Fortuño's Plan to Energize Puerto Rico

by Mary Anastasia O’Grady, Wall Street Journal February 13, 2012 (excerpts)

…If (Puerto Rico Governor Luis Fortuno’s) plan to boost the island's competitiveness by switching electricity generation from oil to natural gas is to succeed, he's going to need relief from the pernicious 1920 Jones Act. It prohibits any ship not made in the U.S. from carrying cargo between U.S. ports. There are no liquefied-natural-gas (LNG) tankers made in the U.S. Unless Puerto Rico gets a Jones Act exemption, it cannot take advantage of the U.S. natural gas bonanza to make itself more competitive.

The Jones Act is good if you are a union shipbuilder who doesn't like competition, or a member of Congress who takes political contributions from the maritime lobby. But it's bad if you are a low-income Puerto Rican who needs a job. And there are plenty of those….

Life on the island is also expensive, in part because of the high price of electricity, 68% of which is produced using imported oil. The governor's office says that the price of electricity here went up 100% from 2001 to 2011….

Gov. Louis Fortuño's efforts to reduce Puerto Rico's high electricity prices are opposed by environmentalists….

But bringing down high energy costs remains a fundamental challenge, and one that is exacerbated by new costly federal regulations on emissions that would require the installation of scrubbers on oil-fired electricity plants. To meet those regulations affordably, Mr. Fortuño wants to convert the island's oil-fired plants to cheaper, cleaner natural gas. To that end, he proposes a pipeline from the southern LNG terminal at Punta Guayanilla across the island to San Juan. The U.S. Army Corps of Engineers has assessed the proposal and said it would produce no significant environmental impact.

It sounds like a plan to help the poor and unemployed. There are only two problems. First, the Sierra Club and local environmentalists have ginned up fears about the project and promised to sue to stop construction. Second, the Jones Act is still in the way.

The governor admits that his administration could have done a better job communicating the pipeline plan to Puerto Ricans, but he also points out that "some of the same groups that have opposed the pipeline have also opposed wind-power and solar projects. They are opposing everything, including waste-to-energy" projects which he maintains are less polluting than landfills.

Mr. Fortuño says that he expects Washington to give him a carve-out for LNG tankers, but he doesn't have it yet. He also says that a large part of the environmentalist push-back is political, suggesting to me that he ought to be more worried than he is. This kind of politics needs to preserve the status quo of the welfare state. And that implies blocking Mr. Fortuño's development agenda no matter what it means to the poor.

read … Fortuño's Plan to Energize Puerto Rico

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Alaska gas line port authority tackles Jones Act tanker issue

by Kristen Nelson, Petroleum News Editor-in-Chief January 30, 2005

The Alaska Gasline Port Authority and Sempra LNG targeted some of the questions about the authority’s liquefied natural gas project in a presentation to the Alaska Legislative Budget and Audit Committee Jan. 26.

The West Coast market can handle Alaska gas, the Yukon Pacific permits give the project an edge in timing and an LNG project will cost about the same as taking gas to Chicago, the authority and Sempra told the committee.

And it should be possible to get an exemption to the Jones Act which requires that ships moving between U.S. ports be U.S.-built, U.S.-owned and U.S.-crewed. This has been an issue for the port authority, which proposes to build a pipeline from the North Slope to Valdez, with a spur line into Southcentral Alaska, and liquefy gas at Valdez for shipment to the West Coast.

Darcel Hulse, president of Sempra LNG, told the committee that the United States has “lost the capability to compete in the world on LNG shipping and if you were to build in the United States an LNG carrier today, it would cost you at least three times as much as it would on the open market.”

Hawaii, he said, faced the same issue. They needed luxury cruise liners to operate between the islands, “and they’ve got an exemption from the Jones Act” allowing them to use vessels built in foreign shipyards.

“If they can do it for tourism, we certainly think you can do it for a compelling reason to avoid further imports of foreign gas into the United States.” The tankers would be built in foreign shipyards, Hulse said, but owned by a U.S. corporation and crewed by U.S. maritime employees. “It is one of the hurdles,” he said, but Sempra believes the reasons for an exemption are “compelling, and it’s been done before.”

Rigdon Boykin, development counsel for the port authority, said the port authority has visited some of the large shipyards in the United States, and was told that even if those yards started today to develop the capacity to build large LNG tankers, they wouldn’t have that capacity available until “long after this facility came online.” He said the port authority has also talked to some maritime union representatives and “they’ve assured us they will work with us to work out a solution to this issue and we believe we will achieve one. They’ve been most cooperative so far.”

read … LNG Follows Tour Ships