Hurricane Waivers and Infrastructure Funding [Maritime and Infrastructure Federal Update]

by Cozen O'Connor
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Cozen O'Connor

This edition of the Cozen O’Connor Maritime and Infrastructure Federal Update highlights: (i) the unprecedented nature of the recent Jones Act waiver, (ii) available infrastructure funding through the TIGER program, (iii) President Trump’s executive order aimed at infrastructure environmental reviews, (iv) the resurgence of the Small Shipyard Grant Program, (v) Congressional stagnation on certain maritime legislation, and (vi) the Senate’s passage of the National Defense Authorization Act for Fiscal Year 2018.

Regulatory and Administrative

The Unprecedented 501(a) Jones Act Waiver

As widely reported, on September 8, the Acting Secretary of Homeland Security waived the Jones Act for the transportation of petroleum products for a seven-day period, in recognition of the severity of Hurricanes Harvey and Irma. The waiver was extended on September 11 when the extent of Hurricane Irma’s devastation became clear. The extended waiver applies to the movement of refined petroleum products from New York, New Jersey, Delaware, Maryland, Pennsylvania, New Mexico, Texas, Louisiana, Mississippi, Alabama, and Arkansas to Florida, Georgia, South Carolina, North Carolina, Virginia, West Virginia, and Puerto Rico.

The waiver was unprecedented because of the authority that it cites — 46 U.S.C § 501(a) — which allows the Secretary of Homeland Security to waive the Jones Act when requested to do so by the Secretary of Defense. Unlike waivers under 46 U.S.C § 501(b), there is no requirement for the Maritime Administration to determine the non-availability of qualified U.S.-flag capacity before the waiver’s issuance. Prior administrations have been hesitant to use the 501(a) authority because it permits foreign-flag vessels to engage in coastwise transportation while available U.S.-flag coastwise-qualified vessels, and their U.S. mariner crews, may be sitting unemployed. It is unclear whether the invocation of the 501(a) authority marks a change in policy or if it is simply a one-off response to back-to-back hurricanes and the emergent need to move petroleum products to the affected area.

Additionally, while the waiver requires all merchandise to be laden on board a vessel by September 22, it does not require the merchandise to be delivered by a certain date. It remains to be seen whether shippers will use this opportunity to store petroleum products for later delivery, as occurred during the Strategic Petroleum Reserve Jones Act waiver in 2011. Notably, because the products would be transported under the open-ended waiver they potentially could be taken to a foreign intermediary destination for a period of time and subsequently delivered to one of the states named in the waiver without a requirement to transform the petroleum into a “new and different” product.

DOT Announces Availability of TIGER Funding

On September 6, the Department of Transportation announced the availability of $500 million in grant funding for national infrastructure (including port infrastructure) investments through the Transportation Investment Generating Economic Recovery (TIGER) program. Our readers will recall that the Trump administration proposed defunding the TIGER program in the President’s Fiscal Year 2018 budget proposal, with the promise of a reformed infrastructure investment strategy. Therefore, this may be the last opportunity to participate in the TIGER program. The highly successful program has already provided nearly $5.1 billion in infrastructure funding through eight rounds of grants. For this ninth round, the maximum grant award is $25 million, and no state can receive more than $50 million. Applications for TIGER grants must be submitted through grants.gov by 8:00 p.m. EDT on October 16.

Trump Issues Order on Environmental Review Process for Infrastructure Projects

President Donald Trump issued Executive Order (EO) 13807, Establishing Discipline and Accountability in the Environmental Review and Permitting Process for Infrastructure, on August 15. The order directs federal agencies to implement a “transparent and coordinated process” when conducting environmental reviews and authorizations for infrastructure projects. The director of the Office of Management and Budget (OMB) is directed to create a cross-agency priority goal to modernize infrastructure permitting and the Council for Environmental Quality (CEQ) is directed to evaluate methods of modernizing federal environmental review and permitting practices.

The EO further instructs the CEQ to serve as the mediator of interagency disputes during the environmental review and permitting process and to create an interagency working group that will identify barriers to reviewing and authorizing infrastructure projects under the National Environmental Policy Act (NEPA). The EO builds on the President’s Order from January 2017, which called for streamlining and expediting processes for reviewing and permitting high-priority infrastructure projects.

MARAD Awards FY 2017 Small Shipyard Grants

The Maritime Administration (MARAD) awarded $9.8 million in Small Shipyard Grant Program funding to 18 shipyards. The grants assist shipyards with fewer than 600 production employees by providing funding for industrial modernization, employee training, and technological innovation. The selected shipyards are located in Alaska, California, Connecticut, Indiana, Kentucky, Louisiana, Massachusetts, Maryland, Maine, Pennsylvania, Rhode Island, South Carolina, Texas, Virginia, and Washington. The program, which was once seemingly dormant, has recently found new life and appears to have increased Congressional support. Section 3505 of the Senate-passed version of the National Defense Authorization Act for Fiscal Year 2018, discussed below, will reauthorize the program through Fiscal Year 2019 and will increase authorized funding to $30 million.

Legislative

Little Action Taken on Maritime Legislation

With Congress recently returning from its traditional August recess and a wealth of competing Congressional priorities, such as hurricane disaster relief and must-pass legislation, neither chamber has taken new action on maritime-related legislation.

Both Rep. Duncan Hunter (R-Calif.) and Sen. Deb Fischer’s (R-Neb.) bills to authorize the Federal Maritime Commission (FMC) have stalled in their respective chambers. In the House of Representatives, the Committee on Transportation and Infrastructure held a markup of H.R. 2593 in May but has not taken further action. The Senate version, S. 1119, was referred to the Committee on Commerce, Science, and Transportation in May but has similarly seen no further action. Neither committee is currently scheduled to review FMC authorizing legislation.

Senator John McCain’s Open America’s Waters Act, S. 1561, which would repeal the Jones Act, was referred to the Senate Commerce Committee in July and has not yet been considered. There are few legislative days remaining in 2017 for Congress to take action on any of these bills. How both chambers will prioritize maritime legislation alongside other pressing issues remains to be seen.

NDAA Scheduled for Final Vote

The Senate voted on September 18 to pass H.R. 2810, the National Defense Authorization Act for Fiscal Year 2018 (NDAA). The bill passed by a vote of 89-8 and contained more than 150 amendments offered by both sides of the aisle. The Senate-passed bill also contains the Securing the Homeland by Increasing our Power on the Seas (SHIPS) Act, introduced in the Senate by Sen. Roger Wicker (R-Miss.), which seeks to make it the policy of the United States to increase the Navy’s fleet to 355 battle force ships from its current level of 276 ships. In addition, the Maritime Administration’s authorization for Fiscal Year 2018, noted above, was included in the Senate-passed bill. In aggregate, the bill demonstrates significant Senate support for U.S. shipyards. The bill now heads to conference to resolve differences with the House version passed in July.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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