0:21 All right, so here's my opening. I have this really good friend. He and his wife built or bought a luxury apartment and one of the high rises in Houston. And their reduced story is just like
0:35 classic mishaps and this breaks and all this. And it got to the point where his wife would call the contractor every day and say, Are you gonna make me cry today? Is that what you're gonna do?
0:48 You're gonna make me cry? I kind of feel like that when you and I are about to start talking. Are you gonna make me cry about the Jones Act again? I think it's hard. Get the Kleenex ready, Chuck.
0:57 Ah, all right, let's do it. Colin, you're cool to come back on. Do this real quick. Well, you just level set the Jones Act. I'm sure everyone in the civilized world watched our last podcast,
1:10 but just in case they didn't. Well, in the off chance they didn't, yes. So the Jones Act is, Colloquial term for Section 27 of the Merchant Marine Act of 1920, which states that essentially, if
1:22 you want to transport goods by water within the United States, you have to use a vessel that meets four conditions. It has to be flagged and registered in the United States. It has to be built here
1:33 in the United States. It has to be at least 75 owned by Americans and it has to be crude by Americans with just a few limited exceptions. Well, that doesn't sound so bad Well, really? I mean,
1:46 yeah, what kind of pico-communist would oppose a law like that, you know, like I said before, you know, this law bleeds red, white and blue. How could you hate it? So the issue, of course,
1:55 the Jones Act is that, you know, I think a lot of people reasonably would think that sounds good on paper, but the reality is quite terrible. So the Jones Act essentially makes water
2:04 transportation extremely expensive. In many cases, it's just prohibitively expensive here within the United States. And that's an issue because we live in a huge country. 330 million people and,
2:16 you know, world's biggest GDP, but just geographically, it's massive. I mean, we forget the fact that the United States stretches from, you know, Guam to Maine, from the Aleutian Islands to
2:26 Puerto Rico, and distance is a barrier to people trading with each other and doing business with each other. And efficient transportation is really important to overcome that barrier. And
2:37 traditionally one, you know, highly efficient means of moving goods, especially over long distances, is water transportation. Something like, I think 80 of all international trade goes by water,
2:48 goes on ships. And we've taken what should be, you know, very efficient means of transportation. We've made it so expensive that we barely use it. I believe that currently for all transportation
3:02 modes, water, and we're talking, you know, barges on the river or on the Great Lakes, everything altogether, it's less than 9 of ton miles moved Um, And when it comes to ships, I think we're
3:15 like 2 something like that, which is again, incredible when you just consider the geography of the United States. We have thousands of miles of coastline home to major population centers. We have
3:26 the Great Lakes. We have an impressive network of inland waterways and rivers. We have the non-contiguous states and territories that are basically made for shipping. And yet we're at less than 10
3:38 and for ships, you know, 2. So what are we doing here? And just to add on real quickly, you know, people may be thinking, well, what about the Jones Act that makes it so expensive? What's
3:48 going on here? Well, the situation is, you know, I mentioned the first condition, as we built a rather registered and flagged in the United States. Well, that takes 99. Actually, more than 99
3:60 of the world ships off the table, you know, less than 1 of the ships are compliant with the Jones Act requirements. So it's less competition, less supply, as we've built here in the United States.
4:12 The Wall Street Journal had an article about America's tiny and rusty shipbuilding industry. They gave the example of three ships currently been being built in Philadelphia. Was pretty much the only
4:23 ships being built here in the United States right now. And they have a cost of333 million a piece. And over in China, that's a55 million ship. And by the way - And that's just like the rest of the
4:37 manufacturing base in America, in all industries, right? We just, in effect, exported it to the rest of the world. Unfortunately, we just can't use ships unless they're built here, right? No,
4:50 I mean, I would push back on that actually. The United States is the world's second leading manufacturer. We make all kinds of things. You know, we're home to Boeing, which until a few years ago,
4:59 pretty impressive producer of commercial aircraft. We are the world's, I believe, second biggest producer of autos, or the world-tongued fourth biggest producer of Steel.
5:12 Obviously, we produce lots of refined products, a fuel that we export over the world is processed in highly sophisticated refineries. So Americans can manufacture, Americans can compete in lots of
5:24 places, but when it comes to this protected industry, they are just wildly uncompetitive. And the issue here is not that we can't compete with China, we can't compete with anyone. We can't
5:36 compete against the Europeans, with the Dutch and the Norwegians over the last five years have outbuilt the United States. These are tiny countries, they're out building the US. And no one is
5:46 going to those countries for the low, low wages. So I think it's a real indictment of what this law has done. And I want to get to your article that you wrote, because I think what's going on in
5:60 Hawaii is fascinating, but is there a short version of kind of why we got to the spot we're in? Jones Act was protecting us and we just atrophied like anything that gets coddled or what happened?
6:16 Yeah, so the kind of a short history as short as I can make it history of the US shipping shippily industries is it back? Yeah, the Jones Act, you know, I mentioned it was past in 1920, but
6:28 these, you know, the Jones Act was just the latest iteration of these protections laws, these are called cabotage laws that restrict the participation of foreign forms for transportation within a
6:38 domestic market. It goes back to at least 1817, you could argue 1789, well, the first acts of Congress, I think the third act of Congress said that, okay, you can use foreign shipping between
6:51 US ports, but you have to pay incredibly high duties. Think foreign ships, you had to pay 50 cents per ton is a duty and American ships is like six cents per ton. And the foreigners had to pay at
7:02 every port they hit was Americans paid once a year. But back then. It wasn't that big of an imposition 'cause American
7:10 shipping and shipbuilding was some of the world's best. This makes sense when you consider the fact that this is the days of wooden ships and we had a plentiful supply of timber. These coasts is one
7:21 big forest, basically. In fact, something like one third of all the ships in the British merchant fleet were built in the 13 colonies. That speaks to how skilled, how efficient US. shipbuilding
7:33 was So then we move on, 18, 17, the US. changed lawns, isn't it, just foreign ships, no more. We don't care if you pay a duty, flatly restricted. But again, not that big of an imposition.
7:45 But then we get to roughly the mid-1800s or so, and US. shipping and shipbuilding falls behind. This is the era where we shift from wooden vessels, we're starting to get steam vessels, iron,
7:56 ships made of iron. And the British, where the Industrial Revolution happened, this is where you see shipbuilding take off And back then, it wasn't just. Ships being used domestically, they had
8:08 to be built in the US. All ships flying the US flag had to be built in the US. So we see the US industry start to be coddled. They have this captive domestic market. And remember back then, there
8:18 are no highways to compete with. There's more limited rail networks. So that's a big deal. And we quickly start to see US shipping become uncompetitive. And people start looking for ways around
8:30 this. There was a case where someone tried shipping 250 kegs of nails from the East Coast to California. And they did it through a foreign port because they thought, hey, I can't take a foreign
8:42 ship between US ports. But what if I go to a foreign port, switch ships go back to the US? And there was court case. Court said, yeah, you could do that. So Congress changed the law. And by
8:53 the way, I bring that up because that shows how wacko things were that someone did the math. And that made more sense than just using an American ship more and more directly. Um, so even by the
9:03 late 1800s, we start to see people saying, Hey, us built ships are, you know, 20, anywhere from 25 to 50 more expensive than those built overseas. And then we get the Jones Act passed in 1920.
9:16 And since then the history has been, you know, I think in 1922, there's a government report that said a US built ship is about 20 more expensive than one built abroad. 1930s were up to 50 more
9:26 expensive In the 1950s, we're up to double the costs by the 1990s where it tripled the cost. And today, you know, that figure I just gave you earlier if you compare the US against China, and
9:36 we're looking at a 6x delta. And you know, I do think the Jones Act is at least partially responsible here, culpable because I look at other high wage developed countries, again, take the
9:49 Europeans as a decent analog. Well, they still build ships. Again, we're getting out built by the Netherlands I think a couple of years ago, we were outbuilt by Croatia, so I don't think that,
10:00 you know, absent the Jones Act, we'd be out there cranking out ships and we'd be one of the world's leading shipbuilders. But I do think that Americans, given our performance and numerous other
10:10 industries, we could have developed a competitive niche and gotten good at it and sold to the international market. But what the Jones Act is, you build small volumes for a captive market and you
10:21 don't get really good at anything, you don't develop a real expertise. And that's just a formula for inefficiency in high costs, which I think goes a long way to explain what we're at. Yeah,
10:33 interesting thing, you know, so we did this podcast call it a year, year and a half ago, we went through, basically this is just a huge tax on Puerto Rico, it's a huge tax on Alaska, it's a
10:46 huge tax on Hawaii, Ie. 20, 25, whatever you wanna call it.
10:55 In effect, it's tax on Americans too, 'cause you're not really shooting stuff from Houston to New Orleans or Houston to Miami. We went through all that. What you did a little while ago, a couple
11:08 of weeks ago, I think you just wrote an editorial talking about Hawaii and energy. Lay that on me 'cause I read that and I cried. I had my Kleenex. All right. So yeah, the Jones Act, I think
11:23 you diagnosed it accurately You can see the cost to the non-contiguous states and territories for obvious reasons. They have to rely on ships. This is very much an American problem. We're all hit
11:32 by it 'cause the cost of the Jones Act is not that, okay, this container going to San Juan costs X more. It's was the United States look like with the Jones Act in place versus was it look like
11:43 without the Jones Act in place? Imagine all the possibilities to get unlocked if we could connect Americans with efficient shipping.
11:53 Folks selling lumber up in the Pacific Northwest could be more better connected to folks in the southeast. You get American steel could be better compete with imports on the other side of the country.
12:05 You can get Americans that export scrap metal, which is used to to produce steel and electric arc furnaces, mini mills, and we're the world's leading exporter of scrap metal, but it's you know,
12:16 it's cheaper to send it to China than it is to send it to another part of the United States Which brings me to the Hawaii example. Yes, I had an op-ed published in the Honolulu Star Advertiser a
12:26 week or two ago. And it pointed out that we've made shipping so expensive that in 2024, Hawaii, which uses light sweet crude, that's its preferred crude for the one refinery they have there. They
12:40 didn't buy a drop from the Gulf Coast. They didn't buy a drop from Texas. They met their needs Their number one supplier was a continent of Africa. They bought from Libya. They bought from Nigeria.
12:50 I think equatorial Guinea was another. flyer, Egypt, they bought a few cargos from Argentina, and yet not one drop from the country that they're part of. Even though Texas is about 4, 000
13:05 nautical miles closer to Hawaii going through the Panama Canal, then Libya is. But this speaks to the degree of lack of competitiveness of Jones Act shipping. And that's just the crude oil. They
13:18 also need jet fuel and motor gasoline or the refined product. And they bring in three times more comes from South Korean refineries than from refineries on the West Coast, like Washington State,
13:32 which is home to I think the fifth biggest refinery capacity in the country. And the ironic part to this is that a lot of that product that came out of South Korea was made with Texas oil because
13:42 they can get it efficiently, whereas Hawaii cannot.
13:47 And then it gets kind the worst part, arguably, is that we're also the world's third leading expert. order of liquefied petroleum gas and basically propane. Hawaii buys it from West Africa instead
13:59 of - Oh my God. Hank Hill has just rolled over in his grave.
14:04 And why? It's not just, in that case, it's not just as more expensive. It's absolutely impossible because there are zero specialized ships to transport that. LPG carriers, there are none in the
14:16 Jones Act fleet, so they can't get it. And now Hawaii's talking about, they want to move to a green energy future, I believe by renewables by 2040 and they see LNG as a bridge fuel. There's a
14:29 report authored for the Hawaiian government just a few weeks ago and they said, LNG would be great, but we're not going to be able to get any from the US. Because again, there are no ships to
14:40 transport. This is a recurring thing when it comes to Jones Act world Oh my gosh. All right. So.
14:49 This is just crazy that this is happening. Is
14:54 the solution and is there any momentum to just say pay Trump administration? 'Cause we've got Chris right there. We've got folks, I mean, Vance to his credit, I think understands energy a lot
15:09 better. Is there any way we can push back and just say, will you exempt energy from the Jones Act? I think the base case when it comes to the Jones Act, always your assumption should be no change.
15:21 But I'll try to give you the optimistic take, which is that we have an administration that is committed to an energy dominance agenda that really seems to value domestic supply chains, the idea of
15:35 self-sufficiency, American should buy American products from other Americans.
15:40 We had President Trump, I believe a week or two ago, He's taking aim at Canadian lumber. All these, I
15:47 see repeated. issues come up. And I think to myself, you want to solve that, I know the way that they would, the way they would help out, you know, target the Jones Act. We get efficient
15:56 shipping. Um, you know, we can better connect Americans to American energy so they can buy those molecules. Uh, you know, the lumber example, you know, the, the folks up in Washington state
16:06 have complained for years saying, you know, our competitors over in Canada, well, when they send their lumber to the US, they can use efficient international shipping. We're stuck with Jones Act
16:15 shipping. This puts us on the back foot. Um, I'll, I'll point out that there have been, uh, well, I should stick it with the, with the Trump White House. Uh, Kevin Hasett, who's head of the
16:27 National Economic Council at the White House, he's on record. He's gone on record at least a couple times as opposing the Jones Act, but he's a voice inside the White House. Um, and also note
16:38 that in Congress, we recently had Senator Mike Lee, express anger on Twitter about the Jones Act just a week or two ago. He was also joined in that anger by Senator Cornyn of Texas. We've seen
16:52 Alaska last November elected a representative Nick Beggage to the House and he campaigned against the Jones Act, which so he's the first representative from Alaska and something like 40 years to go
17:03 on record as opposing the Jones Act. There's a story there that shows kind of politics of it, by the way, we can get into later. We had, and it's not just Republicans, we had representative
17:14 Richie Torres of New York. He came out, I think, on New Year's Eve or early January and blasted the Jones Act as a tax on Puerto Rico. We had another Democrat elected from New Jersey, Nellie Poe,
17:26 who she was formerly a state legislator and during that time she repeatedly introduced resolutions urging a repeal of the Jones Act to to exempt Puerto Rico. So the issue does seem to be getting more
17:39 traction. There does seem to be momentum, but the issue is you're up against a Colossus. So I think Jones Act opponents are in a better position now than a few years ago. There's more people are
17:50 speaking up. I think there are more people that recognize the problem, but it's a big lift. Let's not pretend otherwise. Yeah, I was at a fundraiser for, I forget what it was, but Mike Dunlavy,
18:04 the governor of Alaska was in to speak at it. And I, you know, they go to the, anybody got any questions? I raised my hand and said, Is this the year we can finally get rid of the Jones Act?
18:17 And you should have seen the exasperated look on his face. He was just like, One would think, can we do that? Can we just stop paying 25 extra for everything?
18:31 By the way, he did not like our idea of the big celebrity concert. He said, I'm anti celebrities after how they performed in the last presidential election. But hey, you know, whatever it takes,
18:43 whatever it takes, yeah, that's a, it's an understandable position for governor Dunleavy because obviously everything coming up from the lower 48 is going to pay that Jones Act premium, that Jones
18:53 Act tax. But remember, we were talking about energy earlier. I talked about Hawaii. I could have been talking about Alaska. I looked, there's a, there's a website called the National Ballast
19:02 Water Clearinghouse They basically records every ship that comes into a US. port and I think how they treat their ballast water. Whatever the point is, you have a record of who's coming in and out
19:11 of your ports. I looked at the port of Anchorage last year. Every single tanker that came in was from Asia. There was one tanker that came from the lower 48, but it was not Jones Act compliance.
19:22 So they must have been stopping off to fuel up or something. They, because of the Jones Act, we know they weren't transporting anything. So there's mostly from South Korea, I think a couple of
19:31 Kargos from China. Meanwhile, again, we have Washington State Refineries, not in closer proximity. We got that. We have the Alaskan ferry system is struggling. They have to pay out the Wazoo
19:43 for new vessels. They need, they have like one ferry is 60 years old. They need to replace it. I think they're having trouble just finding a US ship you are willing to take on the work. So for
19:53 multiple angles, they are incredibly hurt by this issue. And I think the governor's frustration is a hundred percent understandable I mean, you sent me a resolution that had passed in Alaska. And
20:07 if I'm recalling this correctly, they're sitting there saying, hey, we have all this natural gas that we could use internally. We just can't build a pipeline. It's too big, it's too expensive,
20:20 it doesn't make any sense. But gosh, if we could throw it on a ship and just ship it to ourselves, I forget what it was, 40 of all power generation in Alaska is natural gas fired. half of the
20:33 homes use it to heat their house. Can we just move our own natural gas around? And the answer is the Jones Act says resoundingly no freaking way, right? Yeah, that's a point that I neglected to
20:47 mention. So there's another issue in Alaska where they use a lot of natural gas and traditionally it's come from the Cook Inlet down in the greater Anchorage area and close to population center.
20:58 They got a problem because production is tapping out and they're gonna, it's a thing that's supposed to run out in mid 2030, something like that. On the other hand, they have an abundance up on
21:08 the North Slope, but how to get it there? As you said, the pipeline is cost prohibitive. They've been talking about for a long time. It hasn't happened. So another alternative is you liquify it
21:19 and ship it within the state from one part to the other. But again, that's Jones Act. We have zero Jones Act compliant LNG tankers. Although there's a little wrinkle to that
21:33 And good luck, you know, getting one, especially, you know, we're talking Alaska. It's going to need to be ice class so it can withstand, you know, the ice and the Arctic conditions up there.
21:45 You know, US. shipyards struggle to build just a normal LNG carrier. And you imagine them trying to build one that is fit for those conditions. Now, I will note what interesting news story that
21:56 came out earlier this week or last week is apparently some Koreans with folks of the Trump White House. And there were discussions about Korea possibly building icebreakers and warships and LNG
22:09 tankers for the US. for the purpose of sending Alaska and LNG, not just international markets, but also to domestic markets. So perhaps that suggests at least a recognition of a problem up there
22:20 in Alaska
22:24 Okay, so I think we have to revamp our approach.
22:28 You know, you and I, if we could do it. bring in the exorcism, we just get rid of the Jones Act. Is there maybe a strategy that we should do in terms of temporarily abandoning the Jones Act but
22:44 maybe having protectionism creep in over time just to, because I think one of the points here is if we're gonna keep the Jones Act in place, I mean, this is stuff that's so big, so far off, we're
23:02 just lost. Can we find a middle ground between, hey, we'll create this US domestic shipbuilding industry, but until we do, let's exempt it. Is
23:15 there a middle ground somehow we can think through? Well, Chuck, that's just way too logical. The problem with when you come up against Jones Act supporters is that there's no playcating these
23:28 guys. in their eyes, there's nothing to talk about. There's no conversation to be had. The Jones Act is perfect. The Jones Act is working out great. We need to keep it. And
23:38 any deviation from the Jones Act just sets you on a slippery slope down to that ends with the maritime apocalypse. That's how they view, which I would argue that's kind of the status quo, but set
23:50 that aside. That's how they perceive the issue. So it's really hard to have negotiation with folks that are just absolutists, they're total zealots on the issue. But to your point, let me give
24:00 you an interesting example that's recently cropped up that I alluded to earlier with regard to Alaska and LNG. So in 1996, there was something called the Coast Guard Authorization Act pass and had
24:14 this little provision that said that if at some point you take a foreign-built ship, it was built before the date that law was passed. I think it was like October 1996, so it had to be built before
24:28 that. If you took an LNG tanker that was foreign built, put an American flag on it, American crew, you could use that to supply Puerto Rico. Well, that kind of sat there for a long time. And in
24:40 2013, the GAO, the Government Accountability Office to the study of the Jones Act's impact on Puerto Rico. And that's some of the people, the Puerto Rico and the electrical power authority. Hey
24:50 guys, you got this waiver kind of sitting there. Why aren't you using it? And they said, well, I mean, look, you know, that was 1996, any ship that, you know, we'd use be pushing 20 years
25:01 old. I don't know, you know, safety and efficiency reasons. I'm not sure that makes a whole lot of sense. Well, I think today, Crowley Maritime announced that they have purchased a French-built
25:14 LNG tanker, built in 1994, so fits within that window. And they are going to start transporting LNG to Puerto Rico So the good news is, is hey. We did something about the Jones Act. We created a
25:28 little narrow exception. And guess what? We're connecting Americans to Americans. It's working.
25:36 The problem here is that the way it's working is kind of embarrassing. This ship was built in 1994. To put this in the - By the French. I mean, by the French. By the French. By the French, my
25:47 God. To put this in perspective, it's one, there's an organization called the International Gas Union. Every year they publish a report about the state of
25:58 LNG. According to them, they're only 13 ships that are 30 years old or older in the world, out of a global population of like 700. So, you know, it's unfortunate. It's good that we're solving
26:08 the problem to an extent, but we're using, why are Americans stuck with everyone else's scraps? You know, why can't we use new efficiencies? Why can't we use the world's best? And furthermore,
26:18 again, the ship is built in '94. It's gonna turn 31 years old this year How much of a long-term solution is this? This is like a Band-Aid, I think. So, but perhaps I hope the lesson here will be,
26:32 hey, you provide exceptions for at least, can we at least do it for
26:37 products where there are no Jones Act vessels? You know, no shipyard is losing work because this vessel was brought in. It's providing employment for American mariners. It's gonna supply natural
26:49 gas. It's gonna be good for the people of Puerto Rico. It's gonna be good for the producers and the Gulf Coast Let's try to learn some lessons from this and build on it. Okay, I've been thinking
27:00 about this. Who's the arguably the most important person in the sphere of the president these days? Who are you thinking? That's a great question. Yeah, who needs to whisper in his ear to get
27:16 this idea?
27:19 Maybe it depends, I'm sure you have thoughts here, Chuck. You tell me Elon Musk, right?
27:25 And what does Alon Musk want to do? I mean, he wants to populate the world to no ends. Is there some trade between the female population of Alaska, Puerto Rico, Hawaii, will all carry a kid for
27:43 Alon in exchange for getting rid of the Jones Act? But that's an interesting idea. This is kind of creative energy
27:51 to be made to you know, think about all options need to be on the table, but I will point out something, since you mentioned his name last year, last October, so I think a guy named Alex Stapp
28:03 tweeted, something against the Jones Act is crazy, blah, blah, blah. And Elon Musk responded and just said, True.
28:13 Nice. So he's kind of, you know, it's on his radar, I guess. So that's positive. So yeah, if you're all about government efficiency, You want to make America great again? You want to unleash
28:27 America's potential? I've got an idea for you. There we go. All right, we'll try that. So I watched the State of the Union except it's the joint message to Congress or whatever they call it when
28:43 it's your first term. Interesting trivia, Trump is only the second person in history to deliver that twice You know, he and Grover Cleveland, you know, 'cause it's when you've been president for
28:56 an effect six or eight weeks
29:00 instead of being the State of the Union. So he started talking about shipping in the middle of that. I didn't understand anything he said. Is there any kind of buzz or thoughts behind that or was
29:12 that a Trump I'm gonna throw it out there and we'll figure it out later? No, I don't think that was random. There are people in White House circles that are very attuned or at least. recognize the
29:25 deficiencies that we see in the US maritime industry. And, you know, as a reporter, I think this week that the Wall Street Journal, by the Wall Street Journal, that there is an executive order
29:36 being drafted to try to revamp the US shipbuilding industry. Of course, Trump mentioned the establishment of a White House Office of Shipbuilding. So, and then of course, last year, last last
29:51 December, there was something called the ships for America Act that was introduced in Congress, one of the authors of that piece of legislation while the co sponsors is representative Mike Waltz,
30:02 who is now national security advisor, Mike Waltz, for the record. I don't think that the provisions in that law represent the ideal approach or the correct approach. But at least there's a
30:15 recognition there. So you have folks that are attuned to the issue. And my hope here is that as people recognize the issue, start asking questions, start digging deeper. They'll say, what's the
30:27 Jones Act thing doing? We've had this on the books for how long? Is it the whole point of the Jones Act so we're not in this position? So that we have, there's a group called the American Maritime
30:36 Partnership, which is the country's leading pro-Jones Act advocacy group. In fact, it's the only thing they do. That's the only reason they exist is to advocate for the Jones Act. Go to their
30:45 website and they lay out, here are the benefits of the Jones Act And they say, well, it gives us a modern industrial shipbuilding capacity. If you go to the Shipbuilders Council of America, they
30:58 called it a robust shipbuilding capacity. Well, folks, we built zero Jones Act ships last year. The Wall Street Journal, this article I mentioned earlier, referred to the US shipbuilding
31:12 industry as Tiny and Rusty. Last Thursday, the government accountability office released a report that called US commercial shipbuilding in a state of near total collapse. Mike Waltz, at a think
31:24 tank event late last year, said that, you know, you go to Japan, South Korea, they have these first-class shipbuilding facilities, and he said you go to some of ours, you look like they were
31:32 from the 1930s. So again, there's a recognition, here's what the Jones Act promised us. Here's what's delivered. I'll give you one more quick thought. Another one of the law's promised benefits
31:43 according to the American Maritime Partnership is that it gives us world-class vessels. That's their term world-class To me, this suggests new, efficient, great condition fleet. I mean, the
31:58 average Jones Act ship is 20 years old. There was one Jones Act ship last year. This was built in 1980, was a steamship. Folks, steamship went out of fashion back in the '80s. It went from steam
32:09 to diesel, and now they're becoming LNG powered. So, it's 44 years old. So, of course, the company said, Wow, this ship is old Let's. go support our American shipyardsand build a new ship.
32:21 of course not. They took the ship to China to a state-owned shipyard, had the engine ripped out, went from steam to LNG. The company is called Peisha, Hawaii. You go on their YouTube page and
32:31 they brag about this. This is the world's first steam to LNG power conversion. Folks in any other country, the reasons first the world, because no one else would do this, it's insane the did same
32:40 competitors their of one but, them cost it much how know don't I. ship new a bought just have would They. thing in another Chinese shipyard.
32:48 And according to their annual report, public company, they spent72
32:52 million. 72 million. You could have bought a new ship from our allies in South Korea. So to wrap this up, my hope is that as maritime comes into focus, these guys have only been there several
33:02 weeks now. They started to think deeply about this and ask questions. I think it's hard to come to a conclusion other than the Jones Act has been a failure and we need to rethink these things.
33:14 I haven't started crying yet, but I guess we still So I have a couple of, couple of them that I still have. Yeah, there we go. A little bit. I'll get you there, Chuck. Now, is there a bribe
33:25 that we could offer the existing Jones Act, call it stakeholders, meaning is there something they could get out of their legacy position that might make them allow more competition to come on? I've
33:40 kind of thought about that and I don't think I have any good ideas there. I have ideas. I don't know if they're good, but I'll let you judge. So I mean, you make a great point People aren't going
33:50 to willingly let go of getting access to a captive market. You got to give them something, some kind of compensation. So what might that look like? I don't know if it'll work, but here's kind of
34:02 contours of some my thinking about this. As far as the ship builders, you'd say, Look, guys, you're barely building anything as it is. I mean, the opportunity cost here is not great, but tell
34:14 you what we'll do.
34:16 We have something called the Ready Reserve Force. This is a government-owned fleet of ships. It's in time over war with transport, material and supplies to wherever it's needed in the world. It's
34:28 a seal of fleet. The average age of those ships, last I checked is around 45 years old. Again, internationally ships, they're considered ancient once they hit 20. These are 45 years old. That's
34:41 not good for our military readiness Say, look, I'll get rid of the Jones Act. Well, at least get rid of it for large ships. Maybe the tugboat stuff. Okay, fine, we'll keep that here. But the
34:52 large ships, which are, we're not building. I mean, I'm not exaggerating here. I was doing the math earlier. So in 2020, there was one ocean-going cargo ship built. In 2021, there was zero
35:05 and 2022 was one and 23 won. Last year is zero, this year is zero. Next year is one you after that two, you after that one low, low volumes and say Guys, we'll give you a huge contract. We got
35:20 to recapitalize the sea lift fleet. We're going to give you enough business to keep you going for years and years to come. And then you take that US. build requirement that's currently a
35:28 prohibition, say, we're going to replace that with a tariff. And we're going to set it high, 400, maybe higher. And then every year, we're going to take it down 10, 20, something like that.
35:40 And you just know, you got this window 10, 15, 20 years at the end of that, you're going to have to sink or swim here, but we're going to help you out. And the Jones Act shipping companies, you
35:51 say to them,
35:53 look, you guys will never pay taxes ever again. We're going to give you, you know, you tell us, we'll figure out the value of your existing ships. We'll put that towards future tax payments.
36:05 Yeah, your tax bill will be zero for decades to come. I don't know if that's ideal, I don't know if it'll work, but it's kind of the best I
36:14 I kind of like that. I mean, the, what's the Keanu Reeves line from speed? You got to take the hostage out of the equation. You know, we've got to take the hostage somehow out of the equation.
36:26 So yeah, anyway, and Chuck, I'll just add, you know, we often talk about this in binary terms, you know, we keep the Jones out, we get rid of the Jones act. I mean, there's so many
36:35 possibilities between here and there and pretty much anything will make things better. Even the small tree form would generate benefits. You go after the US build requirement, you can limit it just
36:45 to big ships, you can limit it just to big ships built by certain allied countries. You could set up a waiver system to say, hey, you need to move something from point A to point B.
36:58 And there you're willing to use the Jones act ship that they just don't exist. You know, like the LPG example or the LNG cares. In those instances, you can use a ship again, maybe from one of our
37:08 allies, you know, trusted, trusted ally of ours. So there's a whole lot of room for of thinking here and I'd like to believe that they're giving all the myriad possibilities that there is, you
37:20 know, a potential path forward. So, you know, the one thought I did have is you go to New York City taxi medallions and in effect you make the Jones ships, maybe the the ship building yards,
37:36 whatever, in effect medallions and you let in effect any one of a certain number of our allies, you know, the South Koreans, the other people good at shipbuilding, you allow them to to bid on
37:51 those medallions and, you know, the people it goes against everything I stand for. I kind of get a little I threw up a little bit in my mouth when I said that but in effect you get in in the hands
38:05 of people that can actually build ships and maybe there's some requirements of you you got a 50 of the workers have to be US or maybe just proximity geography, the fact that the shipyards are here,
38:18 they wind up using American workers instead, but maybe that's a way too, that we could baby step into it. Yeah, well, to be clear, one interesting thing about the Jones Act is, you know, you
38:31 have to use American built ships and American this and American that, the shipyards themselves can be fore-known. In fact, several of them already are The Philly shipyard producing those333 million
38:44 ships, whatever, that's owned by a South Korean company, just bought by a South Korean company from a Norwegian company. We have Fincante area up in Wisconsin, it's Italian owned. We have Austin
38:54 down in Alabama. It's Australian owned. And we have a couple of shipyard in Brownsville, Texas that is Singaporean owned. Unfortunately, that foreign ownership, while I welcome foreign
39:06 investment, it has not proven to be a magical elixir to transform them into world-class competitive shipyards. Another thought is that, look at the US auto industry. One thing that's enabled them
39:21 to be stay competitive is they bring in a lot of parts that are made in Mexico, made in Canada. We have a very integrated supply chain for autos. Why not say, okay, you can build part of the ship
39:31 down the Yucatan Peninsula or something like that and then just barge it up to Texas and they can take it and do the high end work. In fact, that's how a lot of
39:41 how Norwegian shipbuilders, for example, of how they stay competitive, they will take the construction of the hull, now they'll be built in Poland or Croatia or Bulgaria, someplace like this,
39:52 they take it up there and the Norwegians do the high end, you know, put it in the machinery, the outfitting, transforming those parts into an actual ship. So, you know, maybe have like a NAFTA
40:03 exception. I mean, they're USMCA, whatever call them now. So again, I think there's creative thinking, the medallion one, that's another one to keep in mind, I'll rest with that one a bit. I
40:16 got just, so my idea was a failure already. But anyway, the, well, you were cool to come back on and update the man reading the thing about Hawaii, just got my blood boiling. I mean, here we,
40:34 Hawaii catches on fire and they have to go through all that and they're paying more and as a Texan, not being able to sell my oil to my brother and then Hawaii just got me, so. I'll tell you one
40:49 last thing, Chuck, since we're talking about Hawaii. Hawaii is an interesting example for a few reasons, but of course, once upon a time, Hawaii was not the state of Hawaii, wasn't in the
40:58 territory of Hawaii, it was the kingdom of Hawaii. It was subject, it wasn't subject to US, what we call coast-wise laws, like the Jones Act that applied to shipping. And so the US annexes
41:09 Hawaii in 1898 and then with anything about 10 years, Hawaiians are showing up in Washington DC going to Congress and say, guys, now that we're part of part of the US, it's actually harder for us
41:21 to get ships going to the US. You know, becoming part of the US has made it more difficult for us to travel there. This, you know, is just another result of the Jones Act. So, yeah, but
41:33 nothing says lunacy like, you know, buying Libya, buying well from Libya, 4, 000 miles further away than Texas. That's bad for Hawaiians, bad for Texas, bad for America. Yeah. Now, we, we
41:43 rant all the time on BDE, the other podcasts I do about the Northeast importing LNG at Everett. And, you know, I think it was 2018, so we can probably start griping about it. But literally,
41:59 they took a tanker from Russia. I mean, they took a tanker from Russia. Puerto Rico is taking at least two cargos I'm aware of that came out of Russia And also remember
42:09 that they use natural gas that's piped down from Canada. Well, there's an LNG export or import facility terminal up there in Canada, and all that comes out Trinidad, Tobago, because if it came
42:20 from the Gulf Coast, that would be a Jones Act violation too, because even if it went to Canada, they ultimately ends up back in the US. So yeah, they just get it from a few different directions
42:31 there. It's lunacy. I mentioned LPG, same deal with New England. They buy their propane imported from Norway, other places. Yeah, we could talk all day about all the screw effects just in the
42:41 energy sector. Ah, ah, so give us the latest and greater. Go ahead. Well, one last thing while I'm thinking, you know, we're talking about all the other places. LA Times a few months ago had
42:52 a story about a refinery shutting down in Southern California. It's the question becomes. So where's the fuel going to come from that was being produced? How are we going to fill that gap? And the
43:02 article mentioned they said, yeah, likely sources include Singapore, South Korea, Saudi Arabia, the Netherlands, Gulf Coast. Probably not, why Jones Act? All the way from the Netherlands,
43:17 think about that.
43:20 I mean, it's lovely in the Netherlands, I have nothing. I used to live there, it's a great place. Yeah, my girlfriend and I took my daughter there went and saw Anne Frank's house and a
43:33 delightful trip and all, don't think we should be buying stuff from them that we've got in Texas, but So closes from the dutch, you know? Yeah, exactly. We have plenty of gas here, it's one
43:46 thing we don't need. Exactly, so close us out real quick, just give us the latest and greatest of the Cato Institute. What are you guys up to? Well,
43:57 there are other things going on besides the Jones Act, it turns out we've been real busy with tariffs and trying to sort all that out and talk about why these tariffs are a bad idea and tariff
44:08 reciprocity and all the rest So as some keepin' us busy, that actually - People think I'm old Jones Act all the time. No, I've written about this as well. So that's keeping us busy. But we,
44:19 Jones Act's still going to be front and center. Maritime dysfunction just keeps popping up all the time. It seems like, so that'll be front and center. And I expect that in a few months, maybe
44:30 we'll sit down and do this all again. I will also let your listeners know they have the time to listen to other podcasts. I'm going to be on the Odd Lots podcast done by Bloomberg We'll record a
44:42 debate about the Jones Act next Wednesday. So I assume the episode will drop shortly thereafter. I will be debating someone from the Pro Jones Act Transportation Institute, which is essentially,
44:53 you could call it, say, the Think Tank Arm or the American Maritime Partnership that I mentioned earlier. So that should be lively and interesting. So yeah, I look forward to checking back within
45:02 you on this issue and later this year next. I'm sure there'll be plenty of updates. Standing invite to come back whenever you want. And my one promise to you is even if I have to hit play when we
45:16 have coffee, I'm going to make Congressman Troy Nell's listen to this because he's a Texan. He should want to sell energy. He's an American. They should all want to do something about this.
45:28 Exactly. Colin, thanks, Kim, for coming on. Chuck, thanks so much for the invite, it's always a pleasure to talk to you.