The Energizing American Shipbuilding Act – Is it really energizing LNG?

By: Ashley Clawson / August 1, 2019

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With an attempt to boost the shipbuilding industry in the U.S., the Energizing American Shipbuilding Act has been reintroduced with bipartisan support.  It is being supported by Senator John Wicker (R-Mississippi) and Congressman John Garimendi (D-California).  This act would require 15 percent of liquefied natural gas (LNG) exports be moved by U.S. crewed and built tankers by the year 2041.  It also applies to 10 percent of seaborne crude exports by the year 2033.  During this same time, the act would also require an additional 50 U.S. ships be built during the same time-frame.  Wicker and Garimendi are supporters of the Jones Act – where cargo ships transporting goods between U.S. ports must be built, owned and operated by U.S citizens.

“Rebuilding America’s shipbuilding and mariner base is an idea that unites Democrats, Republicans, metallurgical trades, the business community, labor, and our armed forces,” said Garamendi, “These industries are not only vital to our economy—they’re vital to our country’s national security. Congress has neglected our maritime industry for too long, to the point that we’re now several dozen merchant ships and 1,800 mariners short of what’s needed to guarantee sufficient sealift support in times of crisis.”[1]  Just as the shale boom has revitalized the economy of Appalachia, LNG can further revitalize another sector of the American economy.  In December of 2018 the Kremlin announced that Russia, for example, has placed similar requirements for both natural gas exports and Arctic oil. 

If the bill is enacted, it is anticipated that it will reinvigorate the domestic shipbuilding industry which has been impacted by subsidized shipyards located around the world.  Additionally, it will increase domestic manufacturing for ship components. 

By the end of 2019, the EIA predicts that the U.S. LNG export capacity will be 8.9 Bcf/d – up from 3.6 Bcf/d currently.  Two new liquefaction units are driving the additional capacity.  The U.S. will have the third largest export capacity behind only Australia and Qatar.  Capacity will continue to grow into 2021. 

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The shale revolution has allowed the U.S. to become one of the largest exporters of natural gas in the world.  While we sit in a position to become energy independent from the rest of the world, other countries are becoming increasingly more dependent on the U.S. exports.  Currently, no such U.S. built ship exists to move domestic LNG.  “The U.S. shale boom combined with the opening of the Expanded Panama Canal and Washington’s lifting of its 40-year ban on crude oil exports in 2015 has ushered in a new era of American energy exports which have the global oil and gas landscape.”[2] 

Opposition to the Energizing American Shipbuilding Act refers back to the Jones Act.  The Jones Act increases prices of cargo shipped to places like Hawaii and Puerto Rico as well as any other non-continental U.S. land.  Because of the lack of ships that can legally deliver, shipping companies can charge increased freight rates.  That price increase is passed on to the consumer.  “A 2019 report prepared by the New York City–based economic consulting firm John Dunham and Associates found that for Puerto Rico “the differentials between US- and foreign-flagged carriers range from about 41.0 percent, to as high as 62.0 percent for bulk cargo and between 29 percent and 89 percent for containerized freight.” It calculated the additional costs caused by the act for the island’s economy to be nearly $1.2 billion, which comes to just over $375 per resident.”[3]  Currently there are less than 100 ships that are eligible to move cargo under the Jones Act.  That number was over 300 in the 1980's. 

The abundance of LNG being produced on the mainland of the U.S. has the potential to be too expensive to provide into other U.S. ports. 

Sources:

[1] https://gcaptain.com/bipartisan-bill-energizing-american-shipbuilding-act-introduced/

[2] https://gcaptain.com/bipartisan-bill-energizing-american-shipbuilding-act-introduced/

[3] https://www.investopedia.com/terms/j/jonesact.asp


Categories: natural gas, liquid energy, LNG


Ashley Clawson

Written by

Ashley Clawson

My background that has been split between roles in procurement, operations, and sales allows me to understand my customers' needs in unique ways. I want to exceed my customers' needs every day by finding long term solutions to allow them to develop their businesses.


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