The Jones Act and Offshore Wind: The Challenges & Opportunities
Like other nations across the world, the U.S. is embarking on an energy transition - away from carbon-based energy sources to renewable energy sources such as offshore wind. However, a century old piece of legislation makes the development of U.S. offshore wind projects somewhat unique. Keep reading and find out more about the challenges and opportunities presented by the Jones Act…
What is the Jones Act?
For anyone even vaguely familiar with the U.S. maritime industry, the Jones Act will probably sound familiar.
The Jones Act (also known as the Merchant Marine Act) became a federal statute in 1920. The act was introduced by Senator Wesley Jones - hence the common use of the term ‘Jones Act’.
Since then, it has ensured that nearly all vessels travelling up U.S. waterways and between U.S. ports are:
- Built in American shipyards (ships must also be registered in the U.S.).
- Crewed by American mariners (the majority of a ship’s crew must be U.S. citizens).
- Owned by American companies (over 75% of the ownership stake must be held by U.S. citizens).
It’s important to note that the primary focus of the Jones Act is ‘cabotage’. Cabotage refers to the transport of goods or passengers between two points within the same country. So, this includes coastal waters, and inland waterways.
Jones Act waivers
Although the Jones Act is designed to protect U.S. maritime capacity, it is subject to a number of waivers in exceptional circumstances:
- In the event of a natural disaster, the Jones Act can be waived to increase the number of ships that are able to provide aid/goods to an affected area.
- The Secretary of Homeland Security can waiver the Jones Act in the ‘interests of national defence’.
The effects of the Jones Act
The Jones Act has had a far-reaching and deep impact upon several aspects of the U.S. maritime industry - and by extension the American economy.
As the Jones Act requires vessels operating within U.S. waterways and between U.S. ports to be American-built, the U.S. shipbuilding industry has naturally benefitted.
Opinions differ as to the impact of the Jones Act on the U.S. shipbuilding industry.
Free market critics such as the Cato Institute suggest that the Jones Act has resulted in the stagnation of the domestic shipbuilding industry.
For example, they reference a report from the now-defunct Office of Technology Assessment (OTA) which said that U.S. shipyards “generally employed lower levels of technology” than their foreign counterparts.
In a similar vein, a 2019 Congressional Research Service report stated that ‘U.S. shipbuilding has declined in competitiveness since the law’s passage’.
Supporters of the Jones Act make the contrary claim that the act provides necessary stability to the industry. For example, a report by the Centre for Strategic and Budgetary Assessments (CBSA), found that ‘shipyards that build smaller ships for the government depend on orders for commercial Jones Act-compliant vessels to stay in business between Navy and Coast Guard contracts’.
The CBSA report also found that, ‘without the Jones Act’s requirements… it is likely the U.S. government would have few, if any, shipyards available to episodically recapitalise its smaller vessels’.
Given that the Jones Act stipulates that vessels engaged in cabotage within U.S. waters must employ American citizens, it has had a considerable impact upon the U.S. maritime industry.
From its outset, the Jones Act formalised the rights of seamen and has allowed them to make claims and obtain damages from their employers if shipowners act negligently.
Aside from the rights of seamen, the Jones Act is also credited with protecting jobs within the U.S. maritime industry.
According to an article penned by Sen. Roger Wicker, Sen. Maria Cantwell, Rep. Peter DeFazio, and Rep. Sam Graves, in DefenseNews, the Jones Act helps to sustain 650,000 American jobs.
It is argued that the Jones Act helps to maintain critical maritime infrastructure across the U.S.
With more than 400 ports and 25,000 miles of navigation channels in need of ongoing maintenance, supporters of the Jones Act argue that it protects America from potential acts of terrorism or sabotage from foreign-flagged dredging, towing, or salvage vessels.
Critics of the Jones Act argue that it has resulted in the transport costs associated with U.S. flagged vessels being far higher than they need to be.
A Maritime Administration report found that ‘the daily operating costs, which include crew, tools, supplies, maintenance and repair, insurance, and overhead were tallied at $7,454 for foreign-flagged vessels, but a whopping $20,053 for U.S.-flagged vessels’.
Critics argue that it’s these high operating costs that result in inflated waterborne shipping rates.
Supporters of the Jones Act claim that a focus on daily operating rates is myopic, and instead point towards the broader economic growth fuelled by the Act. At the time of writing, the American Maritime Partnership claims that the Jones Act generates $150 billion in economic benefits each year.
The Jones Act and the development of America’s offshore wind industry
The U.S. federal government has ambitious plans for its renewable energy sector.
With growing demand for green energy, and significant incentives as a result of the Inflation Reduction Act (IRA), the next decade is expected to see multiple, sizable offshore wind projects come to fruition.
According to the Wind Energy Technologies Office, the U.S. offshore wind energy project pipeline has ‘reached a total of 40 gigawatts (GW) of capacity’.
Additionally, further leases for new offshore wind farms are being auctioned. These include:
- Six new lease areas in New York Bight.
- Two new lease areas in Carolina Long Bay.
There are also plans to lease new areas in the Gulf of Maine and Gulf of Mexico, as well as areas off the west coast, including California and Oregon.
Furthermore, major offshore projects such as the South Fork Wind Farm are expected to become fully operational in 2023.
In short, America’s offshore wind industry is set to experience explosive growth. However, there’s one bone of contention - the Jones Act.
The challenge that the Jones Act poses to the development of the American offshore wind industry can be summed up in a word - vessels. Or rather, a lack of vessels.
More specifically, a lack of the right types of vessels…
Given that the U.S. is a relative newcomer to offshore wind projects - especially when compared to Europe, there is a distinct dearth of wind turbine installation vessels (WTIVs).
WTIVs are - as their name suggests - vessels which are designed for the express purpose of installing wind turbines in offshore environments.
The majority of WTIVs are self-elevating (in much the same way as jack-up rigs are) and are self-propelled in order to reach project locations. WTIVs will also generally use azimuth thrusters to maintain position during operations.
To date - there is a significant lack of WTIVs which are Jones Act compliant. At present, the 472-foot Charybdis is the only U.S.-built WTIV under construction (which is expected to enter service in late-2023).
However, it is estimated that an additional six WTIVs will be required to meet President Biden’s target of 30 GW of offshore wind capacity by 2030.
Despite the current lack of Jones Act compliant vessels, the situation provides an opportunity to foster a truly home-grown offshore wind energy industry within the U.S.
This opportunity was cemented when an amendment was made, in 2021, to the Outer Continental Shelf Lands Act (OCSLA). This amendment clarified that devices fixed to the seabed for the purpose of ‘developing non-mineral energy resources’ fall within federal jurisdiction and thus constitute ‘coastwise’ points under the Jones Act.
Put more simply, the Jones Act applies to offshore wind turbines.
In addition, two U.S. Customs and Border Protection (CBP) rulings have confirmed that although certain portions of offshore wind projects can fall outside the purview of the Jones Act - and be completed using non-compliant vessels - the act ultimately applies to offshore wind construction and operations.
The American offshore wind industry then must adapt to the requirements of the Jones Act.
As we saw earlier, moves are already being taken (albeit in a limited way) to create Jones Act compliant vessels to facilitate offshore wind project construction and operations.
The most advanced of these moves is the construction of the Charybdis.
Dominion Energy - the company that commissioned the Charybdis - is not alone in planning Jones Act compliant vessels though.
Eneti Inc has announced plans to construct at least one Jones Act compliant WTIV.
Meanwhile, a consortium consisting of ONP Management and Renewable Resources International has developed what they are calling ‘FEEDERDOCK’. This will be a Jones Act compliant installation vessel that’ll have the capacity to install 25 MW wind turbines.
Although it is encouraging that new Jones Act compliant WTIVs are being planned and commissioned, the fact is that these vessels are unlikely to be available in sufficient numbers to meet the Biden administration’s ambitious goals.
So, what are the alternatives?
Feeder vessels and fixed WTIVs
An alternative solution that’s already been used to good effect is combining Jones Act compliant feeder vessels with fixed WTIVs.
Consider the Vineyard Wind 1 project. Because this project uses a fixed WTIV which remains completely stationary during the installation of a turbine, it isn’t required to be compliant with the Jones Act.
Components, turbine parts and other elements of the turbines are then transported to the WTIV via Jones Act compliant feeder vessels.
This setup points to a potential solution for other offshore wind projects - however, other projects will necessarily have to seek maritime counsel to establish whether their own project could compliantly implement such a solution.
Nevertheless, although this solution helps mitigate the lack of Jones Act compliant WTIVs, it would still require the construction or conversion of numerous new Jones Act compliant feeder vessels and barges.
Another alternative that is emerging is the use of partnerships to meet the requirements of the Jones Act.
As the Jones Act allows vessels to be 25% foreign owned, foreign offshore wind developers are increasingly partnering with U.S. companies to provide the 75% Section, and with U.S. crews that will make their vessels compliant.
A novel alternative that is being suggested by wind energy developers is the concept of sharing vessels between wind farms.
Covering both WTIVs and feeder vessels alike, the idea is that joint ownership and sharing of vessels would help drive down costs (including day rates). Sharing vessels would also mean that each vessel has a larger, long-term workload. This in turn justifies expenditure on the construction of the vessel in the first place.
An alternative solution which is gathering considerable momentum is the idea of converting existing vessels for use on offshore wind projects.
At present, there is a large fleet of vessels that had previously been engaged in the oil and gas industry across the Gulf of Mexico. For example, Crowley has a fleet of 400-foot deck barges that were originally built for the oil and gas industry. These are ideally placed for use in feedering operations for offshore wind projects.
But, how big is this opportunity? Are there really enough vessels that could be converted?
According to Tidewater - a leading provider of offshore service vessels - the oil and gas sector has approximately 3,400 vessels of which 1,000 are classed as ‘stacked’ and approximately 300 which are idle.
And, numerous companies are now actively working on vessel conversions. Boskalis, Norwind Offshore, and VARD are just a few of the companies setting about conversions.
The Jones Act certainly adds a unique challenge to the U.S. offshore wind energy industry. Certainly, it’s not something that European wind energy developers have had to deal with in their own domestic markets.
However, with the right approaches, the Jones Act needn’t be an insurmountable barrier for the development of offshore wind projects.
As we’ve seen, there are some interesting and novel solutions that developers can use to ensure they are complying with the requirements of the act. With the right support from the maritime industry, America’s offshore wind generation potential can be truly realised.
3D Marine at Brookes Bell
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- Anthony York