New Legislation to Apply the Jones Act to Offshore Renewables (Updated)

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The House of Representatives passed legislation, H.R. 4447, the Expanding Access to Sustainable Energy Act of 2019, on September 24, 2020, that included a provision from Representatives Garamendi and Lowenthal (“Amendment 33”) to amend the Outer Continental Shelf Lands Act (“OCSLA”) that would confirm the Jones Act applies to all offshore energy development on the Outer Continental Shelf (“OCS”), including wind energy. Passage of this provision now appears imminent, as it has been recently included in the National Defense Authorization Act (“NDAA”). From an operational standpoint, while most offshore projects are planned with Jones Act compliance in mind, enactment of this provision would be a welcome development to stakeholders and bring needed clarity to renewable energy development offshore. 

Background

The Coastwise Merchandise Statute, commonly known as the Jones Act, has evolved over time. The U.S. cabotage laws date back to the founding of the Republic and were enshrined in their current form in the Merchant Marine Act of 1920. These were originally laws that dealt with transportation issues for domestic voyages. However, as time progressed and production of marine resources became feasible, the U.S. Congress passed OCSLA, which extended federal law to installations on the OCS. 

U.S. Customs and Border Protection (“CBP”) has historically interpreted OCSLA to apply the Jones Act to oil and gas-related activities on the OCS. However, there is some ambiguity about whether the Jones Act applies to offshore wind projects. Arguably, under current law, the coastwise laws should not apply to a wind farm project located on the OCS because the resource is the wind above the ocean, not from the seabed itself. While most companies have conservatively assumed that the Jones Act will apply to offshore wind construction, CBP has yet to rule on this issue. In addition, other agencies, such as the U.S. Coast Guard, take the position that OCSLA does not apply to an offshore wind project.

Both chambers of Congress have been working on parallel energy bills, and whether Congress passes a new energy bill before the final recess of the 116th Congress in December remains to be seen. As previously noted, the House of Representatives has passed an energy bill containing Amendment 33. The current version of the Senate energy bill, the “American Energy Innovation Act,” currently does not contain a version of Amendment 33. However, in a recent development, this provision was included in the NDAA. As such, this provision will likely become law this year because the NDAA is one of the few bills that inevitably is enacted into law each year.

Analysis

Amendment 33 would extend federal law to “all installations and other devices permanently or temporarily attached to the seabed [for the purposes of] … producing or supporting the production of energy from sources other than oil and gas.” (Amendment text in italics.) The drafters of this provision have publicly declared that the purpose of this amendment is to extend the Jones Act to offshore renewables. While there have been some articles in the media questioning whether this language is flawed, we believe those articles are in error. The operative language in the use of the words “supporting the production” is extremely broad, and thus would clearly extend the Jones Act to offshore renewables, including the placement of wind structures on the seabed.

As such, we believe CBP would have to conclude, if this language is enacted, that the Jones Act applies to renewable energy projects such as offshore wind in the same way it applies to oil and gas. This legislation would be a positive development for vessel operators and renewable energy developers because it will bring clarity and ensure a level playing field for all stakeholders.

As of this writing, the NDAA is scheduled for a vote during the week of December 7, 2020, although President Trump is threatening a veto. Even if the president vetoes the bill, there is a good chance that Congress will take action to override the veto before adjourning at the end of the year.

Looking ahead, if passage of Amendment 33 does not occur in the current Congress, it is entirely possible that passage could occur in the 117th Congress. The power dynamics in both the House and Senate will likely remain largely unchanged, and the Biden administration will likely be a proponent of renewable energy sources. As such, even if passage does not occur this year, Amendment 33 could become law in the near future.

Conclusion

Enactment of Amendment 33 would bring welcome certainty to the application of the Jones Act to offshore renewable work. While timing may be an issue for passage in the current Congress, members have shown a sense of urgency in prioritizing this legislation. Nonetheless, the results of the recent election portend the possibility of passage in the near future, which would give CBP the needed clarity to adequately rule on offshore wind issues related to Jones Act compliance. In addition, other federal agencies would have to align their positions on offshore wind with the new legislation. Passage of Amendment 33 would assist the burgeoning offshore wind industry, which in its nascent years in the United States has shown tremendous promise for energy production as well as exciting opportunities for domestic and international vessel owners and operators and shipyards.

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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