U.S. shipbuilding industry fought changes, study says
by Andrew Cline, Josiah Bartlett Center for Public Policy
A federal government agency worked in the winter of 2019 to prevent New England from accessing adequate supplies of natural gas, emails recently obtained by the Cato Institute show.
Government is supposed to work on behalf of citizens, not special interests. But the U.S. Maritime Administration (MARAD), a subdivision of the U.S. Department of Transportation, has been working in coordination with the U.S. shipbuilding industry to prevent New England from importing domestic natural gas when supplies run short in the winter.
Why? To protect U.S. shipbuilders from foreign competition.
The Jones Act, a century-old federal law, requires that ships transporting goods between two U.S. ports use ships built in America, crewed by Americans and owned by American companies. That’s a problem for New England because no liquid natural gas tankers are in compliance with the Jones Act.
With no LNG tankers capable of legally bringing natural gas from Texas or Pennsylvania to Boston, New England governors have spent years pressing for waivers from this protectionist law. After the extremely cold winter of 2017-18, that effort was redoubled. But it was crushed with the help of MARAD, a move that put the entire region at risk of blackouts during periods of peak demand.
Through years’ worth of Freedom of Information Act (FOIA) requests, Cato Institute researchers recently exposed how MARAD lobbied to block the importation of domestic natural gas into New England even when the region’s supply constraints put lives at risk.
Cato scholar Colin Grabow laid out the sordid, outrageous story, which we summarize with permission here.
The background: In early 2016 the United States began large‐ scale exports of LNG following the opening of an export facility in Sabine Pass, Louisiana. As export levels increased, observers began to point out the Jones Act’s role in preventing this LNG from reaching U.S. consumers. In March 2018, for example, the Texas Railroad Commissioner sent an open letter to Congress noting the Northeast’s importation of gas from Russia instead of Texas because of the Jones Act. In August of that year, a group of New England governors floated the possibility of Jones Act modifications to help meet regional energy needs while that December Massachusetts released a comprehensive energy plan that repeatedly cited the Jones Act as an obstacle to obtaining domestic LNG.
In 2019, as New England elected officials pressed Washington for a Jones Act waiver, a senior MARAD official began lobbying others in the U.S. government, including the secretaries of energy and transportation, to oppose a waiver. MARAD also tried to stop Massachusetts’ waiver request, in part by giving the state false information about the status of its waiver request and one from Puerto Rico.
This is not speculation. Cato got the emails, which show MARAD officials collaborating with shipping industry leaders on messaging in the agency’s effort to block Jones Act Waivers for New England.
These emails come from January of 2019, just a year after New England came within two days of rolling blackouts because of a shortage of natural gas, according to ISO New England, the region’s power grid operator. The winter of 2017-18 was so cold that Massachusetts power generators burned through twice as much oil in two weeks as they did in all of 2016.
The CEO of ISO New England testified to the U.S. Senate Committee on Energy and Natural Resources in January of 2018 that New England’s access to natural gas was dangerously constrained.
“Bitter cold temperatures drove an increase in demand for natural gas, Gordon Van Welie said in his testimony. “However, we’ve known for several years that when it gets cold New England does not have sufficient natural gas supply infrastructure to meet demand for both home heating and power generation. Constrained pipelines resulted in substantially higher natural gas prices which led to much older and less efficient oil- and coal-fired power plants running ‘in merit.’”
It was no secret in Washington that New England was one long cold snap away from rolling blackouts.
Yet MARAD officials, in coordination with U.S. shipbuilding interests, succeeded in squashing the region’s effort to get an exemption from the Jones Act. This amounted to a federal agency putting the financial interests of one industry ahead of the health and safety of an entire region of the country.
With ISO New England and the Federal Energy Regulatory Commission again warning about the possibility of rolling blackouts if we experience another prolonged cold snap, there are renewed calls for a Jones Act waiver for New England. U.S. Rep. Chris Pappas has said he favors a waiver. (He said this on my radio show last week.)
Will New Englanders win this time? That depends not just on the political influence of shipbuilders and their unions, but on the influence of a federal agency that has aligned with them and against consumers. Needless to say, that’s not how government is supposed to work. It’s how government too often works under the corrupting influence of protectionist laws.
The author is executive director of the Josiah Bartlett Center for Public Policy, which since 1993, has been New Hampshire’s premier advocate for free markets and limited government.