Puerto Rico Pays More For American Energy Than Its Neighbor
Crowley Maritime, an American shipping company, recently announced that it raised the U.S. flag on a 31-year-old French-built LNG carrier to comply with the Jones Act—a 100-year-old law—finally allowing for U.S. LNG to be shipped from the U.S. mainland to Puerto Rico through a loophole in the protectionist law.Â
A Major Problem With Minor Relief
Over 100 years ago, Congress passed the Merchant Marine Act of 1920, better known as the Jones Act, requiring all goods transported between U.S. ports to be carried on ships that are built in the United States, owned by U.S. citizens, crewed by Americans, and flagged under the United States. While support for the Jones Act was built on maintaining a strong U.S. maritime industry and protecting national security, it has failed to live up to these promises.
Due to absurdly strict requirements, the Jones Act increases the cost of shipping and ship manufacturing by limiting competition in domestic markets and even inspiring collusion. These inflated costs have historically made it impossible for Puerto Rico to import LNG from the United States. Unlike the mainland, Puerto Rico can’t import LNG via trucking or rail and must instead import LNG using Jones Act carriers (which, until recently, didn’t exist).
There is, however, a minor workaround. The U.S. Coast Guard Authorization Act of 1996 grants coastwise authorization (which is required for transportation of U.S. LNG to Puerto Rico) to foreign ships built before October 19, 1996, so long as they meet the remaining Jones Act requirements. This technical exception allowed Crowley Maritime’s recently purchased American Energy, an LNG carrier built in France in 1994, to finally star
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