Proposed CBP Jones Act changes could cause problems, API study warns

There could be significant damages from the US Customs and Border Protection Agency’s (CBP) proposed modifications of its rulings related to the use of Jones Act vessels in offshore oil and gas activity, a report commissioned by the American Petroleum Institute warned.

This story was updated Apr. 5.

There could be significant damages from the US Customs and Border Protection Agency’s (CBP) proposed modifications of its rulings related to the use of Jones Act vessels in offshore oil and gas activity, a report commissioned by the American Petroleum Institute warned.

The proposed changes, which the US Department of Homeland Security agency outlined in a Jan. 10 general notice, potentially could cost many jobs, reduce US oil and gas production, and cut federal and state government revenue, the Calash Ltd. report said.

“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,” API Upstream and Industry Operations Group Director Erik Milito said on Apr. 4 as the trade association released the study.

“[It] also concludes that these changes would have an abrupt negative impact on oil and gas development and investment in the Gulf of Mexico, further impacting consumers and businesses and substantially decreasing government revenue,” he added.

The Calash economic report said CBP’s proposed Jones Act-related modifications could:

• Lead to losses in the range of 30,000 industry-supported jobs in 2017, with as many as 125,000 jobs gone by 2030. Gulf of Mexico states would be the most affected by these job losses, it said.

• Reduce US oil and gas production by 23% from 2017 to 2030.

• Cut government revenue by more than $1.9 billion/year during the same period.

• Lower offshore oil and gas spending by $5.4 billion/year.

• Slash US gross domestic product by $91.5 billion during 2017-30.

Noting that US President Donald Trump’s recent executive order on energy independence was an important step toward increasing American competitiveness, Milito said CBP’s proposed changes would undermine the order’s purpose by placing unnecessary and harmful burdens on US energy production.

“These proposed changes to the rulings should be immediately withdrawn in order to protect US energy security and allow for consumers and businesses to continue benefitting from America’s energy renaissance,” he said.

In a response, the Offshore Marine Service Administration in New Orleans said the report contained erroneous claims and misguided research. “This study is a desperate attempt by companies promoting foreign workers to distort facts to enable them to continue to skirt US law,” OMSA Pres. Aaron Smith said on Apr. 4.

“The only relevant economic impact is the adverse impact that CBP’s erroneous rulings have had for decades on US ship owners, mariners, and shipyards,” Smith said. “CBP’s course correction ensures that more ships will be built in US shipyards employing US citizens. This is why 33 members of Congress signed a letter to US Homeland Security Secretary John F. Kelly urging him to support the CBP and affirm the congressional intent of the Jones Act.”

Contact Nick Snow at nicks@pennwell.com.

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