US Cabotage laws and Alaska LNG trade: the dawn of the Jones Act Waiver.

• Author: Hurst, Isaak
• Position: SPECIAL SECTION: World Trade Alaska

Love it or hate it, the Jones Act is the single most important piece of US maritime legislation to date. It provides many Alaskan fishermen with jobs on the water, delivers significant employment benefits to injured mariners, and protects Alaskan seaman from the vicissitudes of foreign flagged jurisdictions by limiting US trade to US owned and operated vessels. All in, the Jones Act generates over $100 billion in US revenue and provides over five hundred thousand jobs to Americans annually. However, the Jones Act is not without its critics, and many of the larger commercial maritime entities are wondering what future the Jones Act will have if Alaska needs to ship Liquefied Natural Gas (LNG) to US ports, rather than those exclusively in Asia. This article will examine the current LNG tanker market, US shipping laws, and the impact each will have on Alaska's LNG trade.

The Global Supply of LNG Tankers-or Lack Thereof

A vital element in Alaska's LNG equation is the vessels needed to ship this cargo. Today there are around 375 plus LNG carriers operating globally. Compared to the global oil tanker fleet, which has 5,757 vessels, the LNG fleet is nominal in size. However, in the scheme of maritime history, the LNG tanker is a new design. The first international shipment of LNG occurred in 1960 with a shipment from Algeria to the United Kingdom. By 1990, the world's LNG fleet was nearly 100 vessels, and by the millennium, the feet had doubled. In 2008, the world's LNG tanker fleet launched its 300th ship, and today there are over 375 tankers transporting LNG to all comers of the world. With a limited supply of ships and global LNG demand souring, these vessels can charter out for a whopping $157,000 per day--$cha-ching$.

Time to get into the LNG carrier market-fight? Easier said than done. These vessels are equipped with cryogenic storage tanks designed to keep the ship's cargo at a frigid -260[degrees]F. The vessels all have sophisticated vapor capture systems, bespoke loading and off-loading arms, engines that burn the very fuel it's transporting, and a super high-tech computer monitoring system that keeps all of the above running smoothly. Indeed, these are incredibly exotic vessels. All in, the average cost to build a mid-sized LNG carrier can between $151 million to $210 million. For the luxury tanker--the Q-Max, which can store 250,000 metric tons of LNG--the building cost is closer to $300 million. As a result, LNG carriers are some of...