Category: Government/Legislation

Will Jones Act Waivers Be a Viable Option in the Future?

Dana S. Merkel, Jonathan K. Waldron, and Jeanne M. Grasso


Companies often ask if it is possible to obtain a Jones Act waiver in emergency circumstances or otherwise when they know that there may not be domestic Jones Act vessels available to perform the transportation or installation of cargo. Historically, waivers have been very difficult to obtain and recent Congressional developments will make them even more difficult to obtain.

Background

The Jones Act prohibits the “transportation of merchandise by water, or by land and water, between points in the United States . . . either directly or via a foreign port” unless the vessel is U.S. built, U.S.-flag, and 75 percent U.S. owned. Jones Act requirements can only be waived if “necessary in the interest of national defense.” 46 U.S.C. § 501 (the “Waiver Provision”).

It is extremely difficult and rare to obtain a waiver of the Jones Act. The Waiver Provision has always limited waivers to situations where such waiver is needed for national defense purposes.

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A Practical Approach to Reduce MARPOL Enforcement Risks in the United States

Kierstan L. Carlson and Jeanne M. Grasso


Readers of Mainbrace know well that the United States has been aggressively enforcing compliance with MARPOL for decades. Often referred to as “magic pipe” cases, the U.S. Department of Justice (“DOJ”) has brought criminal MARPOL prosecutions against owners and operators of ships running the gamut from fishing vessels to bulkers, tankers, container ships, and cruise ships. These prosecutions have involved underlying violations of MARPOL Annex I (oil), but also Annex V (garbage) and more recently Annex VI (air emissions).

Criminal MARPOL cases are extraordinarily costly and disruptive to vessel owners/operators. Not only are significant fines levied against violators, but companies convicted of MARPOL violations suffer attendant reputational damage that can impact charter hire prospects and incur significant costs for paying wages, housing, and per diem to the crew members whom the government requires to remain in the United States for the duration of the criminal case. On top of that are the costs associated with a comprehensive Environmental Compliance Plan for the fleet, along with costs associated with a Third-Party Auditor and a Court-Appointed Monitor.

Unlike other areas of U.S. criminal enforcement, MARPOL prosecutions have continued at a steady pace, across administrations led by different political parties. This is due, in part, to the fact that the Act to Prevent Pollution from Ships (“APPS”), the U.S. statute that implemented MARPOL, is enforced by the U.S. Coast Guard (“USCG”), which is typically less affected by political change than other executive agencies responsible for criminal enforcement. Perhaps more importantly, APPS includes a whistleblower provision pursuant to which anyone who provides information to the USCG that leads to a conviction may be awarded up to 50 percent of the criminal penalty imposed under APPS. Potential awards incentivize seafarers to report misconduct to the USCG instead of to the company, even in cases where there is an open-reporting program. It also gives the USCG and DOJ a significant advantage, as they often receive photos and videos of the alleged improper conduct before their investigation even begins.

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Offshore Wind Development Is Coming to the Gulf of Mexico

Joan M. Bondareff and Keith B. Letourneau

Joan M. Bondareff

The U.S. Department of the Interior’s Bureau of Ocean Energy Management (“BOEM”) has identified two Wind Energy Areas (“WEAs”) in the Gulf of Mexico (“GoM”) to develop offshore wind farms. A lease sale is expected later this summer. One 546,000-acre WEA is located south of Galveston, Texas; the other is a 188,000-acre tract off the coast of Lake Charles, Louisiana. According to BOEM, the two WEAs have the potential to power 2.3 million and 799,000 homes, respectively, with clean energy generated by continuously renewable offshore wind.

Offshore wind promises various advantages over onshore wind farms, including stronger, more consistent, and less turbulent winds, and the use of substantially bigger towers and blades than onshore farms, resulting in more efficient and greater power generation; out-of-sight-and-sound facilities; the capacity to service large U.S. coastal populations; and the ability to avoid ecologically sensitive sites ashore. (See Onshore vs offshore wind energy: what’s the difference?) Moreover, according to some estimates, the GoM possesses the potential to generate almost 510 giga watts (“GW”) of offshore wind (“OSW”) annually. (See The Gulf of Mexico is poised for a wind energy boom. ‘The only question is when.’) Additionally, given the mature oil and gas offshore infrastructure along and off the Gulf Coast states, that infrastructure arguably can and would adapt to build and maintain OSW farms in the GoM.

This article reviews the next steps in the development of wind farms in the GoM, comparing the environments in other parts of the country with those in the Gulf region and describing the obstacles to actual production of offshore wind in the GoM.

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Transfer of Offshore Wind Safety and Environmental Responsibilities

Dana S. Merkel and Jonathan K. Waldron

The Department of the Interior (“DOI”) transferred safety and environmental oversight for the Outer Continental Shelf (“OCS”) renewable energy program from the Bureau of Ocean Energy Management (“BOEM”) to the Bureau of Safety and Environmental Enforcement (“BSEE”) on January 31, 2023. Importantly, the transfer does not affect current regulatory requirements for offshore wind development, but merely the agency responsible for oversight and enforcement.

Background

A number of reorganizations have occurred over the years since the Energy Policy Act of 2005 authorized the Secretary of Interior to grant OCS leases for renewable energy activities. When the Minerals Management Service was divided in 2011 following the Deepwater Horizon incident, the Secretary of Interior highlighted the importance of separating the lease planning and management functions and safety and environmental enforcement functions into two separate entities, creating BOEM and BSEE, respectively. A third entity was also created to manage the royalty and revenue management functions.

The renewable energy program, however, remained with BOEM entirely as the program was still in early development. It was noted that the renewable energy program would be split between the entities when it is determined that “an increase in activity justifies transferring the inspection and enforcement functions” to BSEE.

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Compliance, Enforcement Risks, and Emerging Issues Regarding EPA’s Vessel General Permit

Jeanne M. Grasso and Dana S. Merkel

About a year ago, we wrote about a rise in enforcement of the U.S. Environmental Protection Agency’s (“EPA”) Vessel General Permit (“VGP”). In the words of one EPA attorney, that was “just the beginning” and we have continued to see more aggressive reviews of VGP compliance and penalty demands, particularly on the U.S. West Coast. Since then, EPA has continued demanding significant penalties for alleged violations, sometimes citing interpretations of the VGP that are not outlined in any guidance documents. Additionally, in January 2023, EPA published an Enforcement Alert, EPA Reminder About Clean Water Act Vessel General Permit Requirements, reminding the maritime industry of the VGP requirements and impacts of non-compliance, and citing recent enforcement examples.

The VGP and VIDA Implementation

The VGP was issued under the Clean Water Act’s (“CWA”) National Pollutant Discharge Elimination System (“NPDES”) program and provides permit coverage nationwide for discharges incidental to the normal operation of commercial vessels more than 79 feet in length. EPA issued the first version of the VGP in 2008 and then another, more stringent version in 2013. The VGP set effluent limits and mandated Best Management Practices to control certain types of incidental discharges. It also required vessels to conduct routine and annual inspections and imposed numerous recordkeeping obligations, as well as monitoring and reporting requirements.

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U.S. DOJ and FMC Increase Focus on Antitrust Enforcement

William E. Lawler III and Kierstan L. Carlson


The Biden administration recently announced a renewed enforcement focus on consolidation and alliances in the maritime industry that may hinder competition and increase prices. While federal agencies historically have worked together to target anti-competitive conduct and shipping companies have been targeted in cases alleging cartel activity (e.g., price fixing, market allocation, and bid rigging), companies should heed the recent warnings and must be vigilant in ensuring compliance with competition laws now more than ever.

Regulation of Competition within the Maritime Industry

The Federal Maritime Commission (“FMC”) and the U.S. Department of Justice’s (“DOJ”) Antitrust Division (the “Division”) share enforcement duties over the maritime transport market.

The FMC monitors the effects of ocean carrier alliances on competition. Under U.S. law, international carriers enjoy a limited exception to some antitrust laws, as they are permitted to meet to discuss and agree on voluntary rate guidelines and can file agreements with the FMC establishing such guidelines. However, the FMC is not required to approve such agreements and can bring civil actions in court to enjoin any agreements likely to reduce competition such that it leads to unreasonable price increases or service reductions, or to substantially lessen competition in purchasing covered services. The FMC also has a Bureau of Enforcement, which investigates potential violations and can impose civil penalties or engage in formal proceedings.

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Mainbrace Live: U.S. Offshore Wind Industry Update

Blank Rome’s internationally recognized Maritime & International Trade practice group presents a new series of informative webinars covering hot topics in the shipping industry and key insights into 2021 and beyond. Sessions will cover:

    • Sanctions and international trade
    • Offshore wind developments
    • Shipping litigation
    • Maritime regulation
    • Ship finance
    • And more!

For the second webinar in our Mainbrace Live series, Blank Rome LLP Maritime attorneys Thomas H. Belknap, Jr., Joan M. Bondareff, Jonathan K. Waldron, Douglas J. Shoemaker, and Dana S. Merkel presented “U.S. Offshore Wind Industry Update” on Tuesday, April 27, 2021.

Tom, Joan, Jon, Douglas, and Dana discussed:

    • U.S. offshore wind development projects and infrastructure
    • Biden Administration’s commitments to expand renewable energy
    • The Jones Act’s impacts on existing and planned offshore wind installation and servicing projects
    • Pitfalls and opportunities for contractors and service providers looking to enter the industry

MODERATOR

PRESENTERS

You can read coverage of this webinar at TradeWinds here.

To watch a recording of this webinar, please go to the webinar on-demand registration page here.

Mainbrace Live: Prepare for the Biden Administration’s Maritime & Foreign Policy

Blank Rome’s internationally recognized Maritime & International Trade practice group presents a new series of informative webinars covering hot topics in the shipping industry and key insights into 2021 and beyond. Sessions will cover:

    • Sanctions and international trade
    • Offshore wind developments
    • Shipping litigation
    • Maritime regulation
    • Ship finance
    • And more! 

To open the series, on April 13, 2021, Blank Rome LLP Maritime Partners Matthew J. Thomas and Kierstan L. Carlson, along with Blank Rome Government Relations LLC Senior Advisor David S. Jansen, presented “Mainbrace Live: Prepare for the Biden Administration’s Maritime & Foreign Policy.”

Matt, Kierstan, and David discussed the outlook for maritime policymaking under the new Administration and its impacts on the global shipping industry, including:

    • Maritime outlook for the new Congress and Administration
    • International trade sanctions and foreign policy 
    • Enforcement trends

MODERATOR

PRESENTERS

To watch a recording of this webinar, please go to the webinar on-demand registration page here.

CBP Modifies First Offshore Wind Ruling

Jonathan K. Waldron, Matthew J. Thomas, Jeanne M. Grasso, and Stefanos N. Roulakis

Stakeholders in offshore wind construction projects, including vessel owners and operators, project developers, and equipment manufacturers, should ensure that their plans for offshore wind development take into consideration the implications of U.S. Customs and Border Protection’s (“CBP”) most recent Jones Act ruling. While a previous ruling issued by CBP in January 2021 changed course by ruling that “pristine sites” were subject to the Coastwise Merchandise Statute (commonly referred to as the Jones Act), CBP has modified this ruling generally in line with past precedent. Nonetheless, CBP’s modification creates some changes for Jones Act compliance in the offshore wind sector.

On January 27, 2021, CBP ignited controversy in its first Jones Act ruling on offshore wind since the passage of the 2021 National Defense Authorization Act (“NDAA”). The NDAA, through an amendment to the Outer Continental Shelf Lands Act (“OCSLA”), clarified that the Jones Act applied to renewable energy projects on the U.S. Outer Continental Shelf (“OCS”), and stakeholders expected that the same cabotage rules which have applied to mineral energy development projects would equally apply to offshore wind. Nonetheless, in HQ H309186, CBP deviated from decades of precedent by ruling that the lading of “scour protection” materials by a non-coastwise qualified vessel at a U.S. coastwise point (i.e., a port or place in the United States), and unlading of these materials at a pristine site on the OCS, would violate the Jones Act. Reversing course after comments from industry stakeholders, CBP issued a modification, which held that the “Jones Act does not apply to activity occurring at the pristine seabed on the OCS, which has been CBP’s longstanding position on the issue.” HQ H317289 (March 25, 2021). While CBP’s reversal appears to be consistent with “longstanding” precedent on pristine sites, the modification itself raises questions about the applicability of the Jones Act in certain contexts as discussed further below.

BACKGROUND

Decades after extending federal law (including the Jones Act) to the OCS for mineral-related energy development projects, Congress enacted the 2021 NDAA, which included a provision confirming that the Jones Act applies to all offshore energy development on the Outer Continental Shelf, including wind energy. While most offshore wind projects were planned with Jones Act compliance in mind, this has generally been a welcome development for all stakeholders, with the hope that it would bring needed clarity and certainty to renewable energy development projects offshore.

However, CBP’s first shot out of the gate in January missed the mark, although the agency should be lauded for issuing a correction in short order last month. In the initial ruling, Great Lakes Dredge and Dock (“Great Lakes”) proposed to transport and unlade “scour protection” materials (i.e., rocks) to protect wind turbine generator (“WTG”) foundations in conjunction with the construction of the Vineyard Wind Project located on the OCS off the southeast shore of Martha’s Vineyard. Great Lakes proposed unlading the materials at the WTG sites on the OCS in layers and at different phases of the WTG installation process using both coastwise and non-coastwise vessels under various scenarios.

Please click here for the full client alert.

Maritime Legislative Update

Jonathan K. Waldron, Joan M. Bondareff, and Stefanos N. Roulakis


Joan M. BondareffStefanos N. Roulakis




The end of 2020 has seen significant developments in legislation with implications for the maritime industry as we move from the Trump administration to the new Biden administration. This article provides an update on the status of several key maritime-related bills in the 116th Congress as of December 7, 2020. 

The incoming Biden administration has not developed specific bills yet, but we anticipate infrastructure being at the top of the list. This will provide a number of opportunities for the maritime industry—from expanding title XI loan guarantees to funding for port infrastructure projects, new vessels for new offshore wind projects, and an expansion of cargo preference to support the Jones Act. Of import, Biden’s campaign voiced his support for the Jones Act.

Key Maritime Bills Expected to Be Enacted in the 116th Congress

National Defense Authorization Act (“NDAA”)

The NDAA is roundly considered to be an annual “must-pass” bill, having passed every year since the Kennedy administration. In recent years, many maritime provisions have been included in the NDAA. The reason for this is that, as an essential bill that is enacted every year, the NDAA creates opportunity for the advancement of policy priorities in the maritime industry if they are included. The House and Senate have agreed to a conference report for the NDAA and the final bill will include significant maritime provisions, including U.S. Maritime Administration (“MARAD”) reauthorization, U.S. Coast Guard (“USCG”) reauthorization, extension of the Jones Act and other federal laws to offshore renewable energy, and funding for ports to address COVID-related emergencies. A few of these bills are summarized below and more details will be addressed in a follow-up maritime advisory.

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