Valero Secures Biden’s First Jones Act Waiver for Foreign Tanker

UPDATE: The Biden administration has issued a second waiver of U.S. shipping requirements as it seeks to get more fuel to the East Coast in the wake of the Colonial Pipeline shutdown that caused tanks and filling stations to run dry. The waiver, announced late Thursday night, gives an unnamed company a limited exemption. Homeland Security did not provide any details about the recipient of the new waiver or how long it would be valid.

By Jennifer A. Dlouhy (Bloomberg) –The Biden administration temporarily eased century-old U.S. shipping requirements so a foreign tanker could transport gasoline and jet fuel to the East Coast for Valero Energy to the East Coast, according to two people familiar with the matter.

The waiver announced on Thursday gives the refiner a limited exemption from 101-year-old Jones Act requirements that goods transported between U.S. ports be carried on domestically built and crewed ships.

Colonial Pipeline – To Waive Or Not To Waive The Jones Act

Homeland Security Secretary Alejandro Mayorkas announced the waiver without specifying the recipient. A White House official later said the exemption applied to one tanker but other waiver requests were under consideration.

“We’ll grant additional waivers if necessary,” President Joe Biden said in remarks at the White House.

The move is designed to address fuel shortages spurred by the cyberattack on the Colonial Pipeline, which shut down a major artery for gasoline, diesel, and jet fuel across the U.S. East Coast. Even with shipments resuming Wednesday evening, it’s unclear how long it will take for the network to return to normal.

Valero didn’t comment on the waiver but released a statement that said it’s “working with the government to help supply fuel for those areas impacted by the pipeline outage.”

Gasoline stations from Florida to Virginia ran dry after Colonial Pipeline Co. was forced to take systems offline late last week, and pump prices soared above $3 a gallon for the first time in six years.

“This waiver will enable the transport of additional gas and jet fuel between the Gulf Coast and East Coast ports to ease supply constraints,” White House Press Secretary Jen Psaki said in a statement.

While the government has temporarily lifted U.S. shipping requirements to combat fuel shortages after major storms, the issue is politically fraught. The Jones Act is championed by some of the nation’s biggest shipbuilders and vessel operators, as well as their allies on Capitol Hill. It also has the backing of a key Biden constituency in organized labor, including the Seafarers International Union.

The American Maritime Partnership, a group that represents U.S.-flagged ship owners and has opposed efforts to scale back Jones Act protections, said it didn’t object to “the targeted approach of the administration.”

But, Mike Roberts, the group’s president said in a statement, that it “strenuously encourages all policy makers to hold accountable those who seek to benefit from any waiver to avoid undermining American jobs and consumers.”

Waiving the requirements allows foreign-flagged tankers to fill the supply gap left by the interruption to the pipeline. It would take an estimated six to seven days for a tanker to carry fuel from the Gulf Coast to New York Harbor. By contrast, a shipment of fuel from Europe could arrive in 10 to 14 days. A single cargo delivery into the East Coast is usually about 300,000 barrels (12.6 million gallons).

“We believe widespread panic buying, coupled with the one- to two-week time frame for fuel to reach delivery points along the pipeline created an opening for a non-U.S. tanker,” Height Capital Markets analyst Josh Price said in a research note for clients.

Under federal law, the U.S. could waive Jones Act shipping requirements if “necessary in the interest of national defense.” However, first, the Maritime Administration “would have to determine that qualified U.S.-flag vessels cannot meet the need,” said Charlie Papavizas, an expert in Jones Act law at Winston & Strawn LLP.

The Maritime Administration completed a survey of available Jones Act-compliant tankers on Tuesday, though the results have not been made public.

By Jennifer A. Dlouhy and Lucia Kassai. With assistance from Jordan Fabian and Jennifer Jacobs.

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