Jones Act Impacts on U.S. Offshore Wind

Any opinions in this article are not those of Winston & Strawn or its clients. The opinions in this article are the author’s opinions only.

No discussion of offshore project finance in the United States is complete without a discussion of the Jones Act, argues Winston & Strawn's Maritime Practice Chair Charlie Papavizas in his article for Thompson Reuters Project Finance International.

The Jones Act is a federal law that regulates maritime commerce in the United States. It requires that transportation of merchandise between two points in the U.S. must be made by qualified US-flag vessels—ships that are built, owned and operated by the United States and U.S. citizens. This often means that the Jones Act-qualified vessels are more expensive to build and operate than similar foreign vessels.

The Jones Act is particularly important in the nascent U.S. offshore wind industry because most of the know-how regarding construction of offshore wind farms resides with European firms that employ non-U.S. citizens on foreign vessels. Therefore, the Jones Act plays an outsized role in how offshore wind projects are planned and constructed.

The offshore wind industry should look to the offshore oil and gas industry for guidance in applying the Jones Act to their offshore projects—namely, where the Jones Act does not apply. For example, if there is no transportation of merchandise between two points, then the act does not apply. So, in the instance of drilling or the act of installing a wind tower where the installation vessel remains station, the Jones Act does not apply. More importantly, precedents indicate that cable or pipe laying between two U.S. points is not covered by the Jones Act and can be accomplished with a foreign vessel.

Areas of concern include cable repair and cable disposal. The burial of cable can implicate the restrictions on dredging in U.S. waters.

Also, even when foreign vessels can be used in U.S. waters legally, careful attention should be paid to other U.S. laws that affect vessel operations, particularly when a vessel might remain in U.S. waters for an extended period of time. Once anything is temporarily or permanently attached to the U.S. outer continental shelf, then anything brought to that point from a U.S. port would have to be brought to the construction site by qualified U.S.-flag vessels.

This presents a number of potential complications. For example, once the first point is established in a multi-unit project by the driving of a pile into the seabed or the placement of a foundation structure, it is not clear whether that first construction site is an individual point or a point that indicates nearby work sites as well. The answer to this question affects operational issues of whether tower components can be placed on a foreign vessel that then may shift from work site to work site within the same wind farm.

Another issue involves the installation of scour protection around a tower. It is not clear to what extent the “point in the U.S.” includes areas immediately adjacent to the base of the foundation of the tower.

Finally, highly technical issues have arisen in the oil and gas industry about whether a foreign construction vessel can move very short distances once it has onboard merchandise from a U.S. port to be installed offshore. Right now the answer is “no”—unless transported by crane, which can cause serious safety issues.

The path to using any foreign vessels in U.S. waters by virtue of a waiver is narrow and usually must require a national defense reason. Cost is not a relevant waiver consideration.

Those seeking guidance about the Jones Act can contact the National Jones Act Division of Enforcement (JADE). The long-standing alternative is to seek a ruling from U.S. Customs and Border Protection’s national headquarters, whose rulings have legal effect.

That said, despite the Jones Act, the U.S. offshore wind market remains a viable commercial opportunity for foreign vessels, so long as its activities are lawful in U.S. waters. 

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