Law to protects unions leaves the East Coast cold

Bloomberg/Fuel Fix:
As freezing weather drained stockpiles of propane to their lowest seasonal level in two decades on the U.S. East Coast this month, shivering New Englanders couldn’t tap abundant supplies sailing out of Texas. They had to look 4,000 miles away to more-expensive heating fuel from Europe.

The reason? The Jones Act, a 94-year-old law that prohibits non-U.S. ships from transporting cargoes between the country’s ports. With pipelines full and not a single eligible propane tanker to deliver fuel from Houston to states such as New York, consumers have had to pay more than $100 a metric ton extra for propane from across the Atlantic.

“It’s kind of a crazy thing, where we’re sending ships to Europe and then in return, at some point in time, Europe is sending propane cargoes back to us,” Peter Fasullo, a principal at energy consultant EnVantage Inc. who has been following the natural gas liquids market for over 30 years, said by phone from Houston. “You have to think, isn’t there a more efficient way of doing this?”

This costly two-way propane trade is the latest example of how the unforeseen U.S. boom in shale oil and gas has left energy consumers and producers, such as Houston-based Enterprise Products Partners LP (EPD), complaining about outdated laws and infrastructure.

Trading in growing domestic supplies of heating oil and gasoline has also been inhibited by the Jones Act. Oil drillers are lobbying the government to allow crude exports, currently banned under a different 39-year-old law.

The Jones Act has a broad support group among U.S. shipyards, vessel owners and labor unions, such as the Washington, D.C.,-based American Maritime Partnership, which said in an emailed statement yesterday that it is critical for the U.S. economyand national security.

Demand for propane jumped this winter as an arctic weather system, or polar vortex, caused temperatures to plunge from Boston to Miami. The more than 3 percent of households in the Northeast that use propane as a main source of heating are expected to spend on average $206, or 11 percent, more on the fuel this winter than last, according to the U.S. Energy Information Administration.
This policy makes no sense.  It is bad for both Texas producers and East Coast consumers.  When there is no domestic shipping available, the law should be waived.  If the administration can't figure that out, then the law should be repealed.


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