OSG Executive: U.S. Needs Jones Act


June 2012


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The head of an SIU-contracted company recently made a compelling case for maintaining the Jones Act – a time-proven law that benefits America’s national and economic security.


Morten Arntzen, president and CEO of Overseas Shipholding Group (OSG), addressed a large audience April 23 as he was being honored by the Marine Society of the City of New York. He devoted his speech to a 92-year-old statute that requires cargo moving between domestic ports to be carried on vessels that are crewed, built, flagged and owned American. Even though the Jones Act isn’t new and is strongly supported by (among others) the Obama administration and the U.S. Navy, the subject is timely because of misguided attacks against the nation’s freight cabotage law.


OSG in recent years has built 12 Jones Act product tankers and two articulated tug-barge units – investments of more than $1.5 billion.


“The U.S. Merchant Marine has played an integral role in our nation’s economic history and national security and the Jones Act has been our industry’s cornerstone for almost 100 years,” Arntzen stated. “It’s a good law that provides our nation with sound, stable, cost-effective transportation.”


He pointed out that the Jones Act fleet consists of 40,000 vessels that generate about 500,000 American jobs and more than $100 billion in yearly economic output. Arntzen also said that while his support for the law has never been stronger, he also is greatly concerned about its future.


“Support for the Jones Act in the U.S. runs deep – the law has been supported by every president of our generation and we can count our Navy among its strongest supporters,” he noted. “The support in Congress remains bipartisan and solid. Nevertheless, noise from the critics of the Jones Act has grown of late.


“Critics of the Jones Act decry it as protectionism,” he continued. “Yes, the Jones Act is sort of protectionist: It protects our industrial base, U.S. jobs and our national security. During Operations Enduring Freedom and Iraqi Freedom, U.S.-flag commercial vessels transported 57 percent of all military cargoes moved to Afghanistan and Iraq. The American domestic fleet also provided half of the mariners used to crew U.S. government-owned sealift vessels activated from reserve status. The U.S. Navy’s position is crystal clear: repeal of the Jones Act would hamper America’s ability to meet strategic sealift requirements and Navy shipbuilding. Does anyone in this audience think that we have evolved to a conflict-free world and that our Navy will never call us into action again?”


Arntzen pointed out that the U.S.-flag industry as a whole doesn’t object to waivers of the Jones Act if those waivers truly are necessary because of national emergency or when no U.S. vessels are available. By contrast, the industry objects to waivers such as the ones issued last summer allowing foreign-flag vessels to transport oil from drawdowns of U.S. Strategic Petroleum Reserves. As Arntzen observed, American-flag ships were available, and the situation wasn’t an emergency.


Additionally, he cited the Deepwater Horizon tragedy (which happened in 2010) as the launching point for “perhaps the most misguided attack against the Jones Act.” Arntzen recalled blatantly false accusations that the law somehow “inhibited the cleanup by blocking the use of foreign-flag skimming vessels, which were reported to be far superior in technology and number than American skimming vessels. A number of media outlets and pundits bought into this story and criticized the unwillingness of the president to waive the Jones Act. With some, the accusation stuck. As Mark Twain is alleged to have said, ‘A lie can travel halfway around the world while the truth is still putting on its boots.’”


He then pointed out that the Jones Act didn’t even apply at or near the spill site, and the law contains provisions allowing waivers for specialized foreign vessels if such ships are needed and no American ones are available. “The truth is, there were no magical foreign ships ready to handle anything American-flag vessels couldn’t already handle,” he said. “The fact is Jones Act did not inhibit the cleanup in any way; to the contrary, it helped.”


He emphasized that plenty of Jones Act tonnage is available to move barrels of gasoline to the northeast this summer “as a result of the various refinery closures in the Delaware Bay and the Caribbean.”


Along those lines, he also refuted the suggestion that utilizing Jones Act tonnage contributes to high gas prices.


“This is political math at its worst,” Arntzen said. “We are talking about a few pennies of difference. And, because transportation costs are so insignificant in the pricing equation and Jones Act movements of gasoline are a relatively small part of the supply chain, it won’t move the pricing needle for gasoline at all. At most it will put a penny or two of profits into an industry that is already more than adequately profitable…. Does anyone here think it is worth destroying the U.S. maritime industry so the oil industry in this country might make one or two cents more profit selling their internationally priced transportation fuel products to Americans?”


He concluded, “We, the American shipping industry, must band together to protect the Jones Act. Our voices must be loud, our convictions strong and our message clear: The Jones Act cannot be weakened if America is to fulfill its opportunities. Short-term waivers of political convenience will have an enormous long-term negative impact on the industry. I ask all of you to take a few minutes over the coming weeks to contact your elected officials and tell them how you feel about upholding our country’s maritime traditions and capabilities. Remind them of the hundreds of thousands of jobs it creates and the commerce it facilitates. Tell them our country needs the Jones Act to stay.”



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