Oklahoma City’s Chesapeake Energy is among those U.S. oil and gas companies that could benefit if the Trump administration waived a law that mandates only American vessels can be used in transporting goods among US ports.
The American Exploration and Production Council sent a letter to congressional leaders asking them to support a temporary waiver of the Jones Act. The group represents independent oil companies like Chesapeake Energy that had announced plans to cut back operations as Russia and Saudi Arabia flooded the world with crude. Others were Pioneer Natural Resources Co. and Parsley Energy Inc. The Council said a waiver of the Jones Act “can allow American producers to move domestic products with greater ease within the U.S.”
Continental Resources Inc. Chairman Harold Hamm told Bloomberg TV on Wednesday that he wants the Commerce Department to investigate whether Saudi Arabia is violating antidumping laws by flooding the world with cheap crude. Not everyone is on board.
“We want to be clear: Our industry is not seeking a bailout from the federal government,” AXPC Chief Executive Officer Anne Bradbury told House Speaker Nancy Pelosi, Senate Majority Leader Mitch McConnell and other congressional leaders in the letter. “This goes against the business-minded and entrepreneurial spirits of our members, who believe in the free market.”
The group did say, however, that it needs President Donald Trump’s help in ensuring “restoration of a functioning, stable, global market for oil” and backs “market-based solutions” to help alleviate the current supply-demand imbalance. That could include diplomatic efforts by the president as well as the Jones Act waivers, AXPC said.
Waivers would let U.S. companies move their oil around the country more easily, without being forced to rely on more expensive, U.S.-flagged, -crewed and -built tankers. But waivers would be vehemently opposed by U.S. shipbuilding interests and their allies on Capitol Hill, who have successfully persuaded the Trump administration to back off creating new exemptions to the law.
“This is an opportunistic effort by those who want to use foreign ships to advance their own economic interests at the expense of American workers who are doing everything in their power to keep this economy moving,” the American Maritime Partnership said in a statement Friday. “At a time of American crisis and uncertainty, a waiver to the Jones Act would only open our borders and markets to foreign shipping companies with foreign crews that pose an added threat to the safety and security of our nation’s health.”
The idea could expose rifts in the oil industry and among its political allies. Many lawmakers from Louisiana are fierce defenders of both the oil industry and domestic shipbuilding. And U.S. shipping advocates say waivers could exacerbate pain for the industry, which is also affected by a coronavirus-spurred drop in demand for petroleum products and other goods.
American Petroleum Institute Senior Vice President Frank Macchiarola said the group “supports the current interpretation of the Jones Act,” noting that “many of the companies we represent have made significant investments in line with the current law.” But companies are still free to seek specific waivers under the law, and “we appreciate the administration considering solutions to a difficult challenge,” Macchiarola said.
The group has been steadfast in stressing that it is not seeking any kind of specific policy relief for the oil industry. The best option right now is not a bailout but diplomacy, with the president engaging with Saudi Arabia and Russia to ensure markets aren’t oversupplied, API President Mike Sommers has said.
“Our industry requires constant capital investment and, at these artificially low prices, our industry cannot work,” AXPC warned. “Should this continue, American energy independence will be at risk.”
Source: Bloomberg