Trump weighs Jones Act waivers for LNG shipments

President Donald Trump is considering allowing US LNG facilities to ship their fuel to Puerto Rico and other domestic ports without having to transport their cargoes on US-built vessels, three industry officials said.

The possible waivers from the century-old Jones Act would lift domestic shipping requirements that US LNG producers say have made it difficult to supply other parts of the country that are reliant on imports of the fuel, such as New England and Puerto Rico. Those areas have instead sometimes imported fuel from thousands of miles away on foreign-flagged LNG vessels.

Trump discussed the potential for waivers with administration officials this week and is set to meet next week with members of the US Congress to discuss it further, according to two industry officials. That could tee up a decision soon on the issue, which was triggered in part by a 20 December request from Puerto Rico for a waiver that it said would enable it to purchase US LNG.

At that meeting, administration officials argued for and against the waiver, according to an attorney familiar with the discussions.

The White House declined to comment.

The Jones Act requires shipments between US ports to occur on US-flagged, built and crewed vessels. The administration by law can only grant a waiver if it concludes such an exemption would be "in the interest of national defense."

But the US does not have any large Jones Act-compliant LNG carriers.

Critics say the Jones Act raises shipping costs and harms islands such as Puerto Rico. And in recent winters New England has sometimes imported Russian LNG, as the region cannot get enough gas from the nearby Marcellus field to meet peak demand because of regional pipeline constraints.

But the law has powerful defenders in Congress who say it supports national security and shipbuilding jobs.

Oil and gas industry officials have been among those prodding the administration to grant Jones Act waivers for US LNG, in part based on an appeal that doing so would support Trump's push to achieve "energy dominance." Republican energy lobbyist Michael McKenna said the law has meant large profits for a handful of shipbuilders but has harmed many others in the US.

"It is a relic that dates from around the time of the War of 1812 that is impeding the president's energy agenda," McKenna said.

But supporters of the law are skeptical that existing US LNG facilities have the spare capacity to start sending shipments to Puerto Rico or New England. They also argue approving waivers will undermine US shipbuilding, crater a budding market for US-built LNG bunkering vessels and create a possible backdoor that would undermine the broader Jones Act.

"This waiver will do absolutely nothing but undercut the 310,000 Americans working in the shipbuilding industry, preventing their employers from securing access to the financing necessary to build any more ships," Offshore Marine Service Association president Aaron Smith said.

LNG industry officials say approval of Jones Act waivers could have an effect on spot prices, but they doubt buyers in New England or Puerto Rico would be willing to sign the types of long-term contracts needed to support the construction of new US LNG export facilities. The waivers would also likely get tied up in litigation if they are approved, industry officials say.

Puerto Rico's government, in its December waiver request, asked for a 10-year waiver from the Jones Act that would automatically terminate "if and when" a Jones Act-eligible LNG carrier becomes available.