The Interplay of the Jones Act, Eagle Ford Shale and Domestic Shipping

The Houston Jones Act attorneys at Denena & Points note that just recently the Wall Street Journal (WSJ) ran an interesting article examining the interplay of the Act’s provisions and domestic economic activity. (The Wall Street Journal, John Bussey, 9/13/12.) The WSJ article came down heavily in favor of bringing in foreign ships and crews to handle domestic economic activity.
The thrust of the article follows a long tradition in recent decades of giving over all domestic economic activity to foreign interests. The basic argument is that at some level foreign providers are always cheaper. (They aren’t.)

But even if you accept that argument, to whom do the benefits of the cost savings flow? Any monetary benefits seem to always stay firmly in the pockets of a top few executives and other interests. Our Houston Jones Act attorneys notice that they do not seem to flow down to you or me.

For example, one of the points made in the WSJ article was that the U.S. Gulf area could serve as a hub for the shipment of much new oil to the Northeast, most of it from the Eagle Ford Shale development in Texas, but for a lack of U.S. Jones Act ships. For those who might not know, the Jones Act (aka The Merchant Marine Act of 1920), requires that cargo hauled between U.S. ports must move on U.S.-owned vessels that are operated by a U.S. crew.

Our Houston Jones Act attorneys will ignore for the moment, as the WSJ article did, the danger presented by having hordes of additional foreign ships plying the 3,000-mile long U.S. Intracoastal Waterway, the shore of which is generously dotted with refineries, chemical plants, and storage tanks for combustible substances. The WSJ article states that oil shippers are relying heavily on rail transport to move domestic oil to the Northeast.

Let’s look for a moment at the locations of the two major U.S. oil sources: The Bakken shale in land-locked North Dakota and Montana, and the Eagle Ford Shale in equally land-locked West and South Texas, bordering on Mexico. It would require trucks or rail to haul this oil to ships on the various coasts before a vessel could port the stuff up the Northeast.

One comment in the WSJ article estimates that foreign ships could move oil from the Gulf to the Northeast for $1.20/barrel rather than $4.00/barrel. It doesn’t mention the cost to transport the oil to the Gulf first from its land-locked sources. Perhaps it’s actually cheaper to keep the domestic product on rails from the two shale developments rather than first taking it to the Gulf for movement by vessel.

In any case, our Houston Jones Act attorneys expect that the savings estimate doesn’t present the full story. And as mentioned above, I don’t expect any of the shipping cost savings would be flowing to you or me. Domestic gasoline prices remain high regardless. A large amount of that price consists of various taxes. Gas prices have skyrocketed even as domestic production has increased. And the prices have stayed at their high levels, while oil companies reap unprecedented profits.

One bright note in the WSJ article was a mention of the newly commissioned U.S.-built tanker the American Phoenix. The Phoenix had just taken a shipment of Eagle Ford Shale oil from Corpus Christi, TX to New Jersey. The Phoenix is a symbol of renewal. Let’s hope that the felicitous name of the tanker might herald a renewal in U.S. manufacturing, domestic trade, and economic activity to benefit all of us who live here in America.

Our Houston Jones Act attorneys believe in the Jones Act and the job and injury protections that it provides to U.S. seamen. We’ve dedicated our professional lives to helping injured victims in need of protection and financial relief for their undeserved injuries. Contact us for a free and confidential legal consultation if you’ve been injured in maritime activity and you need help obtaining the financial recovery that you deserve.