The Customs and Border Protection Agency’s (CBP) proposed modification and revocation of ruling letters related to its application of the Jones Act vessels in offshore oil and natural gas activity has the potential to cause “significant and damaging impacts” if the modifications were to become effective, according to a study released this week by the American Petroleum Institute (API), the largest U.S. trade association representing interests in the oil and gas industry.
According to the API report, impacts from proposed modifications may include the potential for significant loss of American jobs, reduced U.S. oil and natural gas production, and diminished revenues for federal and state government.
The proposed modifications, which the CBP published on January 18 just two days before President Trump took office, look change the CBP’s application of the Jones Act by restoring aspects of the Jones Act that would prevent non-Jones Act qualified vessels from transporting certain merchandise and equipment between coastwise points by modifying or revoking prior ruling letters.
“This report projects that the proposed changes to these long-standing rulings would have widespread negative impacts on American jobs and the national economy, as well as a damaging effect on our national energy security,” said API Upstream and Industry Operations Group Director Erik Milito. “The study also concludes that these changes would have an abrupt negative impact on oil and natural gas development and investment in the Gulf of Mexico, further impacting consumers and businesses and substantially decreasing government revenue.”
The CBP’s proposed modifications and revocations would represent a major change in U.S. maritime policy. Supporters of the CBP’s proposal, such as the American Maritime Partnership, the Shipbuilders Council of America, the Offshore Marine Service Association, and certain lawmakers in Washington, say the modifications will close loopholes and restore American jobs. But critics have warned that they could have unintended consequences and may prevent foreign flag vessels deepwater construction vessels from operating in Gulf of Mexico, where there is a need for highly specialized vessels.
According to the API study released this week, the CBP’s proposal could lead to job losses in the range of 30,000 industry supported jobs in 2017, with as many as 125,000 jobs lost by 2030. The report says there could also be a decrease in U.S. oil and natural gas production in the range of 23% from 2017-2030, while government revenue would decrease by $1.9 billion per year during the same time period. There could also be a decrease of offshore oil and natural gas spending in the range of $5.4 billion per year.
“President Trump’s recent executive order on energy independence was an important step toward increasing American competitiveness, and these proposed changes completely undermine the order’s purpose by placing unnecessary and harmful burdens on domestic energy production,” said Milito. “These proposed changes to the rulings should be immediately withdrawn in order to protect U.S. energy security and allow for consumers and businesses to continue benefitting from America’s energy renaissance.”
Earlier this week, the Offshore Marine Service Association (OMSA) announced that over 1,900 letters calling for timely and proper enforcement of the Jones Act have been sent to Congressional lawmakers since over a dozen maritime leaders representing the offshore marine service sector descended on Capital Hill to show their support of the CBP’s modifications, calling it “a ruling that would reward American workers, vessel owners, and U.S. shipbuilders with the creation of 3,200 new jobs.”
“The offshore service industry is ready, willing, and capable of completing the work covered by CBP’s action, having recently invested $2 billion in U.S. shipyards on vessels tailored to safely completing this work without impeding offshore energy exploration or production,” said Aaron Smith, President and CEO, Offshore Marine Service Association. “After nearly eight years of review, CBP is taking the correct action to restore the congressional intent of the Jones Act and open this market to U.S. mariners on U.S.-built vessels, owned by U.S. companies. Further delay will only hurt American mariners and shipbuilders while continuing to benefit foreign vessels, shipbuilders and crews, domestically operating contrary to U.S. law.”
The CBP has extended the comment period on the notice of proposed modification and revocation of ruling letters until April 18, 2017.
The API report can be found HERE.