Regulation

Why Alaskans Can't Get Alaskan Natural Gas 

It's ridiculous to cut off Alaskans from the resources found in their own backyards.

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A plan to tap reserves on the far-flung northern coast of Alaska is expected to produce about 80 million tons of liquid natural gas (LNG) over the next 20 years—but thanks to a protectionist shipping law, it's likely that Americans won't have access to a single drop.

There are no pipelines serving the Arctic coast of Alaska, where a joint effort by ExxonMobil and Qilak LNG, an Alaska-based subsidiary of a Dubai-based energy firm, will be extracting the gas. Instead, the companies plan to use ships to get LNG to market.

That's where the Jones Act comes into play. Passed nearly a century ago to protect U.S. shipbuilders, the law requires that ships carrying goods from one American port to another must be American-built, must be American-flagged, and must have a crew that's at least 75 percent American. Right now, no icebreaking, LNG-carrying freighters in the entire world meet the Jones Act's archaic requirements. As a result, it will be perfectly legal for ships from other countries to pick up liquid natural gas from the new production facility in northern Alaska—as long as they don't stop at any other American ports to unload.

There's nothing wrong with exporting energy, of course, but it's ridiculous to cut off Alaskans from the resources found in their own backyards. Indeed, the Jones Act jacks up the price of almost everything in Alaska, because it artificially inflates the cost of shipping—the American-built ships mandated by the Jones Act are between three and eight times as expensive as foreign-built vessels, according to a 2017 report from the Congressional Research Service.

That's why, despite a wealth of energy resources in their state, Alaskans pay higher-than-average energy prices. The state's largest city, Anchorage, is the 21st most expensive city in the U.S. by cost of living.

The Jones Act "creates large cost inefficiencies by protecting the shipbuilding industry—a tiny economic sector in the U.S.—at the expense of other U.S. industries with enormous economic potential," researchers for the Organisation for Economic Co-operation and Development concluded in a report released earlier this year. Abolishing the Jones Act, the group found, would lower the cost of shipping between U.S. ports by as much as 50 percent.

The Jones Act is still on the books because of old-fashioned protectionism. "The average Alaskan may only be vaguely aware of the law and its costs," says Colin Grabow, a policy analyst with the Cato Institute. "But rest assured maritime workers and union members," who personally benefit from the requirements, "maintain a much keener interest and vote accordingly."

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  1. This is Excellent Article! Thank you for Sharing…

  2. You’d think some libertarian congresscritter or even a Heffalump would propose repealing the Jones act.

    1. That would require a concentrated lobby. The American shipbuilding and intra-national shipping industry isn’t a huge slice of the economy, but it is a concentrated and motivated constituency.

      All of the people who would benefit from the repeal of the Jones Act are diffuse and many are unaware of the impact of this on their lives. Most of the benefits from repeal would fall to individuals in places like Puerto Rico, Hawaii, Alaska, etc. and the problem is too abstract for them to get organized around…. meanwhile, the people and companies who would be out of business without the Jones act are highly motivated and have a compelling story to tell their representatives.

      This is a tough one to win, even though it is right.

    2. You’d have thunk that Ted Stevens, with all his power, would have but I guess he couldn’t figure away to enrich himself off of it.

      1. He was busy building bridges.

    3. Even if it passed the House, it’s likely an automatic veto with the current administration.

  3. What if aircraft, trucks, buses, and automobiles each had their own Jones Acts.

  4. Another issue is that Alaska’s one refinery is too small to meet demand, so most automobile gasoline and diesel has to be brought in from refineries in Washington. Alaskans barely benefit from their crude resources, other than the PFDs.

    1. Alaska has had as many as 3 operating refineries, passing through the hands of multiple owners over the decades. Besides the economy of scale, and being remote from supporting industry, it turns out that operations under harsh conditions actually cost more.

      Alaskans have always whined about why gasoline costs money, but have been as clueless as most people about reality.

      1. None of those refineries produced gasoline. They produced mostly jet fuel for the military and for commercial air traffic. All gasoline in Alaska must be produced outside and shipped back in. It is a craaazy situation made worse with craaaazy environmental regulations.

  5. But in the ideal future without fossil fuels, the People, including in Alaska, will drive electric cars from their electrically-heated homes, schools, and offices, all powered by Mother Sun.

    Of course they will need some fucking awesome 6 month batteries.

    1. Or just use nuclear with a little bit of LNG (or batteries) to handle spikes in usage.

      But nuclear is a scary word, so…

  6. Mercantilism rears it’s ugly head again.

  7. Though the Jones Act is a problem, the real problem is that EPA’s Compensatory Mitigation of Wetlands program doubles the cost of building a pipeline, which makes a pipeline uneconomic. Hopefully, with the common sense reforms that the Trump admin is proposing to WOTUS and the definition of wetlands, this additional cost to permit a pipeline will drop substantially and allow for Alaska gas to flow to Alaska, Yukon, B.C. and to the lower 48 states.

  8. The Jones Act in this situation is nothing but a cover to a much deeper issue.

    How is it that USA manufacturing without even a shipping cost still running 3-times that of foreign? What are we making that is causing foreign countries to worship the US$ so much? Debit Cards???

    Or is it the peoples self-proclaimed “Rights” ( right to healthcare, right to $50/hr wages, right to ……..) that have run them right out of the competitive market.. I still remain quite puzzled as to the summation of reasons but there really is NO non-corrupt excuse our shipbuilders should be costing 3-Times as much as everyone else’s.

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