the proposed modifications to the act, AMP’s Chairman Tom Allegretti, said: “The men and women of the American maritime industry commend the U.S. Customs and Border Protection’s efforts to rightfully restore over 3,200 American jobs to the American economy and close loopholes that gave preference to foreign workers and foreign shipbuilding.”

“We applaud President Trump’s commitment to ‘buy American and hire American,’ and the correct and lawful interpretation of the Jones Act will ensure the preservation of American jobs and maintenance of the U.S. shipyard industrial base, both of which are critical to our economic security and national security.”

Offshore Energy Today Staff