* The following news release was issued June 1, 2022, by the Grassroot Institute of Hawaii. It originally said the Jones Act fleet was down to 93 ships, including 56 oil tankers. Those numbers have been updated to reflect the latest figures from the U.S. Maritime Administration, which are 92 and 55, respectively. 
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The retirement of the 37-year-old Houston is a sign that changes are needed so America can rebuild its U.S.-flag fleet and merchant marine

HONOLULU, June 1, 2022 >>  America just lost another ship from its ever-dwindling Jones Act fleet, an oil tanker named the Houston that counted the islands of Hawaii among its ports of call.

According to Grassroot Institute of Hawaii research associate Jonathan Helton, the 37-year-old Houston is now in India to be dismantled for salvage, reducing the number of Jones Act-qualified oceangoing commercial vessels to only 92, down from 257 in 1980.

As Hawaii residents are all too well aware, the Jones Act is that 1920 federal law that requires all cargo transported between U.S. ports be carried on ships that are U.S. flagged and built, and mostly owned and crewed by Americans.

A 2020 study commissioned by the Grassroot Institute of Hawaii found that the law costs Hawaii residents about $1.2 billion annually, or about $1,800 per average family.

The intent of the law allegedly was to protect America’s maritime industry so as to enhance the nation’s national security. However, after more than a century of such protectionism, America’s oceangoing Jones Act fleet comprises less than 1% of all oceangoing commercial vessels in the world, making a mockery of any claims that America’s merchant marine fleet is protected by the Jones Act.

According to Helton, in his new article “One less Jones Act tanker for Hawaii is signal to lift U.S.-build requirement,” the Houston was a regular visitor to Hawaii. Industry sources say a 9-year-old tanker named the Florida was called on to replace the Houston and has been serving Hawaii about once a month since November. But that still leaves the fleet in general one tanker short.

Last year, there were 17 tanker movements from the U.S. mainland to Hawaii. The Houston completed eight of them, with six other tankers making the remaining nine trips. The Houston also made 17 movements between Honolulu, Barbers Point and other ports in Hawaii.

Oil tankers make up 55 of the 92ships in the Jones Act fleet. Through April 2022, four Jones Act tankers had completed nine movements from the mainland to Hawaii. But with one less Jones Act tanker in the mix, that could result in Hawaii residents paying just a bit more for mainland oil.

The Jones Act prevents foreign-flagged vessels from transporting oil from the U.S. mainland to Hawaii, and that, ironically, has made it cheaper for Hawaii’s sole oil refinery, Par Hawaii, to import oil from foreign oil sources.

In 2014, the Hawaii Refinery Task Force concluded that the Jones Act was a major reason Hawaii is almost wholly dependent on foreign oil, since the cost of importing oil from the U.S. mainland aboard Jones Act tankers — such as the Houston — is more expensive.

In March 2022, President Joe Biden banned Russian oil imports to the United States. At the time, Russia provided about 3% of all U.S. crude oil imports, but Hawaii had been purchasing between a quarter and a third of its crude from Russia in recent years.

Unless Par Hawaii has found some ready foreign alternatives to oil from Russia, then the need for Hawaii to import crude from the U.S. mainland will increase.

With the Houston gone, there is one less Jones Act-qualified tanker on which Hawaii can rely.

Keli‘i Akina, Grassroot Institute of Hawaii president and CEO, said today, “The loss of the Houston is more proof that the U.S.-build requirement of the Jones Act should be lifted, so companies such as Matson and Pasha and other Jones Act carriers can buy and use less expensive foreign-built ships to serve Hawaii’s needs.”

According to Helton, building a tanker in the U.S. costs roughly three to four times more than building one abroad. This, no doubt, weighed heavily on the owner of the Houston, SEACOR Holdings Inc., to not replace it years ago.

Helton concluded that, “If U.S. lawmakers ever hope to enhance Hawaii’s energy security, rebuild the nation’s oceangoing U.S.-flag fleet and revive its merchant marine, they will need to start thinking outside the box.

“So as Hawaii says aloha to the Houston,” he said, “perhaps it is time Congress said aloha as well to the Jones Act’s domestic-build requirement.”

To read Helton’s complete article, go here.

By Keli‘i Akina

Hawaii might be recovering from the COVID-19 recession more quickly than anticipated, but that does not mean we are out of the woods. 

Inflation, economic setbacks and a possible recession are reason enough for policymakers to tread carefully when it comes to the budget.

Fortunately, there is a simple guideline that can prevent overspending and debt: The government should not grow faster than the economy.

It’s called the golden rule of spending. Stick to that rule and our elected officials can make sure that our state and county budgets are sustainable. 

The rule is especially important to remember when you get a sudden infusion of funds, such as relief money from the federal government or a sudden increase in tax revenues for whatever reason. Should you rush out and spend it on every project that makes a case for being worthy? Or do you pay down any outstanding liabilities and prepare for future emergencies?

The right answer should be obvious, but looking at what Hawaii’s counties have been considering doing lately, it appears we need to emphasize the point.

Hawaii’s gross domestic product is down by 4.43% since 2019, yet even as the economy suffers, all four counties seem determined to spend like crazy and expand.

The Honolulu City Council’s fiscal 2023 budget proposes a spending hike of $220 million, a 14% increase since 2019. It also calls for 521 new employees and salary increases of 5%.

On Kauai, county officials are considering a $42 million or 21% spending increase over fiscal 2019. Total salary expenditures would go up by 18%.

On Maui, the Council is proposing a record-high $1 billion spending plan, representing a 27% increase over fiscal 2019. It also is looking to add 232 new employees, an 8% increase.

I am happy to say that the Maui Council did recently lower its tax rates on most categories of property, to account for increased property values — as all counties should. But in general, those reductions will be offset by the other tax rates that were increased, and by its unsustainable spending plan.

Hawaii County, meanwhile, is considering an 18% increase in its annual spending compared to fiscal 2019, with its personnel costs to go up by 2%.  

The point is that no matter how much the counties spend, the money has to come from somewhere. And no matter how they structure it, that money ultimately comes from us.

It could be directly, through taxes on income, property, gifts, inheritance or capital gains. Or indirectly through “the rich,” “the tourists,” “empty rooms,” the gasoline we buy, the food we eat, the liquids we might drink, and on and on. 

Hawaii’s “tax law and rules” are highly detailed and complex. But their effect is simple: They increase our cost of living and crimp our range of economic opportunities, which, along with Hawaii’s high cost of housing, is why so many residents have been leaving the islands in search of greener pastures.

Since 2019, Hawaii’s labor force has declined by 2.8%, to 648,150. Hawaii’s population in general has suffered net losses every year since 2016. Our economy is literally shrinking, yet our counties want to go on spending sprees.

As Grassroot Institute founder Dick Rowland always warned, “When the government gets bigger, you get smaller.”

This is a time for budgetary restraint, not excess. Policymakers at every level must embrace the golden rule of budgeting. Otherwise, they will force even more of our family, friends and neighbors to leave our beloved Hawaii.
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Keli‘i Akina is president and CEO of the Grassroot Institute of Hawaii.