An Obscure Bipartisan Shipping Clause Could Derail One Of Biden’s Big Clean Energy Goals


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May 29, 2023

An Obscure Bipartisan Shipping Clause Could Derail One Of Biden’s Big Clean Energy Goals

A relatively obscure provision in a U.S. Coast Guard funding bill in the House

A relatively obscure provision in a U.S. Coast Guard funding bill in the House of Representatives could jeopardize President Joe Biden's offshore wind energy agenda, according to industry representatives, their allies in Congress and some environmentalists.

Biden has outlined a goal of scaling up the U.S. offshore wind industry to a level where it can generate 30 gigawatts of electricity by 2030 — enough to power 10 million homes.

Language in the Coast Guard Authorization Act of 2023, which advanced out of committee in late April, seeks to limit the use of foreign vessels and mariners in the installation of offshore energy projects, including many offshore wind developments still in their infancy.

Instead, ships working on these projects would be subjected to a requirement that they employ a crew from the country under which the ship is flagged; a restriction on the number of foreign work visas for mariners; and tougher security requirements under a clause added by Reps. Garret Graves (R-La.) and John Garamendi (D-Calif.), both members of the House Transportation and Infrastructure Committee.

Currently, foreign-flagged ships with multinational crews are allowed to perform a number of essential tasks involved in the installation of offshore wind turbines and the laying of cables that transmit electricity from those turbines onto the shore. Restricting this practice is appealing to Republicans, who are generally sympathetic to the U.S. maritime industry, as well as to Democrats, who have close ties to the maritime labor unions that represent many of the U.S. maritime industry's employees.

A professed supporter of the "30 by 30" wind power goal, Garamendi, who represents a maritime-heavy section of the San Francisco Bay Area, says the change supports the Biden administration's desire for the United States’ clean energy infrastructure to be built with American labor.

"This bill carries out the president's policy," Garamendi told HuffPost. "That policy is that we’re going to build our renewable energy systems with American workers."

However, the law would effectively bar the vast majority of foreign ships from working on offshore energy projects.

The global shipping industry relies heavily on multinational crews to work ships that are "flagged," or formally based, in countries with minimal taxation and regulatory regimes, like Panama, Liberia and the Marshall Islands. The crewing requirements proposed by Graves and Garamendi would come on top of a century-old law, the Jones Act, which already requires that ships used for the transportation of goods between two U.S. ports be owned, operated and manned by Americans. That means that the sea vessels involved in transporting wind turbine parts from the U.S. coastline out to sea must be U.S.-flagged vessels.

For the emerging offshore wind energy industry, the new requirements create a significant short-term obstacle.

There is already a shortage of some of the highly complex sea vessels — and specialized marine crews — required to erect offshore wind turbines that can exceed 800 feet in height, and the bill would further limit the availability of those that already exist.

"This definitely bottlenecks the U.S. offshore wind industry," said Seaver Wang, an ocean scientist who co-directs the center-left Breakthrough Institute's climate and energy team. "You might have a lot of projects getting postponed or shelved, because in the near term, if the legislation passes in its current form, you would just not have a ship to install your wind farm."

"This would threaten tens of thousands of new American jobs in the manufacturing, shipbuilding and maritime sectors and impact U.S. energy security objectives."

As of June 2023, there is not yet a U.S.-made version of a wind turbine installation vessel (WTIV), the most sophisticated and scarcest of the many ships involved in the construction process. There is one U.S.-flagged WTIV under construction in Texas that is due to be completed soon. But the U.S. Department of Energy estimates that at least five such vessels are needed to reach the Biden administration's offshore wind energy goal.

Josh Kaplowitz, vice president for offshore wind at the American Clean Power Association, a renewable energy and storage trade group, had a blunt assessment.

"If this maritime crewing provision is enacted, there is no chance of meeting the state and federal goal to deploy 30 gigawatts of offshore wind by 2030," he said in a statement. "This would threaten tens of thousands of new American jobs in the manufacturing, shipbuilding and maritime sectors and impact U.S. energy security objectives."

A spokesperson for the White House did not respond to HuffPost's requests for comment.

Compromises have been discussed — including delaying the implementation of crewing requirements or exempting WTIVs. But Rep. Jake Auchincloss, a business-friendly Democrat who represents part of wind energy-rich southeastern Massachusetts, believes the proposed compromises still assume that the government has the ability to draft a U.S. crewing regulation in a way that wouldn't risk stifling the offshore wind industry's development before it can get off the ground.

"The idea that we in Washington can calculate how much time it takes to get the requisite domestic production of these WTIVs that we need is not supported by real-world experience," he told HuffPost.

In April, Auchincloss led an effort to remove the Garamendi-Graves language from the 2023 version of the bill, an attempt that was voted down. But in 2022, Auchincloss played a role in successfully advocating for the Senate to remove the requirement from the final version of that year's Coast Guard funding bill, and he is hopeful that the Democratic-controlled Senate will do the same this year.

"What we need," he told HuffPost, "is early flexibility so that this industry can get turbines in the water. And then it creates a virtuous cycle" where the proven demand encourages U.S. shipbuilders to invest more money in the industry and workforce, further boosting its reach.

The legislative debate, particularly among Democrats, also reflects an ongoing larger conflict over the extent to which jobs all along the U.S.-subsidized renewable energy supply chain must go to U.S. companies and workers.

In 2021, Democrats engaged in a similar dustup over subsidies for domestic solar panel manufacturing in Biden's landmark Inflation Reduction Act. Over the objections of some solar industry players and environmentalists worried about delays in the energy transition process, Sen. Jon Ossoff (D-Ga.) succeeded in adding language to the legislation that would provide tax credits for U.S. factories that produce the component parts in photovoltaic solar panels.

Now, another component of the renewable energy buildout is highlighting the tension between climate-oriented energy goals and the desire to encourage the hiring of U.S. workers.

At the manufacturing stage, the component parts used to assemble offshore wind turbines and the pile-drive platforms on which they are erected are often assembled by American workers, and American union members in particular. Ørsted, a Danish firm that is a leading developer of offshore wind energy on the East Coast, forged a project labor agreement with North America's Building Trade Unions, a federation of construction unions, that ensures the turbines themselves will be built with union labor.

But shipping is the piece of the construction and maintenance process that offshore energy producers have long been most eager to outsource to foreign workers.

In recent decades, offshore oil and gas companies have used their lobbying and legal might to fight for the narrowest possible interpretation of the Jones Act as it applies to coastal energy projects, arguing that vessels involved in the construction of offshore energy infrastructure are not covered by the Jones Act's requirements for "transportation" vessels. They have repeatedly succeeded in blocking proposed rule changes that would have expanded the applicability of the Jones Act to more of the vessels involved in offshore energy projects. Those regulatory wins have allowed energy companies to contract with foreign maritime firms whose workers are paid less.

Now, advocates for the U.S. shipping industry and its workers want to avoid getting squeezed out of the emerging wind industry before the companies active in that sector are established enough to push them around the way that the oil and gas giants have.

Not every U.S. shipbuilder or sea vessel has unionized workers, but the two main maritime unions, the Marine Engineers Beneficial Association and the Seafarers International Union, are desperate for the U.S. maritime industry to grow so that they can ensure their members consistent work opportunities and organize unions on new ships.

"Because of how finite and small [the wind industry] is, we see this as a great opportunity for our union membership," said Erick Siahaan, director of government affairs for MEBA, which represents licensed marine engineers and deck officers.

"There are provisions in place to ensure union labor is being used to build the turbines onshore," added Siahaan, who previously worked for former Rep. Lois Capps (D-Calif.). "Where is the opportunity to build out the maritime infrastructure between now and 2030 — or Point B, whenever that might be? While we understand that we [don't have the infrastructure] now, how do we work together with the wind developers to build that out?"

Jordan Bispardo, a spokesperson for the Seafarers International Union, which represents mariners in positions that don't require a license, also emphasized his union's desire to collaborate with wind energy developers on a way to include their workers in future construction.

"The best solution to the problem would be for the wind developers to work with us and the rest of the American industry to maximize the use of American mariners so that the impact of a law like this would be minimal to their projects, and to help draft a law that ensures both sides get what they want: a vibrant off-shore wind energy industry, built and maintained by American workers," Bispardo said in a statement.

"Where is the opportunity to build out the maritime infrastructure between now and 2030? ... How do we work together with the wind developers to build that out?"

The U.S. maritime companies and labor unions fear that while the offshore wind energy companies currently cite a shortage of U.S.-flagged ships and properly trained American workers as reasons they need foreign-flagged ships and crews, in a few years’ time, they will find another excuse to continue doing so. That's because, these skeptics note, the wind developers can pay workers on multinational crews — drawn, in some cases, from countries in Eastern Europe and Southeast Asia — a fraction of the day rate of a U.S. mariner.

Even mariners from relatively wealthy countries typically lack unions and earn significantly lower wages than those paid in the United States. For example, the median pay for a marine engineer in Norway is about $78,000 a year, compared with over $93,000 a year in the United States.

Pay can dip much lower for workers from developing countries: The global minimum wage for a seafarer is $658 a month, which is under $8,000 a year.

They see the case of an offshore wind energy development in Scotland as a cautionary tale. The United Kingdom government had repeatedly renewed what was supposed to be a temporary 2017 waiver exempting wind energy developers off the coast of Scotland from post-Brexit restrictions on the employment of foreign nationals to construct and maintain offshore wind farms. Amid public fretting that the temporary exemption had become a permanent loophole used to employ cheaper foreign workers, the U.K.'s Conservative government finally allowed the exemption to expire in April of this year.

The offshore wind developers are "just addicted to cheap foreign mariners," said Aaron Smith, president of the Offshore Marines Beneficial Association, a New Orleans-based trade group representing the domestic shipping companies that work on offshore energy projects. "They built their model on the backs of Estonians and Polish and Filipinos and people from Thailand who command salaries that are exploitative."

Offshore wind energy developers counter by pointing to their investment in the manufacture of Jones Act-compliant ships, including the first U.S.-flagged WTIV and the first U.S.-flagged service operations vessel.

In a statement to HuffPost, Ryan Ferguson, head of corporate communications for Ørsted, noted the company's role in financing the construction of both of those vessels.

"We are committed to investing in the American offshore wind industry and U.S. supply chains," he said. "Our track record shows this commitment as we advance our early-stage projects, which are creating jobs and generating economic opportunity for American workers and businesses across the country."

Auchincloss has sought to assuage the concerns of the U.S. maritime industry and maritime labor unions by securing language in the bill that would ensure mariners from any country are paid something akin to the "prevailing wage" for U.S. mariners. But U.S. maritime stakeholders worry that the offshore wind industry would find a way to slither out of those wage regulations because those rules would erase much of the advantage offered by employing the foreign mariners that the wind companies are fighting so hard to hold on to.

"The lower costs start going away if you have to pay higher wages," said Sal Mercogliano, a former merchant mariner who is now a professor of maritime history and industrial policy at Campbell University in North Carolina.

"There's a big opportunity here for the United States to take advantage of this and build this industry from the bottom up and develop it, and then it would be dedicated within the United States."

According to Mercogliano, the wind energy industry is correct that demand is rising for an unsustainably small number of highly complex sea vessels needed to erect the wind turbines and lay the underground cables to transmit electricity to the onshore grid.

But he says he's sympathetic to the goals of the domestic maritime firms and workers groups. He noted that the same high demand and limited supply making foreign ships and crews attractive now could drive up the cost of chartering those ships — or even render them unavailable — in the future. "There's a big opportunity here for the United States to take advantage of this and build this industry from the bottom up and develop it and then it would be dedicated within the United States."

To do that, though, the federal government would have to find a way to offset the higher cost of hiring American workers — through subsidies or other means, he concluded.

Auchincloss is open to direct subsidies for maritime industry jobs, though he is more focused on drafting legislation that would enable the federal government to issue "surety bonds" to companies that finance the construction of wind industry sea vessels made in the United States. Those bonds would effectively insure any financier against the possibility that a ship it finances is not purchased or the project fails for other unforeseen reasons.

The American Clean Power Association told HuffPost that it supports surety bonds. The trade group is also interested in modernizing the licensing system for U.S. mariners and helping military veterans with maritime experience transition into the civilian maritime sector.

Rather than restricting what kind of crews the offshore wind industry can employ, Kaplowitz said, "Congress should ... focus on incentives that remove the obstacles impeding vessel financing and ways to modernize the merchant mariner credentialing process to better recruit and retain U.S. mariners."

Auchincloss agrees. "There is a very appropriate role for [the] government there," he said. "To try to help kickstart a virtuous cycle, as opposed to helping a self-defeating cycle stay in effect."

Senior Politics Reporter, HuffPost

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A ‘Bottleneck’ For The U.S. Wind Industry A History Of Concerns About Exploitation Of Workers Room For Common Cause?