A Savannah-based business will send delegates this month to Washington, D.C., to lobby for modifications to the Merchant Marine Act of 1920, but the group also has begun a grassroots campaign to enlighten its regional base.
Logistics group Colonial Group Inc., which owns Enmark Stations, has executives out in force spreading the word about how the legislation, also known as the Jones Act, affects gas prices on the East Coast.
Ryan Chandler, the company’s vice president of business development, spoke to the Hinesville Rotary Club on Tuesday about the act.
“We’re not advocating for the repeal of the Jones Act, just the portion that restricts energy transportation in this country,” he said. “Its original intention was to protect U.S. shipping interests back in 1920. Good purpose, good intentions … what it requires is that U.S. goods shipped between U.S. ports could be carried only by vessels built in, manned by and owned by U.S. citizens.”
The downside to the legislation, Chandler said, is that there are not enough Jones-Act compliant vessels to move refined fuel from the Gulf of Mexico to coastal cities where pipelines do not exist. The nearest pipelines are in North Augusta and Macon.
That drives costs upward.
Today, transit costs alone to bring fuel by pipeline from Texas to North Augusta costs 3.3 cents per gallon, and truck freight from North Augusta to Savannah is about 8 cents per gallon, for a total transportation cost of 11.3 cents.
By water, the cost is about 15 cents per gallon from Pasadena, Texas, to Savannah — which means pipeline distributors could have incentive to mark up their prices for coastal customers.
Consequently, the company turns to European imports, which can run about 5 cents per gallon for transit.
The U.S. Energy Information Administration offers independent statistics and analysis on the petroleum industry.
Recent headlines support the claim that there is a domestic oil boom. A Feb. 28 report said U.S. crude oil production exceeded an average of 7 million barrels per day in November and December 2012, the highest volume since December 1992.
Another report released March 20 said the monthly crude-oil production in the United States is expected to exceed the amount of crude oil imports later this year for the first time since February 1995.
The EIA projects the monthly crude-oil production could surpass net crude-oil imports later this year.
Excess fuel extracted in the United States and refined in the Gulf is being exported to countries like Venezuela — though Chandler said it would be better served if sold to East Coast Americans.
“If there’s a world market for gas, and its $3, and you have a choice of shipping it to the East Coast or South America, and it costs you 15 cents to get it to the East Coast, and it costs you 5 cents to get it to South America, refineries earn greater margins by shipping it to South America than to their own East Coast,” Chandler said.
If Americans had access to fuel at lower prices, their discretionary spending on other products would increase, he asserted.
Rotarian Paul Andreshak asked what types of groups benefit from the energy provisions of the Jones Act.
“You have a few people; the railroads will want to make sure — they’re carrying a lot of crude in this country right now, so the railroads would certainly have a problem with it,” Chandler said. “Any of the Jones Act carriers that thought what was being sought was a complete repeal would definitely have a problem with it; any Jones Act carriers that are carrying crude right now would have a problem with it, and I think that there will have to be some kind of negotiated solution if there has to be one.”