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Offshore Support Journal

Joint trade group challenges ‘myths’ about Jones Act changes

Mon 03 Apr 2017

Joint trade group challenges ‘myths’ about Jones Act changes
Opponents of the CBP notice say it covers much more than just light construction vessels

A joint trade group has come together to fight plans to change the way the Jones Act is interpreted and debunk what sources claim are ‘myths’ propagated about the vessels and operations affected by the proposed changes

The joint trade group opposed to the changes includes the American Petroleum Institute, Association of Diving Contractors International, Independent Petroleum Association of America, International Association of Geophysical Contractors, International Marine Contractors Association (IMCA), Louisiana Mid-Continent Oil and Gas Association, Offshore Operators Committee, US Chamber of Commerce and US Oil and Gas Association. The group has held meetings with numerous politicians in Gulf Coast states to alert them to what it believes are the significant adverse implications of the changes.

Members of the International Association of Drilling Contractors (IADC) say they are concerned by the uncertainties associated with the proposed changes, and IADC is participating in a joint effort with the associations named above in order to better understand the implications of the changes. However, the association has not taken a position either in support of, or in opposition to them.

The Offshore Marine Services Association (OMSA) claims that the vessels most directly affected by proposed changes put forward by Customs and Border Protection (CBP) are light construction vessels of a type of which there is a growing number in the US with several under construction (as highlighted here: www.osjonline.com/news/view,jones-act-owners-make-the-case-for-change_47069.htm). As highlighted on a number of occasions by OSJ, although the Jones Act governs the transportation of merchandise between US coastwise points, the CBP notice would expand its scope to include construction, installation and repair operations conducted by foreign-flagged vessels, which have historically been outside the scope of the Jones Act.

Vessels undertaking installation, repair or servicing activity require equipment and material to complete this activity. CBP has long recognised that equipment and materials necessary for a vessel’s mission are not merchandise. Opponents of the plan say the CBP notice would extend the reach of the Jones Act to an entirely new range of offshore construction, installation, maintenance, diving support and repair vessel operations that, for decades, have been outside the scope of the Jones Act. They note that a similar proposal by CBP was issued in 2009 but did not proceed and was withdrawn by CBP. The revocations will prohibit non-coastwise vessels from performing installation, repair and servicing activities as allowed by the Jones Act for over 40 years.

Industry sources close to the issue say many more vessel types than light construction vessels would be affected by the CBP’s proposed changes. “We are concerned about all areas of deepwater construction,” a source close to the issue told OSJ. “OMSA misleads its audience by focusing on vessels where they have some capability, such as light construction vessels, and claim the changes will not affect other areas. This is naïve as the changes will affect all kinds of activity.”

Opponents of the changes point out that there are no Jones Act deepwater vessels capable of heavy-lift or pipelay activity. “Currently, there are no Jones Act vessels with the necessary heavy-lift capabilities required to install topsides or other similar large lift operations without dismantling the components or topsides, requiring reassembly on the Outer Continental Shelf (OCS). There is one Jones Act heavy lift available for offshore operations, however its hook height is limited, it can only lift loads that can be straddled between its two hulls and its class certification limits it to a maximum 20ft wave height. These are serious limitations, and it cannot complete the lifts that are currently made using foreign-flagged crane vessels.

“The lack of the deepwater-capable pipelaying, heavy-lift and well intervention vessels and a shortfall of deepwater-capable light construction vessels along with the operational restrictions imposed on foreign-flagged vessels under the CBP notice has the potential to halt almost all deepwater E&P activities in the Gulf of Mexico if the revocations go ahead,” they claim.

Sources close to the issue say engagement with foreign-flagged vessels has encouraged inward investment and job creation by companies in the US. A survey of IMCA’s 12 largest global and international contractors found that companies supporting foreign-flagged ships employed almost 11,000 people in the US, including over 1,100 seamen and offshore workers. International companies have invested heavily in spool bases, fabrication yards and US-based design and management capability, providing American jobs for American workers.

Organisations concerned about the CBP notice say it will restrict the operation of foreign-flagged vessels, potentially slowing down or shutting down offshore operations or production, and result in loss of US jobs and revenues. Companies could be forced to build components in foreign yards and/or transport components from foreign yards or simply stop investing in work in the Gulf of Mexico, they say.

They also reject claims that the CBP notice will strengthen homeland security measures and note that foreign personnel aboard foreign-flagged vessels are subject to strict US immigration laws and visa requirements, as enforced by the Department of State, DHS, CBP and the Coast Guard. Foreign personnel are permitted to work aboard vessels engaged in the US OCS only where the vessel owner-operator obtains a manning exemption from the US Coast Guard. Foreign crews must go through extensive security vetting by numerous US agencies before they can enter the US at both air and port borders. Moreover, foreign-flagged vessels operating in US waters, including the US OCS, are subject to strict security requirements under international, flag state, US federal and state law, including the various IMO Conventions as implemented by flag states and enforced by the Coast Guard. “These vessels are not a threat to homeland security,” say opponents of the plan. “They would not create an immigration free zone, and the CBP notice does not enhance the already strict security regulatory and vetting requirements.”

Another ‘myth’ the opponents of the notice claim is being propagated is that foreign-flagged vessels use undocumented foreign labour. They note that foreign crews are subject to the laws of the flag state and are certificated as competent and medically fit in accordance with the IMO Standards of Training, Certification and Watchkeeping for Seafarers (STCW) convention and must comply with all US immigration laws including visa requirements before entering the country.

They also reject claims that the CBP notice will create jobs in the US and increase regional economic output. “To the contrary, jobs will significantly decline because the CBP notice will adversely impact the US offshore job market. Because of the lack of Jones Act vessel capacity to complete key deepwater activities and with the foreign flag reliance on Jones Act vessels for offshore support, the new regulatory constraints under the CBP notice will limit operations of foreign-flagged vessels, slowing down or shutting down offshore operations or production, resulting in reduced demand for Jones Act vessels and a loss of US jobs and revenues,” say opponents of the proposed changes. “The only way to properly consider the economic, safety and environmental consequences of the proposed revocations is to publish a proposed rule in the Federal Register, as was done by CBP in 2009, which would require a cost/benefit analysis to be completed.”

Opponents of the CBP notice claim that, if foreign-flagged vessels that engage in industrial activity in the Gulf of Mexico are banned, Gulf coast ports will also suffer. “Foreign-flagged vessels routinely support Gulf Coast ports,” said a source. “There are significant spool bases in Mobile, Gulfport, Ingleside and Port Isabel. If foreign-flagged pipelay vessels go away, then so does their need for support.” Offshore fabrication facilities will also suffer, it is claimed.

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