“Novel and problematic” Jones Act waivers for Puerto Rico

An odd situation of retrospective Jones Act waivers from the US Department of Homeland Security was revealed by communications from the US Department of Transportation’s Maritime Administration (MARAD). The waivers appeared to be the result of urgent requests from the Puerto Rican authorities because the US territory was running badly short of energy sources.

A MARAD determination letter revealed that there was a sudden weekend scramble to waive the Jones Act – which requires that vessels directly from one US port to another be sailed by US crew on US-flagged and owned ships – to avoid what Puerto Rico’s governor described as an imminent power emergency.

The letter was sent on Sunday October 16th by MARAD Administrator and US Maritime Service Commandant Ann Phillips to W. Richmond Beevers at the US Customs and Border Protection (CBP) in response to an urgent request that had been submitted on Saturday for a US-flag market availability survey required of MARAD as part of the Jones Act waiver process.

It appeared that the waiver request was made to the CBP on October 15th by Naturgy Aprovisionamientos (Naturgy) and Dominican Republic-based power company AES Andres, asking for a waiver for the next-day delivery of 30,000 cbm of LNG from the Dominican Republic. CBP sent the availability survey request to MARAD that same day, with a two-hour deadline of 17:00 Saturday.

The “temporary and targeted” waiver was not granted until the Sunday, by DHS Secretary Alejandro Mayorkas. The waiver was to “address the unique and urgent need for liquified natural gas in Puerto Rico.”

The waiver was the second issued retroactively by the DHS in response to relief efforts related to last month’s Hurricane Fiona. The first was requested by BP in late September to allow the foreign-flagged tanker GH Parks (IMO 9428334), to deliver diesel to the island. At the time of the request, GH Parks had already departed the US with the cargo.

Lobby group American Maritime Partnership (AMP) claimed that the GH Parks affair was an example of “theatrics of a foreign oil company to take advantage of the crisis”.

It has become apparent that in both cases the waivers were requested after the cargoes had already departed the US mainland – on foreign-flagged vessels – representing a situation that was described as “novel and problematic.”

Secretary Mayorkas said in a statement announcing the LNG waiver that “as with the previous waiver, the decision to approve was made in consultation with the Departments of Transportation and Energy to assess the justification for the waiver request and based on input from the Governor of Puerto Rico and others on the ground supporting recovery efforts,”

Jones Act LNG Waiver

According to the MARAD letter the waiver request was to allow Marshall Islands-flagged LNG carrier Methane Princess (IMO 9253715) to transport the LNG from the Dominican Republic to Puerto Rico. The issue was the cargo originally left Louisiana on a foreign-flagged vessel back on October 1 and had only been stored in the Dominican Republic. This meant that Jones Act restrictions applied for its transshipment. The waiver explicitly requested the delivery of the LNG cargo no later than Sunday, October 16.

The Marad letter raised the issue of conducting retroactive availability surveys.

“MARAD cannot conduct a retroactive market survey of vessel availability for the waiver request… because the relevant transportation commenced October 1st,” the letter states. Nevertheless, MARAD conducted the survey and “continued to engage industry members with capacity until 8:00 a.m.” on the day the delivery was supposed to be made.

The letter also left open the possibility that another waiver could be in the works. It ended with an apparent grievance against the unusual waiver request process. “The waiver request made by the Naturgy and AES is novel and problematic. We propose that we meet at your earliest convenience to discuss the survey process in such scenarios.”

In the case of the GH Parks MARAD conducted a retrospective survey and found six US-flag tankers that could have been available on the previous date.

Sam Norton, President of Overseas Shipholding Group which operates in both the Jones Act and international tanker markets, wrote on LinkedIn that “yet another ‘targeted waiver’ of the Jones Act was granted over the weekend; this time to allow US-sourced LNG to be transshipped from the Dominican Republic to Puerto Rico. Free market champions will cheer this development as one more example of the failure of the Jones Act to meet market needs at a reasonable price. Yet, anyone believing that consumers in Puerto Rico will benefit from this waiver are naïve.”

2009-built, Marshall Islands-flagged, 30,031 gt GH Parks is owned and managed by GY Shipco XII LLC of Majuro, Marshall Islands. ISM manager is Synergy Maritime Pvt Ltd of Chennai, India. It is entered with Gard AAS on behalf of GY Shipco XII LLC. For Hull it is entered with Hayfin Capital Management, with Gard as claims leader. As of October 20th the vessel was moored at Esquivel, Jamaica, having arrived from Houston, Texas, on October 19th.

2003-built, Marshall Islands-flagged, 93,899 gt Methane Princess is owned by Golar LNG 2215 Corp care of Golar Management Ltd of London, UK. ISM manager is Cool Company Management AS of Oslo, Norway. It is entered with Skuld (Skuld Oslo 2) on behalf of Golar Management Ltd. As of October 20th the vessel was underway off San Pedro De Macoris, Dominican Republic.