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U.S. waives Jones Act to help get fuel to Northeast

Source: Thomson Reuters Foundation - Fri, 2 Nov 2012 09:11 PM
Author: Reuters
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* Foreign-flagged ships will be allowed to deliver fuel

* Waiver lasts through Nov. 13

* U.S. received only one waiver request

* Energy experts divided on level of relief from waiver

By Timothy Gardner and Ayesha Rascoe

WASHINGTON, Nov 2 (Reuters) - The U.S. government issued a rare waiver on Friday allowing foreign tankers in the Gulf of Mexico to supply the Northeast with fuel after Hurricane Sandy, but the extent of relief was uncertain since some ports in the region still lacked power.

The Department of Homeland Security's waiver of the Jones Act allows foreign-flagged vessels to begin shipping petroleum products, such as gasoline and diesel, from the Gulf of Mexico to Northeastern ports effective immediately. The shipments must leave the Gulf region by Nov. 13 and arrive in the Northeast by a week after.

With power still out at many ports and gasoline stations it was unclear how much fuel was needed immediately and how quickly it could get to customers.

DHS said it had received only one request from a company to waive the law. It did not identify the company.

The Merchant Marine Act of 1920, better known as the Jones Act, was created to support jobs in the maritime industry. It requires goods moved between U.S. ports to be carried by ships built domestically and staffed by U.S. crews.

The American Maritime Partnership (AMP), a domestic maritime industry group, said it was not aware of any cases where U.S. vessels had not been available to transport fuel, but it supported waivers in the aftermath of the massive storm.

"We will not oppose waivers that are necessary to facilitate delivery of petroleum products into the regions affected by Hurricane Sandy," AMP said in a letter sent on Friday to President Barack Obama and the heads of several government departments.

Benchmark New York Harbor gasoline futures dropped 5 cents, or 2 percent, on news of the waivers, which could allow shippers to divert cargoes that are enroute to Europe or Latin America to the depleted Northeast market.

NO URGENT NEED?

Craig Fugate, the head of the Federal Emergency Management Agency, told reporters that several government agencies were trying to figure out how many ships were available. He said the Energy Department had held a conference call on Friday with major suppliers.

"We're working ... on which ships can be potentially diverted to New York," Fugate said.

Shipping sources said the slow return of power to ports in the New York Harbor had them considering delivering fuel to nearby cities such as Boston, which could boost supplies available in the wider Northeast region.

Energy experts said the waiver might not bring immediate relief to fuel-strapped New York and New Jersey, where two refineries were shut by Sandy. But, in the longer term, shipping alternatives could help ensure steady supply.

"There appears to be no urgent need at the moment" for a Jones Act waiver, said Bob McNally, head of Washington-based consulting firm the Rapidan Group. He said shortages so far have been at the retail level rather than the maritime import level.

David Goldwyn, who headed international energy affairs at the U.S. State Department until early 2011, said the waiver could boost the ability to deliver fuel to the East Coast now that tankers that were set to go to Europe or other destinations can dock there without restriction.

"The travel from Gulf Coast to the East Coast is pretty quick," said Goldwyn, who currently runs Goldwyn Global Strategies, an energy research and strategy company.

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