Reinterpreting the Jones Act a Done Deal? Not So Fast

offshore construction vessels

The way the Jones Act works offshore is in focus again because of a recent proposal from Customs and Border Protection.

That agency proposed two days before President Trump was inaugurated to alter 25 rulings issued since 1976 and broaden where the Jones Act applies offshore.

The Jones Act community argues that those rulings were always wrong and should be changed. They are particularly focused on the fact that there is a community of foreign subsea construction vessels working in the U.S. Gulf of Mexico which they believe are undertaking activities which should be considered against the Jones Act.

The issue centers on the meaning of “vessel equipment” which has had a technical meaning covering items used by construction vessels in their daily activities — including things they might install like a pipeline connector.

The Jones Act community wants “vessel equipment” to mean what it means in common parlance — in other words, equipment that is needed for the safe navigation of the vessel and nothing more.

The exploration, development and production community argues that the rulings have always been correct and that Customs has no good reason for changing them now — since the Jones Act has not been changed and there are lots of ongoing projects and planning for projects based on those rulings.

That community points out that there are no Jones Act qualified vessels to undertake much of the deepwater work necessary to keep the offshore industry thriving, and trying to kick out the foreign vessels will boomerang on the Jones Act industry because it will slow offshore projects and lead to cancellation of others.

Not surprisingly, this issue will be much discussed during next month’s Offshore Technology Conference in Houston and will be a featured element in Marine Money’s Houston Offshore Finance Forum where Hornbeck Offshore Services Executive VP & General Counsel & CCO, Samuel Giberga, and Jonathan Waldron, Partner and Co-Chair of the Maritime Group at Blank Rome, will discuss “Reinterpreting the Jones Act for Offshore Construction Vessels” in a session led by Jones Act expert Charlie Papavizas of Winston & Strawn. The panel will precede a session featuring Hornbeck Chairman, President & CEO Todd Hornbeck, Gulfmark CEO & President Quintin Kneen, Harvey Gulf Chairman & CEO Shane Guidry and Laborde Marine’s Peter Laborde.

Public comments on the Customs and Border Protection proposal were due on April 18.

Things may move fast after that — or maybe not. In 2009 a similar proposal was made by Customs and then withdrawn in the face of opposition and converted to a rulemaking project — which then was also withdrawn and nothing surfaced again publicly until January 18, 2017.

The process is an interesting test for the Trump Administration and how it will prioritize its America-first strategy with its energy-everywhere strategy.