Colonial Pipeline – To waive or not to waive the Jones Law – gCaptain
Through Salvatore R. Mercogliano, Ph.D. (gCaptain) The cyberattack on the Colonial Pipeline on Friday, May 7, 2021 resulted in the shutdown of a major conduit that supplies 45% of the fuel for the eastern United States. It is a 5,500-mile pipeline stretching from Texas to New Jersey, directly serving 14 states and 7 airports. It handles 100 million gallons of fuel per day. Its closure marks a serious attack on the interior infrastructure of the United States and has highlighted another critical deficit within the country, the lack of sufficient oil and coastal transportation resources to temporarily complete the shutdown. While many view the United States as a massive maritime power, with the world’s largest navy behind the facade, its trading capabilities have grown from number one in the world after World War II to 21st place in terms of the size of merchant navies.
With the shutdown of the pipeline, the eastern part of the United States depends on fuel stored at distribution sites along the grid. It is from these points that tankers and railroads distribute fuels to customers and nearby stations – the pipeline follows a domestic route from Houston, via Baton Rouge, Birmingham, Atlanta and Charlotte. It is currently unclear how long the pipeline’s computer systems will be down, or what damage has been done to the control systems. This means that as the reserves in the depots are depleted, alternative distribution routes must be established.
The Biden administration has already increased the maximum driving time for truck drivers from 11 hours per day to 14. However, even the largest trucks only carry about 9,000 gallons of fuel. To transport the necessary fuel to the eastern states, the nation will have to rely on tankers to load refined products along the Gulf coast and distribute them to ports on the east coast. The question is the amount of tonnage available and the number of vessels.
Coastal trade with the United States has been protected by coasting trade laws since the country’s inception. The last iteration of these laws dates right after World War I, when the world’s largest merchant fleets – those of Britain and Germany – suddenly became unavailable for America to transport its exports and imports. . This is akin to what’s currently happening in the ports of Los Angeles and Long Beach, with US exports languishing in warehouses and terminals as carriers favor returning empty containers to speed up cycling.
Fortunately, the United States had a large domestic fleet which was used for part of its international trade. After the war, the Merchant Marine Act of 1920 – called the Jones Act – created the country’s first maritime policy that covered many aspects of navigation, including stating that only construction, ownership, crew and American flags could carry goods between American ports; which remains in effect today.
This means that if tankers are needed to complete the pipeline, the country can call on 57 Jones Law-compliant tankers in the US fleet, including 44 on the Gulf and East coasts. These ships are widely used to transport distillate fuel to areas not served by the pipeline, such as Florida and New England. Or they haul crude oil to refineries in the mid-Atlantic. Currently, two of the major US oil carriers – Overseas Shipping Group (OSG) and Crowley Maritime – not only have vessels in service, but several vessels are not chartered due to the recent market downturn. These vessels can be rearmed and returned to service. The 44 tankers averaged about 45,000 deadweight tons, which equates to 8 million gallons of gasoline. With a daily capacity of 100 million gallons, it would take a large number of vessels to meet this requirement. A long-term commitment would eventually exceed the number of US-flagged tankers and tugs and articulated barges (ATBs) in the US inventory.
What are the alternatives to alleviate this situation?
The obvious solution would be to restore the pipeline. Without it, an assessment by Colonial Pipeline of the expected number of days that service will be interrupted is essential before formulating a coherent maritime strategy. If the shutdown will last more than a few days and deplete reserves at storage sites along the pipeline, then several courses are available.
First, as mentioned earlier, all available US flagged tankers and ATBs from US carriers – OSG, Crowley, Seabulk, Chevron, Alaska Tankers, and ConocoPhillips Polar – should be the first options for securing fuel transportation contracts. If US carriers are unable to provide the necessary tonnage and transport capacity, limited exemptions should be granted for foreign flag tankers to participate in the trade on a case-by-case basis, on a single trip basis.
Ideally, the entry of these ships into the US coasting trade should require that the vessels be readjusted and bareboat chartered to US companies so that they can manage them and replace their crews with US sailors. However, the timing of the shutdown may prevent this from happening, but if the shutdown is long-term, this should be taken into consideration.
The Biden administration may also have to make tough choices to limit fuel consumption in affected states. Even with sufficient fuel arriving at East Coast ports, it must be transported within the states, much longer than usual. In addition, fuel storage space is insufficient in many of these ports. The United States may need to use some of its tankers as floating storage to supplement onshore tanks.
Finally, this question must highlight the absolute vulnerability of the nation both in its internal infrastructures and in its maritime limits. The reason for the Jones Act was to ensure that the United States did not just have ships with American crews, but shipyards and repair facilities to maintain those ships. Today, China, the Republic of Korea and Japan account for more than 90% of the construction of commercial ships, and the Chinese merchant navy is the second in the world, with a navy in a similar position. Subsidies and protections are given to shipbuilders and operating companies, while such measures have been repealed for American companies.
If the problem is simply the transportation of goods, then the United States can rely on shipping and foreign companies to move their ocean and coastal cargoes. But since the United States is a world power, with global commitments, it needs not only military forces, but commercial elements to support them. Constant reform of all US maritime laws is needed, not repeal. This is a time when US shipping lines, the maritime administration and advocates of the US maritime industry should convey the true context of this situation and how dangerous the nation’s position is today. If this had happened last summer when few tankers were available for hire, it could have been costly. What if an adversary conducted this operation to coincide with military operations and made it impossible to charter non-American ships?
The question of waiving or not waiving Jones Law constantly reappears in an emergency. The attack on the pipeline by a suspected Russian criminal organization exposes the country’s danger not only to outside forces, but exposes the vulnerabilities of our infrastructure. We need to do what is right for Americans to make sure fuel does not become scarce. At the same time, we must take note of the problems facing our maritime infrastructure and the fact that we currently lack the national capacity to support a merchant navy which has been critical to our success in the two greatest wars of the 20th century. century, during the Cold War, and in a multitude of other conflicts.