Congressman Ted Yoho

Representing the 3rd District of Florida
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Puerto Rico, tariffs dominate Jacksonville's LNG summit

Aug 8, 2018
In The News

Puerto Rico is the biggest market opportunity for America's growing natural gas industry, and Jacksonville, which ships almost 90 percent of Puerto Rico's goods and already exports liquefied natural gas to the island, is primed to corner that market. That was the consensus reached by Congressional representatives, industry leaders and even the CEO of Puerto Rico's energy authority at Tuesday's American LNG Summit at the Cecil Center.

Puerto Rico is in the midst of rebuilding its beleaguered power grid, which was neglected for years before Hurricane Maria devastated it last fall.

"We can't live with outages everyday, and that's what's happening," said Jenniffer Gonzales-Colon, Puerto Rico's sole representative in Congress.

Jose Ortiz, CEO of the Puerto Rico Electric Power Authority, has plans to overhaul the network by shedding Puerto Rico's dependency on oil, burying key transmission lines underground and breaking the island-wide grid into about eight micro-grids.

"I didn't come here to change PREPA; I came here to replace it," said Ortiz.

Ortiz has set a goal for Puerto Rico to get 60 percent of its energy from LNG in the next two years, almost doubling the amount of energy LNG generates for Puerto Rico today. He wants to supply all of the island's LNG needs from the U.S. mainland, and Jacksonville is the obvious candidate, Ortiz noted.

Jacksonville-based shippers Tote Maritime and Crowley Maritime have begun converting their fleets to LNG-power, and Crowley already ships LNG to pharmaceutical and food and beverage companies. Pivotal LNG and Eagle LNG, part of Ferus Natural Gas Fuels, have combined capacity to produce almost 2 million of gallons of LNG daily and capacity to store more than 16 million gallons.

But for Jacksonville to provide LNG in mass to Puerto Rico, regulatory frameworks would have to change. The Jones Act, a 1920 maritime law, requires ships bound for U.S. ports to be American owned, crewed and built. Puerto Rico has obtained waivers on certain goods since Hurricane Maria, and more than half of the ships that call on Puerto Rico today are foreign vessels. Nonetheless, a sharp decline in U.S. shipbuilding has left Puerto Rico serviced largely by an aging fleet of small vessels compared to what's available globally.

Such restrictions have made American shipping an expensive choice, panelists noted.

"The fact that it is more expensive to bring in fuel from the Gulf than it does from Europe and Asia should give everybody pause," said Christopher Guith, senior vice president of the U.S. Chamber Global Energy Institute. "It is cheaper to import gas from Russia... because of the Jones Act. That harms us."

The full panel agreed that the Jones Act needed to be restructured and loosened in ways, though none suggested repealing the law, which is strongly supported by American shipping companies.

"It's one of those third rails of politics," said Fred Hutchinson, CEO of LNG Allies, a nonprofit. "Touch it and you're dead."

Gonzales-Colon and Ortiz suggested investments to make Puerto Rico a hub for LNG distribution throughout the rest of the Caribbean, which would secure Puerto Rico a steady stream of LNG, wean the region off of oil from Venezuela and the Middle East and help justify investments in new, larger vessels.

"This is the moment to invest," said Ortiz. "You don't buy stocks when they're expensive. You buy when they're undervalued."

Supplying the world

Congressman Ted Yoho, who represents Central North Florida, has proposed a bill, H.R. 4370, that would drastically increase U.S. exports of LNG by expediting the approval process. The bill would make the U.S. the largest LNG exporter in the world by Congressional estimates.

Yoho sees America's vast reserves of natural gas not only as an economic engine but as a way to counter the influences of nations like China and Russia, which have used their control of minerals and oil to bully neighboring countries, he said, noting the delegations from Indonesia, Taiwan, Bangladesh, Sri Lanka, Vietnam, Singapore, Thailand and South Korea in attendance.

His fellow panelists, however, raised caution over escalating tensions between the U.S. and the rest of the world brought on by tariffs.

"If we alienate the world vis-a-vis trade wars, nobody is going to take our gas," said Guith. "We'll have these sparkling facilities that are going to be dormant."

Hutchinson shared this concern.

"Tariffs are taxes, and they're self-imposed taxes," said Hutchinson. "I don't know why we're doing this to ourselves."

Tariffs on aluminum and steel have especially hurt LNG suppliers, according to Dave Mica, executive director of the Florida Petroleum Council.

"This new tariff situation, it's huge," said Mica. "It's problematic, and it's harder to make the infrastructure available for a growing market."

Yoho, in a stark contrast, backed President Donald Trump's trade policies to the hilt.

"I'm glad the president is doing this," said Yoho. "It's a readjustment. I think it's going to be temporary... Can you imagine if you have the president rattling his trade saber and you had Congress behind him saying, 'We're with you, Mr. President,' and industry behind him saying, 'We're with you, Mr. President?' Imagine how quickly everyone would adjust."

Yoho criticized beer companies who complained that the aluminum tariffs were raising their costs by a cent a can, saying that they, too, should get behind Trump. Hutchinson pushed back at this.

"It may not be a lot on a beer can, but on a $10 billion LNG plant, it's not inconsequential in a competitive marketplace," said Hutchinson.