Kill the Jones Act; Kill It with Fire; Kill It Now

My latest in The Federalist (with help from an anonymous friend in the shipping industry):

Lost in the never-ending debate about the KeystoneXL pipeline is great news for anyone who opposes cronyism and supports free markets and lower prices for essential goods like food and energy. Sen. John McCain has offered an amendment to repeal the Merchant Marine Act of 1920, also known as the Jones Act, which requires, among other things, that all goods shipped between U.S. ports be transported by American-built, owned, flagged, and crewed vessels....  

The Jones Act and its related statutes raise the cost of essential goods for American families and businesses; strangle the life from the industries they were designed to protect; jeopardize U.S. maritime security; and exacerbate the pain of major national emergencies. (They also are major irritant in foreign trade relations.) So why hasn’t Congress repealed these laws? Maybe we should ask the politicians and well-connected cronies who benefit from the current arrangement. I’m sure they’d be happy to explain.  

McCain’s amendment to repeal the Jones Act is a common-sense solution to the problems facing a key American industry and the pain of the U.S. economy. The amendment, as well as any broader proposal to kill off the Act, deserves widespread support from conservatives and liberals alike. Efforts to dispense with this archaic protectionist boondoggle will no doubt meet fierce resistance from entrenched interests, labor unions, and opponents of free trade. However, those same groups stand only to benefit from efforts to make the U.S. fleet more competitive and less costly. American mariners have what it takes to compete on a global scale, and they should be given the chance. More competition translates to more opportunity, and perhaps the expansion and revitalization of a crucial sector of our economy. Where artificial monopolies and ancient restrictions can be removed, American labor, American business, and American consumers will have a chance to thrive.

Be sure to read the whole thing.

Senator McCain took to the Senate floor today to support his amendment and oppose the Jones Act. The text of his rousing speech is here, and video's below - definitely worth your time, and not just because the Senator entered my piece into the Congressional Record at the right at the end (sadly, not on video):

So, um, @SenJohnMcCain just put my @FDRLST piece on #JonesAct ("one of [his] favorites") in the Congressional Record pic.twitter.com/t4bE0PF2gu
— Scott Lincicome (@scottlincicome) January 22, 2015

Fun.

Archaic US Trade Policies Inflate Gas Prices, Enrich Cronies

Cross-posted on Cato's blog:

The summer driving season is still weeks away, but rising U.S. gas prices are already back in the news.  Last week, the average price for regular gasoline at U.S. gas stations hit $3.6918 a gallon – the highest since March 22, 2013 and up 43 cents this year.  Much of this price depends on global supply and demand, but certainly not all of it.  In fact, two archaic, little-known U.S. policies – vigorously defended by the well-connected interest groups who benefit from them – restrict free trade in petroleum products and, as a result, force American consumers to pay considerably more at the pump.

First, the Jones Act - a 94-year-old law that requires all domestic seaborne trade to be shipped on U.S.-crewed, -owned, flagged and manufactured vessels – prevents cost-effective intrastate shipping of crude oil or refined products.  According to Bloomberg, there are only 13 ships that can legally move oil between U.S. ports, and these ships are “booked solid.”  As a result, abundant oil supplies in the Gulf Coast region cannot be shipped to other U.S. states with spare refinery capacity.  And, even when such vessels are available, the Jones Act makes intrastate crude shipping artificially expensive.  According to a 2012 report by the Financial Times, shipping U.S. crude from Texas to Philadelphia cost more than three times as much as shipping the same product on a foreign-flagged vessel to a Canadian refinery, even though the latter route is longer.

It doesn’t take an energy economist to see how the Jones Act’s byzantine protectionism leads to higher prices at the pump for American drivers.  According to one recent estimate, revoking the Jones Act would reduce U.S. gasoline prices by as much as 15 cents per gallon “by increasing the supply of ships able to shuttle the fuel between U.S. ports.”

Some of these costs could potentially be mitigated if it weren’t for the second U.S. trade policy inflating gas prices: restrictions on crude oil exports.  As I wrote for Cato last year, current U.S. law – implemented in the 1970s during a bygone era of energy scarcity and dependence – effectively bans the exportation of U.S. crude oil to any country other than Canada.  Because U.S. and Canadian refinery capacity is finite, America’s newfound energy abundance has led to a glut of domestic oil and caused domestic crude oil prices (West Texas Intermediate and Louisiana Light Sweet) to drop well below their global (Brent) counterpart.  One might think that this price divergence would mean lower U.S. gas prices, but such thinking fails to understand that U.S. gasoline exports may be freely exported, and that gasoline prices are set on global markets based on Brent crude prices.  As a result, several recent analyses – including ones by Citigroup [$], Resources for the Future and the American Petroleum Institute - have found that liberalization of U.S. crude oil exports would lower, not raise, gas prices by as much as 7 cents per gallon.

Thus, the Jones Act and the crude oil export ban – each implemented decades ago – together inflate U.S. gasoline prices by as much as 0.22 per gallon – or about 6% of the current price at your local gas station.  Not everyone in the United States, however, is harmed.  In the case of the Jones Act, the American shipping unions and shipbuilders that benefit from the law have long opposed any type of reforms, regardless of the pains imposed on the American economy and U.S. consumers.  The crude oil export restrictions, on the other hand, have found new support from a small group of U.S. refiners who profit handsomely from depressed domestic crude prices and the lack of any legal limits on their exports.  As is always the case with protectionism, these groups win and U.S. consumers lose.

Given this political dynamic, reform of either law appears unlikely in the near future, regardless of how dramatically the U.S. trade and energy landscape has changed since the laws were imposed.  So the next time you fill up the tank, note that about 6 percent of your bill pads the bottom lines of a few well-connected cronies.

America's Really, Really Messed-up Energy Policy

As readers of this blog know, I've long been a critic of US green energy policy and spent a lot of time in my new Cato Institute paper bolstering those positions.  And just last week I detailed why the Obama administration's policies related to natural gas - particularly exports of LNG - were economically and legally misguided (and blatantly hypocritical).  Now comes further evidence that our crude oil policies are equally problematic.

According to a recent Financial Times article, booming crude oil production in the United States - due mainly to revolutionary drilling techniques - has us poised to become a global crude oil exporter for the first time in decades.  This development sounds pretty great... until you read the rest of the article and discover several very serious - and utterly unnecessary - problems.

First, the main reason for the "export boom" is that the United States lacks adequate refinery capacity and transport infrastructure to process new crude oil in order to satisfy domestic demand for gasoline and diesel.  The FT hints at this when it notes that "Refineries in Canada are important fuel suppliers to US markets. Irving [Oil] says its St John refinery supplies 20 per cent of total petrol and diesel imports to the US northeast."  But a new editorial in today's Washington Examiner elaborates on this problem:

[M]ost of this new [oil] production is in areas that lack the needed refinery and transportation infrastructure that is currently located near our traditional public land sources. Without new pipelines and refineries better positioned to transport oil from private land to market, there will continue to be an oil bottleneck that drives up the price of gas at the pump, even as the price of oil falls.

The solution to this problem is to build new refineries and new pipelines, like the planned Keystone pipeline that would connect Canada's oil sand with existing oil refineries along the Gulf of Mexico. But of course, Obama and his environmental allies have blocked this and many other oil infrastructure projects.

There has not been a major new oil refinery built in the United States since the Marathon Garyville Refinery was built in Louisiana in 1977. True, our existing refinery capacity is higher today than it was 30 years ago, but all that refining is being done at 137 refineries today, versus 254 refineries 30 years ago.

Fewer refineries means more miles of pipe must be built and maintained, and it also means bigger problems whenever a key refinery goes down. That is exactly what happened this fall in California, when the Richmond Exxon refinery caught fire and the Kettleman-Los Medanos pipeline was contaminated. With two key delivery system points at reduced capacity, and without other refineries and pipelines to back them up, gas prices shot up almost a full dollar from $3.73 in the first week of July to $4.65 today.

In other words, Californians are now suffering at the pump because they have let their energy infrastructure become too fragile. Instead of developing the resources closest to them (including the more than 300 million barrels of oil sitting off of California's coast in the Pacific Ocean), California has chosen to become dependent on other states for its oil supply. And instead of building a diverse group of smaller refineries and shorter pipelines, California relies on a big dog that can suddenly take ill.

Without adequate pipelines in the United States, the oil transport and refinery bottleneck could be solved by shipping crude to other US states, but there's one big problem: a little-known bit of 1900s protectionism called the "Jones Act" makes it really expensive to do so.  The aforementioned FT article explains:

One advantage of exporting the crude to Canada is that the US’ Jones Act demands more expensive US-flagged ships for domestic routes. Poten & Partners, a ship broker, estimates it would cost less than $1.50 per barrel to ship crude in a foreign-flagged medium-sized Aframax tanker from Texas to the largest Canadian refinery at St John, New Brunswick. A shorter journey from Texas to refineries in Philadelphia recently cost $4.55 a barrel. 

“This is not about exports or imports,” said Lucian Pugliaresi, president of the Energy Policy Research Foundation in Washington. “It’s about transportation and processing efficiency.”

Because the Jones Act drastically inflates the cost of shipping crude from, for example, booming shale oil producers in Texas to Philly refineries, oil producers are looking to foreign markets to refine their crude and then ship it back to the United States.  Yet even this somewhat-messy relationship isn't the end of the story.  It turns out that the United States government severely restricts exports of crude oil via an arcane (dating back to the Energy Policy and Conservation Act of 1975 (P.L. 94-163, EPCA)) export licensing system intended to address "short supply" conditions that, given all that new oil production, likely no longer exist here in the United States.  As the FT notes, the only country to which American companies can export crude oil is Canada, and even that ain't easy:

US federal rules and the country’s dependency on imports have kept all but a trickle of crude from leaving the US. But a surge in supplies from states such as Texas and North Dakota have prompted companies to seek out refinery customers in Canada. As rising crude volumes reach the coasts, “pressure should build and will trigger policy debates about whether to expand the list of allowable countries beyond Canada”, said Ed Morse, head of commodities research at Citi.... 

Exporting US crude requires a licence from the Bureau of Industry and Security, a branch of the US Department of Commerce. The US has exported less than 100,000 barrels per day of crude in the past decade, a fraction of the 9m barrels imported daily. “It’s generally prohibited except for a whole host of exceptions,” said John Felmy, chief economist at the American Petroleum Institute. By contrast, the US is exporting record amounts of refined fuels such as petrol. 

Shell confirmed it recently applied for licences to export domestic crude. “Crude oil trades on a global scale and imports/exports will follow supply and demand,” it said. BP received a licence to export to Canada but has not yet used it, while Vitol has applied for a licence, people familiar with the matter said. Both BP and Vitol declined to comment.

The Department of Commerce refused to confirm or deny the existence of licences or licence applications, citing US law. But it said exports to Canada had a “presumption of approval”.

As I noted in my recent post on LNG exports, restrictive export licensing systems like the one applied to crude oil very likely violate WTO rules (namely, GATT Article XI which prohibits Members from imposing export restrictions), but it's possible that the United States' crude oil export regime would qualify for the GATT's "national security" exception (Article XXI).  However, this legal loophole doesn't change how totally and utterly nonsensical our crude oil policies are.  To recap: because the federal government and many states refuse to allow the domestic construction of new refineries or interstate pipelines, domestic producers are forced to ship crude oil by ship to other, out-of-state refineries; however, because the Jones Act makes interstate maritime transport of crude oil prohibitively expensive, oil producers are forced to look to export markets to ship crude oil to be refined and then imported back into the United States; however, because a decades-old US export licensing system severely restricts the exportation of crude oil, even this last-ditch effort to ship and refine crude oil faces serious legal and logistical problems.

And gas prices continue to climb.

Seriously, this is one messed-up policy, folks.  While oil and gas prices are admittedly a result of global supply and demand, it's impossible to argue that the aforementioned policies aren't making things worse in the short-term, and that things here would be better - for US consumers and producers/workers - if the federal government reformed arcane, conflicting regulations like the Jones Act and the crude oil licensing regime (not to mention the refinery and pipeline approval process).

Is that really too much to ask?

Hooray, Bi-Partisanship... In Support of Higher "Clean" Energy Prices

I've written a good bit lately about the recent push among US companies and politicians for tariffs and other forms of protectionism against imports of "green energy" goods and services.  One thing I really haven't gotten into, however, is the blatant hypocrisy of such efforts - which inevitably result in higher prices for the targeted goods and services - when undertaken by politicians who at the same time claim to support "clean" energy and its environmental benefits and/or lower taxes on American families and businesses.

You may recall that the Obama administration's Department of Energy - supposedly a champion of "clean" energy production - actually lamented falling solar prices and Chinese subsidies and blamed them for the failure of the controversial Solyndra.  And recently, the administration's Democratic colleagues in Congress have decided to get in on the act.  For example, last Friday a group of 58 congressional Democrats - playing off a preliminary determination by the US International Trade Commission related to potential anti-dumping and countervailing (anti-subsidy) duties on imports of Chinese solar panels - sent a letter to President Obama demanding new trade cases against allegedly subsidized Chinese "clean energy" products:

We write to express our concerns regarding very serious allegations of unfair trade practices by the government of China concerning clean energy products. We urge you to take all available measures to expeditiously investigate these allegations and take swift and appropriate action based on those findings...

It is critical for American businesses and workers to be able to fairly compete in this rapidly growing sector... Already an $80 billion annual market, demand for solar panels is anticipated to continue growing as intense competition and technological breakthroughs further drive down prices.

Two of the letter's lead signatories were Rep. Ed Markey (D-MA) and Sen. Ron Wyden (D-OR), and each touted the letter and the ITC determination on his website.  Both guys are also - allegedly - big environmentalists who really, really care about things like "clean air" and fighting "climate change."  For example, Sen. Wyden's website states:

Protecting the natural environment is one of Sen. Wyden’s highest priorities....

He believes that the Clean Air Act and the Clean Water Act need to be fully enforced in order to keep our environment safe and clean for everyone.

Senator Wyden is concerned with climate change and will continue to oppose bills, such as the 2005 energy bill and the President’s Clear Skies Act, that fail to meaningfully address the problem of global warming.  He will also continue to support funding for agencies, like the National Oceanic and Atmospheric Administration (NOAA), that help us to better understand the impact of climate change.

Rep. Markey has expressed similar concerns, breathlessly complaining that the United States' "continuing addiction to oil presents a serious threat to our national security and economy" and calling for federal efforts to reduce greenhouse gas emissions in an effort to mitigate climate change.

So Sen. Wyden's and Rep. Markey loudly support higher clean energy prices via tariffs on Chinese solar panels or the elimination of foreign subsidies for "green" technologies, yet also supposedly support an significant increase in clean energy production (and concomitant reduction in fossil fuel consumption) for environmental purposes.  And, of course, the biggest obstacle preventing the proliferation of "clean" energy is - you guessed it - its ridiculously high price compared to traditional energy sources.

Regardless of how you feel about clean energy and climate change, the hypocrisy here is obscene.  And one must wonder whether the congressional "environmentalists" who signed that letter to the Obama administration demanding new trade disputes on green energy (and fretting about lower prices caused by "intense competition" and "technological breakthroughs") really care at all about the environment, or just care about funneling cash to their chosen constituents in the unions and "green" energy industry via higher prices paid by US consumers.

The answer to that question seems pretty clear, doesn't it?

Unfortunately, it's not only congressional Democrats who are calling for higher "clean" energy prices in direct contravention claiming to support basic Party principles.  For example, Rep. Jeff Landry (R-LA) has sponsored H.R. 2360, the "Providing for Our Workforce and Energy Resources Act" (the POWER Act), which would extend the Jones Act to the installation of offshore renewable energy resources.  As you may recall, I blogged on the Jones Act in the context of the Deepwater Horizon disaster.  It prohibits shipping merchandise between US ports and performing other maritime activities (such as oil drilling and oil spill clean-up) in US waters "in any other vessel than a vessel built in and documented under the laws of the United States and owned by persons who are citizens of the United States.''  The act essentially bars foreign shipping and other maritime companies from competing with their American counterparts, and recent studies by the International Trade Commission have shown that the Act artificially raises shipping costs by over 20% and imposes hundreds of million dollars in unnecessary costs on the American economy.  Another study by the Government Accounting Office showed that it cost American consumers, particularly those in Alaska, thousands of dollars per year.

The POWER Act's extension of the Jones Act to the installation of renewable energy resources like windmills would eliminate foreign competition and, as it's done for all other maritime activities governed by the Act (including offshore production of traditional energy like oil and gas), inevitably raise the prices of energy made from those "clean" resources.  As such, it's a tax on American consumers of "clean" energy which discourages such energy and, in the process, lines the pockets of the unions and companies that handle such work.  (In his press release touting the POWER Act, Rep. Landry states that "our current economic situation is directly related to high energy prices," and that "we must ensure this energy is made by American workers.”  He seems utterly oblivious to the fact that limiting domestic energy producers to American workers will inevitably result in "high energy prices."  Oops.)

The POWER Act currently has eighteen co-sponsors, including Republican Reps. Rodney Alexander (LA), Jo Bonner (AL), Jeff Duncan (SC), Trey Gowdy (SC4), Duncan Hunter (CA), Frank LoBiondo (NJ), Candice Miller (MI), Alan Nunnelee (MS), Steven Palazzo (MS), Todd Rokita (IN), Steve Scalise (LA), Steve Southerland (FL), Rob Wittman (VA) and Don Young (AK).  The GOP has long been a supporter of lower taxes, free trade and economic freedom, and it claims to oppose corporate welfare - particularly President Obama's green energy initiatives.  So it's odd that these Republicans have dropped the party line in order to support the POWER Act and the higher consumer taxes, corporate welfare (and clear reduction in economic freedom) that it would inevitably produce.  In fact, considering the GOP's principled (and correct) stance about expanding domestic production of traditional energy sources, you'd think that these folks would support a blanket repeal of the Jones Act in order to make domestic offshore drilling less expensive, rather than the law's expansion to offshore "clean" energy in order to make that type of energy even moreso.

Then again, when one notices that most of these folks - and their "environmentalist" Democratic colleagues calling for new trade disputes against China - represent the American unions and industries that financially benefit from higher prices for "clean" energy goods and services, their motivation becomes a whole lot clearer, doesn't it?

Let's hear it for bi-partisanship.  Yippee.

Unions, Protectionism and the Deepwater Horizon Disaster

One of the loudest criticisms of the Obama administration's lackluster efforts in the Gulf of Mexico was that the White House has, for some bizarre reason, refused many countries' offers to help with the BP oil spill's clean-up and containment efforts.  Those refusals are well-documented, and according to the State Department, the United States government has received assistance offers from 18 foreign countries, but thus far has accepted only four of them: (i) Mexico’s offer of two skimmers and 13,780 feet of boom (accepted in early May); (ii) Norway’s offer of eight skimming systems (accepted in early May); (iii) the Netherlands' offer of three sets of Koseq Rigid Sweeping Arms (accepted on May 23); and (iv) Canada’s offer of 9,843 feet of containment boom (accepted on June 4).

As you can see, that's not a whole lot of foreign help, especially for a disaster this size, and it's mostly equipment - only two Mexican skimmer ships have apparently been employed by the US government so far.  So what's up?  Well, many critics of the administration's efforts have cited an obscure protectionist law (the "Jones Act" ), which prevents foreign ships with foreign (i.e., non-union) workers from engaging in "cabotage" in US waters, as the reason why there aren't more foreign ships helping with the cleanup efforts.  Here's Steve Horowitz with the gist of the critics' argument (h/t Mark Perry):

With all of the damage and finger-pointing taking place around BP's Deepwater Horizon disaster, one of the most frequently asked questions is whether the federal and local governments are doing all they can to address the problems. One way in which they are clearly not doing so is the President's continued refusal to request an emergency waiver of one piece of legislation that is slowing down the response: the Merchant Marine Act of 1920, better known as the Jones Act.

The Jones Act is actually section 27 of the MMA and requires "that all goods transported by water between U.S. ports be carried in U.S.-flag ships, constructed in the United States, owned by U.S. citizens, and crewed by U.S. citizens and U.S. permanent residents." This, of course, includes the Gulf of Mexico. Thus any attempt to move equipment from one U.S. port to another for the purpose of either stopping or cleaning up the Deepwater Horizon leak must involve U.S. ships, fully constructed in the U.S., etc..

Of course in a world of globalized trade few such ships exist. In fact, a number of foreign-constructed or crewed ships are in U.S ports at the moment and could easily transport oil sucking equipment or more booms to the Gulf, but the Jones Act prevents them from doing so. Like the school buses that sat in a parking lot while folks were stranded during Hurricane Katrina, those non-U.S. ships and their equipment are sitting idle while an environmental disaster unfolds.

Interestingly, two days after Katrina struck the Gulf Coast, Homeland Security Secretary Michael Chertoff got approval for a blanket waiver of the Jones Act so that oil and natural gas could be brought into the area on non-approved ships. Meanwhile, President Obama and others continue to insist that such a blanket waiver is "not needed at this time."

From the pictures we're seeing of the Gulf, that seems a hard position to defend. However, as an economist, it's always worth asking: cui bono? Who is benefiting from this law's enforcement. One major beneficiary is organized labor. Ships that meet the requirements of the Jones Act are crewed by unionized labor and granting waivers to it (or outright repealing it as it needlessly raises the costs of all kinds of U.S. made goods) would bring lower-wage labor into competition with those nice union jobs, potentially threatening them. One theory is that President Obama does not want to risk alienating the labor vote by waiving the Jones Act even for a short period of time. President Bush had no such concerns as labor wasn't going to vote for him anyway.

Ok.  So basically, Horowitz and others argue that the Gulf clean-up effort isn't firing on all cylinders because President Obama, with a watchful eye on the November midterm elections, caved to the pressure of US labor unions and their hired guns and refused to issue a blanket waiver of the Jones Act.  Blech.

However, as Horowitz notes, the administration's response has been that such a waiver isn't needed right now, and they and other outlets have noted that foreign vessels are working in the Gulf as we, errr, speak.  Indeed, those two aforementioned Mexican ships are operating there already (no, there's no NAFTA exception because the US expressly exempted cabotage from NAFTA's rules), and according to a June 15 article by Offshore, there are actually fifteen foreign vessels doing clean-up work in the Gulf.  Admiral Thad Allen, the guy in charge of the big clean-up effort, also stated last week that no one has even requested a Jones Act waiver.  Hmmm.

So who's wrong and who's right here?  Horowitz and his fellow angry critics or the White House?

Well, it appears that, technically, they're both right, but while the White House probably can't be accused of outright lying, they're definitely not telling us the whole story, and the whole thing reeks of of labor union patronage.  (Shocking, I know!)  The aforementioned Offshore article helps to explain (emphasis mine):

National Incident Commander Admiral Thad Allen instructed the Coast Guard federal on-scene coordinator, U.S. Customs and Border Protection, and the U.S. Maritime Administration to ensure any Jones Act waiver requests regarding the BP oil spill response receive accelerated processing.

The admiral’s guidance would route waivers through the on-scene coordinator and the national incident commander for expedited clearance.

No Jones Act waivers have been required for the 15 foreign-flagged vessels currently in operation in the Gulf of Mexico. A foreign flag vessel can conduct certain operations as part of the flotilla if it is an oil spill response vessel and meets the requirements of 46 USC § 55113.

Federal law prohibits a foreign-flagged vessel from transporting merchandise between points in the United States encompassed by the Coastwise laws. The CBP determines the application of the Jones Act.

Being a diligent lawyer, I took a look at 46 USC § 55113 and here's what it says:

Notwithstanding any other provision of law, an oil spill response vessel documented under the laws of a foreign country may operate in waters of the United States on an emergency and temporary basis, for the purpose of recovering, transporting, and unloading in a United States port oil discharged as a result of an oil spill in or near those waters, if (1) an adequate number and type of oil spill response vessels documented under the laws of the United States cannot be engaged to recover oil from an oil spill in or near those waters in a timely manner, as determined by the Federal On-Scene Coordinator for a discharge or threat of a discharge of oil; and (2) the foreign country has by its laws accorded to vessels of the United States the same privileges accorded to vessels of the foreign country under this section.

So basically, Jones Act waivers aren't needed if a foreign-documented "oil spill response vessel" meets the two criteria listed above.  This explains how (a) the Jones Act remains unwaived; (b) some foreign vessels are working in the Gulf right now; and (c) other foreign vessels - like the transport-type that Horwitz describes above - can't operate in the Gulf because of the Jones Act.  It also explains how the White House technically isn't lying when it says that foreign ships can operate, and are operating, in the Gulf without a Jones Act waiver, so a blanket waiver isn't "needed."

Yet something still stinks here.  And bad.

First, if there's no political benefit to not issuing a blanket waiver like Bush did after Katrina, then why not stop the PR bleeding (such as these comments by Hawaii Congressman Charles Djou (R) or this Fox News story) and just issue the damn waiver?  Seems like a no brainer, right?  Well, unless, of course, the AFL-CIO's spokesman on the Jones Act issue has met with the White House and expressed his clients', ahem, views on the subject, and the White House has already exhibited a strong willingness to cave to union pressure on obscure trade issues (see, e.g., mexican trucks).

Second, now that the Jones Act has become a political issue, will the Obama adminstration openly deny a new limited Jones Act waiver request?  Earlier administration statements from White House Spokesman Robert Gibbs "that there are no pending requests" came before today when Dallas businessman Fred McCallister formally requested one pursuant to the expedited process described above:

Fred McCallister, an investment banker with Allegiance Capital Corporation, sent a letter to Incident Commander Admiral Thad Allen today asking for a limited waiver of the Jones Act, to enable 12 to 25 foreign flagged skimmer ships to assist in clean-up efforts in the Gulf.

"Many in the Gulf have been calling for this equipment, which can collect 3,500 gallons of oil per hour per vessel from Gulf waters. With estimates now at 2.5 million gallons of oil spilling into the Gulf every day, the urgency can't be overstated," said McCallister, a Vice President at Allegiance Capital.

The Jones Act has been waived as part of disaster response in the past, including a waiver to assist in response to Hurricane Katrina. More recently it has been waived to support renewable energy development efforts off of the coast of Delaware. Several Gulf state leaders have asked for a general waiver of the Jones Act this week.

Mr. McCallister has 12 skimming vessels specifically designed to remove surface oil from the Gulf that are immediately available and at least 13 more that can be made available over the next few weeks. The firm also has specialized vessels for deploying oil booms and providing housing for personnel working in the Gulf of Mexico on the BP oil spill cleanup.

McCallister's vessels probably don't meet one of the waiver requirements set forth in 46 USC § 55113, so they're going to provide a test for the White House.  It appears that, contrary to Admiral Allen's earlier statement, at least one Jones Act waiver request was submitted and denied, but that was long before the new media and political firestorm.  Things are much different now, and a denial of this new waiver request would certainly make news, especially considering that the quotes above come from a press release by McCallister's investment firm, and he was on Fox earlier this week.  (Something tells me that he's probably not going to keep quiet if his request is denied.) 

So will the White House really deny a(nother?) formal Jones Act waiver request when the Deepwater Horizon effort is, from a PR perspective at least, an abject failure?

It appears that the answer to that question depends on just how much all that union support is worth, and we're all about to find out about that very, very soon.