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U.S. Government Expands Jones Act Waiver Regarding Fuel Shipping

December 3, 2012

The U.S. government expanded a Jones Act waiver regarding shipping requirements at the beginning of November for the purpose of allowing vessels flying a foreign flag to carry and transport components used in the production of gasoline. The expansion was a move to help increase fuel supplies to the East Coast, which had suffered destruction following Hurricane Sandy.

According to the Department of Homeland Security, the temporary lifting of the Jones Act, which requires ships traveling between U.S. ports to be flagged domestically, was done to allow foreign ships to carry gasoline, diesel and other petroleum products for the production of fuel among U.S. ports temporarily, to supply more fuel from the Gulf of Mexico refining hub. It expanded on a previous waiver that had been granted by the agency allowing foreign vessels to send oil tankers to the East Coast. The waiver, which was in effect until Nov. 13, required that fuel supply shipments leave the Gulf region by that date and arrive in the Northeast within a week.

Hurricane Sandy caused severe damage in the East Coast, particularly in New York and New Jersey. The damage disrupted pipeline flows to the Northeast, causing oil refineries and terminals to shut down, as well as closed the New York Harbor – one of the main ports for fuel delivery – causing shortfalls across the area.

Fuel supplies increased as the harbor’s fuel barges and pipeline operations were restored, but they were still functioning at subpar rates. Two refineries that lost power during the storm remained closed as the government issued the Jones Act waiver expansion and terminals in the harbor had not been restored to fully receive fuel shipments.

In addition, the Energy Department announced it was tapping the Northeast Heating Reserve for the first time to release roughly 48,000 barrels of ultra-low sulfur diesel for the Defense Department to distribute to responders in New York and New Jersey. The fuel was to be used for emergency equipment, including generators, as well as for motor vehicles.

Homeland Security said it only received one request from a company, which it did not identify, to waive the Jones Act. The act, once known as the Merchant Marine Act of 1920, is a federal law that was created to support and protect those who work in the maritime industry. Among its stipulations, the Jones Act requires goods moved between U.S. ports to be carried by ships built domestically and operated by U.S. crewmembers.

The American Maritime Partnership (AMP), a domestic maritime industry group, said it wasn’t aware of any instances in which U.S. vessels were not available to transport petroleum products, but supported waivers in the aftermath of Hurricane Sandy.

“We will not oppose waivers that are necessary to facilitate delivery of petroleum products into the regions affected by Hurricane Sandy,” read a letter AMP sent to President Barack Obama and the heads of other government departments.

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