Foreign Ship Ban Debated in Obama's Response to BP Oil Spill

The sign over the Dog House Deli in Pensacola Beach, Florida, delivered the message: “President Barack Obama Waive Jones Act.”

Nate Holler, who runs the family-owned hotdog shop, posted the plea when Obama visited the coastal town on June 15. He is among coastal residents who say the president should waive a 90- year-old maritime law to speed foreign assistance in fighting the BP Plc oil spill in the Gulf of Mexico.

“We have all these other countries willing to help,” Holler, 24, said in an interview. “There is not enough happening.”

The Jones Act, which bars foreign ships from transporting goods between U.S. ports, has become a flash point in debate over the spill. Opponents of the law, which applies to cleanup vessels within three miles (4.83 kilometers) of shore, say it should be suspended or repealed. The administration says foreign vessels are already helping to combat the worst U.S. oil spill so a blanket waiver isn’t needed.

“There are a lot of foreign vessels operating offshore,” Coast Guard Admiral Thad Allen, the government’s incident commander, told reporters on June 25. The Coast Guard would be happy to aid in requests for waivers, “but to date, since they’re operating outside 3 miles, no Jones Act waiver has been required.”

22 Offers Accepted

The U.S. is accepting 22 offers of help from 12 countries and international organizations, the State Department said in a statement yesterday. The aid includes “two high-speed skimmers and fire containment boom from Japan,” according to the statement. The State Department didn’t immediately respond to a question concerning whether the Jones Act would be waived for the vessels.

Twenty-four foreign vessels are already working in the Gulf, according to Clark Stevens, a spokesman for the Homeland Security Department, in a phone interview. Coast Guard Rear Admiral James A. Watson, the federal on-scene coordinator in the Gulf, has put in place a process to allow Jones Act exemptions if they prove necessary for foreign skimming vessels to operate within three miles of the coast, according to Stevens.

That hasn’t eliminated assertions that the Jones Act is slowing efforts to help. Fred McCallister, an investment banker in Dallas with Allegiance Capital Corp., told a Senate Commerce Committee hearing today that his proposal to assemble a fleet of foreign ships for cleanup duty has been rebuffed by both BP and the Coast Guard.

Greek Cruise Ship

“Allegiance Capital took it on itself to submit a request for a Jones Act waiver” on June 21 and hasn’t received a formal response, McCallister said.

McCallister said in a letter to Allen that he was seeking waivers for 12 skimming boats and a Greek cruise ship that could be used to store equipment and house 800 workers.

Senator Frank Lautenberg, a New Jersey Democrat, said he questioned whether the government should spur competition between foreign and U.S. vessels rather than giving preference to “American vessels standing by.”

“I think that to challenge” Allen’s judgment “leaves us scratching our heads,” Lautenberg said.

The Jones Act was passed on the grounds that preserving a U.S.-flagged fleet would promote domestic and international commerce and provide a merchant marine that can be called into action in wars and emergencies.

‘To Go Without’

Senator Kay Bailey Hutchison, a Texas Republican who supports changing the law, said that “each hour that passes without a waiver is one more hour that the communities in most need of assistance are forced to go without.”

The law is championed by U.S. shipping companies such as Horizon Lines Inc. and Alexander & Baldwin Inc.’s Matson Navigation Co. and by maritime unions.

“It’s an urban myth that the Jones Act is the problem” in the cleanup effort, said Mark Ruge, counsel for the Maritime Cabotage Task Force, a Washington-based group representing companies led by Horizon and Matson. The law preserves a domestic shipping industry that generates $100 billion a year in revenue, Ruge said.

Kimberly McCloskey, an outside spokeswoman for Horizon of Charlotte, North Carolina, and Jeff Hull, a spokesman for Oakland, California-based Matson, referred questions to Ruge’s group.

McCain for Repeal

Senator John McCain, an Arizona Republican, introduced legislation last week to repeal the Jones Act. He said in a statement that eliminating the “antiquated and protectionist” law may add almost $1 billion a year to the U.S. economy by lowering shipping costs. He based the estimate on a 2002 study by the U.S. International Trade Commission that found the economic cost of the law was as much as $656 million in 1999.

Bill Van Loo, secretary-treasurer of the Marine Engineers’ Beneficial Association in Washington, said the push by McCain and others to suspend or repeal the law “seems like politics more than a pragmatic approach.”

Attempts to dismantle the law are made periodically in an effort to weaken unions, said Dennis McElwee, a maritime lawyer in Houston.

Eliminating the Jones Act would “do away with the last remaining union seamen in the U.S.,” McElwee said in an interview, Fewer than 10 percent of U.S. maritime workers are in unions today, he said.

To contact the reporter on this story: Kim Chipman in Washington at kchipman@bloomberg.net

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