Repeal the Jones Act to speed Puerto Rico recovery

An obscure century-old law is slowing Puerto Rico’s recovery from the devastation of Hurricane Maria, forcing our nation to import more oil, and driving up prices on oil and other products. The law is called the Jones Act and Congress should repeal it.

Puerto Rico is in trouble. Nearly 85 percent of the island’s 3.4 million American citizens remain without electric power, water pumps on half the island aren’t working, and fuel and truck shortages are preventing food and supplies from being delivered to many areas. Authorities say it could take at least three and as many as six months to restore electricity to all residents.

As a result, Puerto Rico is being punished for being part of the United States. Any other country – Jamaica, Canada or even Spain – can import fuel, food and supplies from the United States at a fraction of the price. But Puerto Rico pays a premium.

The recovery of Puerto Rico could progress much more rapidly if the Jones Act was wiped off the books. The law, officially called the Merchant Marine Act of 1920, says that all shipments between U.S. ports must be on ships made in the United States, manned by a U.S. crew.

It costs much more money to transport items on U.S. ships, because the Jones Act protects the U.S. shipping industry from foreign competition, allowing U.S. shippers to charge far higher prices. 

In fact, economists have estimated that just from 1970 to 2012, the Jones Act raised the costs of bringing all sorts of goods into Puerto Rico by nearly $29 billion. These higher costs contributed to Puerto Rico declaring bankruptcy in May because it is $74 billion in debt.

While President Trump announced Sept. 28 that he was suspending the Jones Act for Puerto Rico for 10 days as an emergency measure, that period ended Sunday and now the Jones Act is back in force for the island.

As a result, Puerto Rico is being punished for being part of the United States. Any other country – Jamaica, Canada or even Spain – can import fuel, food and supplies from the United States at a fraction of the price. But Puerto Rico pays a premium.

Similarly, Puerto Rico must import liquefied natural gas for its power plants, but there are no ships complying with the Jones Act large enough to transport that much gas from the U.S. Gulf Coast. Instead, Puerto Rico imports liquefied natural gas from Trinidad & Tobago. Low-cost gas from the mainland United States is sent to Asia, Europe, and South America instead, transported on the ships of other nations.

How will Puerto Rico recover when it must pay extra for every item it needs in the recovery—every gallon of diesel, every bottle of water, every new truck to deliver supplies, every piece of equipment to repair its infrastructure?

Repealing the Jones Act can also help ensure that more Americans share in our country’s new energy wealth. Thanks to shale, the United States is now the world’s largest producer of petroleum. And Puerto Ricans aren’t the only Americans who could benefit from this new production. East Coast oil refineries also need the kind of light, clean oil that has fueled the Texas oil boom.

But there aren’t enough Jones Act ships to carry Texas oil to the East Coast. Instead, Texas oil is shipped to Canada, Latin America and Europe, and the East Coast imports oil from Africa and the Middle East. Repealing the Jones Act would allow Americans on the East Coast to benefit from the shale boom, cut shipping costs and put downward pressure on fuel prices. 

Repealing the Jones Act could also start reconciling factions in American politics that are now consumed with a fight about whether there should be more or less regulation. This debate is not helpful because it is not specific enough. Regulations cost Americans money but some are well worth it to protect our health and environment.

President Trump has said he wants to get rid of old regulations that are costing Americans money without doing any good. Repealing the Jones Act would be a great first step. Puerto Rico and the rest of our nation would benefit.

James W. Coleman is a law professor at Southern Methodist University follow him on Twitter @EnergyLawProf.