US Energy Exports

ICS is concerned by recent developments that may signal a more protectionist approach by the United States with respect to the carriage of its energy exports, which have continued to increase as a result of the ‘shale revolution’ and the lifting of the 40 year prohibition on the export of crude oil that was enacted by Congress under the previous Administration. 

In February 2017, Congressman John Garamendi introduced ‘The Energizing American Maritime Act’ proposing new legislation which would require 30% of all American exports of crude oil and LNG to be transported on U.S. flag vessels by the year 2025, with 15% to be carried on U.S. flag ships by 2020.

Similar proposals have been made in recent years which were subsequently watered down following interventions by the State Department and the office of the U.S. Trade Representative, which were conscious of the United States’ free trade commitments in the context of ongoing negotiations at the World Trade Organization about maritime services. However, following the election of President Trump, this latest attempt at cargo reservation could possibly gain more traction.
 
A central focus of the new U.S. Administration is stimulating the economy and increasing U.S. jobs, and in theory such a measure would secure employment for many U.S. seafarers, as it is mandatory to employ them on any U.S. flag ship. It is therefore not impossible that the new Republican Administration could support such legislation, even though it has been introduced by a Democrat Congressman.

Energy security is a very sensitive political issue in the United States, and there are vested interests, especially in the U.S. shipbuilding industry, as well as the seafarers’ unions, which are seeking to link concerns about jobs and defence to the growth in energy exports being carried on non-U.S. ships. Because of the significantly higher costs associated with employing U.S. seafarers (which is a U.S. flag requirement) carrying energy exports on U.S. flag tankers would of course be far more expensive than using non-U.S. ships. However, the danger is that American oil companies might possibly see this as a price worth paying if this was the cost of being able to continue exporting U.S. crude overseas. 

There are currently no U.S. flag LNG carriers and virtually all U.S. crude tankers are confined to protected Jones Act trades. Unlike ships in cabotage trades, there is no absolute requirement for the few U.S. flag ships that operate internationally to have been built in the United States. But U.S. shipbuilding interests may nevertheless hope to benefit from any move towards a more protectionist agenda, however unlikely the prospect of them building economically viable ships in practice. 

More generally, ICS is very concerned that any discussion of cargo reservation in the United States could give encouragement to other nations that might be contemplating similarly protectionist measures. This includes Russia, which is currently consulting on a law to restrict the carriage of Russian hydrocarbons on non-Russian flag ships (although it is understood that this is primarily aimed at Russian owned ships which flag with open registers). 

In co-operation with the Consultative Shipping Group of governments (which represents those maritime administrations which are committed to free trade principles in shipping) and their transport attachés in Washington, ICS members will be monitoring this and any similar U.S. developments very closely during 2017.


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