10 Benedict s Maritime Bulletin 98 Second/Third Quarter 2012 WINDOW ON WASHINGTON Waiving the Flag By Bryant E. Gardner The Obama Administration has found itself in hot water again over the application of U.S. cabotage law, popularly referred to as the Jones Act, this time in connection with releases from the U.S. Government s Strategic Petroleum Reserve ( SPR ). The Jones Act, which is actually 27 of the Merchant Marine Act of 1920, attracted controversyin2010whencriticsaccusedthelawofstandingin the way of cleanup operations following the DEEP- WATER HORIZON disaster. Then, in 2011, the Administration found itself under fire from the U.S.-flag maritime industry and congressional supporters after it granted numerous waivers to the purchasers of SPR releases. As the Administration contemplates another release, and possibly a fresh round of Jones Act waivers, it has the opportunity to learn from the mistakes of 2011 and to reform its waiver process in a way that best addresses the concerns of stakeholders and meets the goals of the SPR program. Background and Origins of the Jones Act Administrative Waiver Process The Jones Act provides that a vessel may not provide any part of the transportation of merchandise by water, or by land, between points in the United States, unless the vessel is owned, operated, and built by U.S. citizens. 1 The Jones Act itself does not include any waiver provision. Rather, the authority relied upon for administrative waivers is found in a separate provision, which now provides: (a) On request of Secretary of Defense. On request of the Secretary of Defense, the head of an agency responsible for the administration of the navigation or vessel-inspection laws shall waive compliance with those laws to the extent the Secretary considers necessary in the interest of national defense. (b) By head of agency. When the head of an agency responsible for the administration of the navigation or vessel-inspection laws considers it necessary in the interest of national defense, the individual, following a determination by the Maritime Administrator, acting in the Administrator s capacity as Director, National Shipping Authority, of the non-availability of qualified United States flag capacity to meet national defense requirements, may waive compliance with those laws to the extent, in the manner, and 1 46 U.S.C. 55102.
10 Benedict s Maritime Bulletin 99 Second/Third Quarter 2012 on the terms the individual, in consultation with the Administrator, acting in that capacity, prescribes. 2 TheprovisioncanbetracedbacktoanExecutive Order issued by President Roosevelt ten days after the bombing of Pearl Harbor, in which he cited the authority vested in me by the Constitution and Statutes of the United States as President of the United States and Commander-in-Chief of the Army and Navy, and to further the prosecution of the war... for his delegation of authority to the Secretary of Commerce to waive compliance with the navigation and vessel inspection laws to such extent and in such manner and upon such terms as he may prescribe, either upon his own initiative or upon the written recommendation of the head of any other Government agency that such action is necessary in the conduct of the war. 3 Congress then passed this authority into law with the Second War Powers Act, 1942, an emergency measure that gave the President wide-sweeping powers intended to meet the challenges of World War II. 4 Consistent with its historical roots, current law requires a finding that a waiver be necessary in the interest of national defense. Waivers may take either of two forms, however: (1) where the Department of Defense makes the request based upon its determination that a waiver is necessary for national defense or (2) where another agency responsible for the administration of such laws determines a waiver is in the interest of national defense and obtains a determination by the Maritime Administration ( MARAD ) that U.S.-flag vessel capacity is not available to meet such national defense requirements. It is the second form of waiver that has been controversial. Because of the narrow 2 46 U.S.C. 501. 3 Exec. Order No. 8976, 6 Fed. Reg. 244 (Dec. 17, 1941). 4 Pub. L. No. 77-507, 501, 56 Stat. 176 (1942). The original authority provided that [t]he head of each department or agency responsible for the administration of the navigation and vessel inspection laws is directed to waive compliance with such laws upon the request of the Secretary of the Navy or the Secretary of War to the extent deemed necessary in the conduct of the war by the officer making the request. The head of such agency is authorized to waive compliance with the laws to such extent and in such manner and upon such terms as he may prescribe upon his own initiative or upon the written recommendation of the head of any other Government agency whenever he deems that such action is necessary in the conduct of war. The authority was extended by the Act of Dec. 27, 1950, Pub. L. No. 81-891, 64 Stat. 1120 (1950). national defense exception, Customs and Border Protection has infrequently granted waivers and has consistently held that [a] waiver of the provisions of the coastwise laws cannot be issued solely for economic reasons. 5 In 1988, the U.S. Customs Service, MARAD, and the Department of Energy ( DOE ) entered into an agreement to ensure compliance with the requirements of the Jones Act and to ensure the unimpeded distribution of crude oil from the Strategic Petroleum Reserve ( SPR ) during a severe energy supply disruption... 6 The agreement sets forth the procedure for ensuring expedient consideration of SPR release schedules and for MARAD s determination of the availability of coastwise-qualified vessels for the distribution of released oil. Among other things, it provides that all reasonable efforts will be made to utilize suitable U.S.- flag vessels and that, [u]pon full consideration of such factors as delivery date, bid price, and efficient use of available capacity, MARAD may determine as suitable a vessel or vessels with single or collective capacity exceeding the requestor s contract requirement. 7 The agencies entered into a similar agreement in July 1990, addressing case-by-case waivers of the Jones Act, in response to energy shortages more generally (not just SPR releases), and obligating MARAD to monitor U.S.-flag vessel availability so that it would be ready to make availability determinations in the event of an energy shortage. 8 In light of impending hostilities in the Middle East, on May 15, 1989, Congress directed the General 5 Response to Request of Peter A. Carter, Biehl & Co, Inc., HQ 112520 (Nov. 20, 1992) ( [I]t is clear that the interest involved is not one of national defense, but private economic benefit. Accordingly, it is clear that a waiver of the coastwise laws cannot be granted. ); Response to Request of David Mayo, Freight Management Companies, HQ 112085 (Mar. 10, 1992); Response to Request of James E. Cloutier, Leaseco Servs., HQ 111867 (Sept. 24, 1991). 6 Agreement Among the U.S. Customs Service of the Department of the Treasury, Maritime Administration of the Department of Transportation, and the Department of Energy Concerning Drawdown of the Strategy Petroleum Reserve (Feb. 29, 1988). The original agreement was established in 1987 but was updated with an Operating Annex in 1988. 7 Id. at 1 & Operating Annex A. 8 Agreement Among the U.S. Customs Service of the Department of the Treasury, the Maritime Administration of the Department of Transportation, and the Department of Energy to Expedite Waivers of the Jones Act During Periods of Actual or Imminent Shortages of Energy (July 29, 1990).
10 Benedict s Maritime Bulletin 100 Second/Third Quarter 2012 Accounting Office ( GAO ) to examine the role of the SPR in mitigating the effects of an oil-supply disruption. 9 In its November 1990 report, GAO opined that SPR oil must be quickly and effectively introduced into the market to achieve its purpose and warned that a major distribution could be hampered because buyers of SPR oil are required to use U.S.-flag tankers to transport the oil between U.S. ports, based upon DOE and industry complaints alleging inadequate Jones Act tonnage. 10 Although GAO did note that MARAD and the other agencies had agreed to an expedited review process and that MARAD indicated the case-by-case waivers could be processed in a timely manner, it also noted DOE s skepticism and, therefore, concluded that questions remain about the effectiveness of the process, which remained untested at the time of the report. 11 GAO suggested that waivers in the past had taken too long, at up to seven days, and further that giving the President standby waiver authority to issue blanket waivers which he could use in the case-bycase waiver process were slowing the SPR drawdown [sic] could provide additional assurance for SPR use without unnecessarily jeopardizing the interests of the U.S. fleet. 12 On January 16, 1991, coinciding with the international effort to counter the Iraqi invasion of Kuwait, President George H.W. Bush authorized the first emergency drawdown of the SPR as part of an international effort to minimize world market disruptions caused by Middle East hostilities. 13 The DOE also announced that [c]oncurrently with the authorization to use the SPR, the President directed the Secretary of Treasury to waive provisions of the Jones Act that require the use of U.S. flag vessels to transport crude from the Reserve. The general, or blanket, waiver will ensure that the 9 GENERAL ACCOUNTING OFFICE, OIL RESERVE: SOME CONCERNS REMAIN ABOUT SPR DRAWDOWN AND DISTRIBUTION, B-233820.5 (Nov. 1990). The General Accounting Office is now known as the Government Accountability Office. 10 Id. at 2 (emphasis added). DOE SPR officials estimated that Jones Act capacity was adequate to meet 30%-60% of requirements but a drawdown would likely require 40%-50% transportation by water. Id. at 22. Whereas DOE indicated there would be a shortage of U.S.-flag vessels at 3 million barrels per day, an oil industry official reported that U.S.-flag capacity would be insufficient for even 2 million barrels per day. 11 Id. at 16. 12 Id. at 4. 13 Press Release, Department of Energy, President Directs Drawdown of Strategic Reserve (Jan. 16, 1991). widest range of opportunities is made available for moving SPR oil into all parts of the U.S. market. 14 Responding to a subsequent waiver request, the Customs Service held that foreign vessels operating in the coastwise trade would not face Jones Act sanctions provided they could demonstrate, by production of a manifest and written certificate signed by the master, vessel agent, or operator, that the cargo on the entering vessel was from the SPR and that the voyage represented the first transportation of crude by water. 15 Following Hurricanes Katrina and Rita in 2005, the President authorized the second SPR drawdown, and Department of Homeland Security ( DHS ) Secretary Michael Chertoff issued blanket waivers of the Jones Act, citing the need to address hurricane-induced disruptions to refining and pipeline capacity, which he declared threats to national security. 16 As with the 1991 waiver, these waivers appear to have disregarded the detailed processes established by the 1990 agreement, which contemplated case-by-case waivers, and there is little indication that MARAD was involved in the process on any meaningful level. 2011 SPR Release & Jones Act Waivers In response to a call from the International Energy Agency ( IEA ) on June 23, 2011, DOE announced a drawdown and sale of 30 million barrels of SPR crude oil, the same day, to include a blanket waiver of Jones Act requirements. 17 DOE then amended the notice the next day to remove the blanket waiver but indicated the availability of individual case-by-case waivers. 18 During a pre-bid briefing among the agencies and potential buyers, one bidder said that no U.S. ships could hold 500,000 barrels and asked if there would be a defacto blanket waiver for large volume sales, to which DOE reportedly responded: Once a bid has been 14 Id. 15 Response to Request of Donald Toenshoff, Philbro Energy Inc., 25 Cust. B. & Dec. 283 (Feb. 22, 1991). 16 Waiver of Compliance with Navigation and Inspection Laws, 70 Fed. Reg. 53,236 (Dep t of Homeland Security Sept. 7, 2005); Waiver of Compliance with Navigation and Inspection Laws; Gulf Coast States, 70 Fed. Reg. 57,611 (Dep t of Homeland Security Oct. 3, 2005). 17 See, e.g., H.R. Rep. 112-573 at *60 (2012); Tom Doggett, White House drops plan to let foreign vessels move SPR oil, REUTERS, June 24, 2011. 18 Department of Energy, Notice of Sale DE-NS96-11PO97000 (June 24, 2011).
10 Benedict s Maritime Bulletin 101 Second/Third Quarter 2012 awarded, then, yes, a waiver would be granted in that situation. But you ve got to apply for it. 19 Shortly thereafter, on June 29, DOE issued a memorandum to the Secretary of DHS stating that, to the extent there are not qualified U.S.-flagged vessels available to transport the SPR release[,]...the waiver of the Jones Act will be necessary... [P]etroleum availability is crucial to economic security and the national defense. 20 Then, two days later, DOD reported that: The Department of Defense recognizes that the Department of Homeland Security under 46 U.S.C. 501(b) may grant waivers based on national defense interests and the nonavailability of qualified U.S. flag vessels. If the Maritime Administrator...determines that qualified U.S. flag capacity is unavailable, the Department of Defense has no objection to waiving the Jones Act...for petroleum released from the SPR now through August 31, 2011...and concurs with the issuance of waivers in these circumstances. 21 Thus, under the waiver statute and in accordance with the 1990 interagency agreements, it fell to MARAD to determine whether suitable Jones Act capacity was available to carry the lots in question before DHS could issue the waivers. Jones Act interests have suggested that MARAD was excluded from the initial decision to issue the blanket waiver on June 23, that it objected to the initial blanket waiver, and that it questioned the decision to provide waivers to large-lot shipments rather than requiring that they be broken-up into parcels suitable for Jones Act vessels. 22 Moreover, these interests have asserted that 19 Memorandum from Staff, Subcommittee on Coast Guard and Maritime Transportation, House Committee on Transportation and Infrastructure to Members, Subcommittee on Coast Guard and Maritime Transportation, House Committee on Transportation and Infrastructure at 5 (June 22, 2012) (quoting Sayeh Tavangar, DOE offers more details on SPR auction, PLATT S ENERGY WEEKLY, INSIDE ENERGY EXTRA (June 28, 2011)). 20 Memorandum from David Johnson, Deputy Assistant Secretary for Petroleum Reserves, Department of Energy to Secretary of Homeland Security (June 29, 2011). 21 Letter from Ashton B. Carter, Under Secretary of Defense to Hon. Steven Chu, Secretary of Energy (Jul. 1, 2011). 22 See A Review of Vessels Used to Carry Strategic Petroleum Reserve Drawdowns Before the Subcomm. on Coast Guard & Maritime Transportation, H. Comm. on Transportation & Infrastructure, 112th Cong. (2012) (statement of Thomas Allegretti, President, The American Waterways Operators, On Behalf of the American Maritime Partnership) (discussing emails uncovered through the Freedom of Information Act that indicate that MARAD did not know about the blanket waiver until an hour before it was announced). DOE s pre-bid assurances that waivers would be granted for large-lot purchases amounted to a de facto blanket waiver for such purchases, which composed almost the entire drawdown, thereby locking-out the U.S.-flag. 23 Yet, once DOE made such representations to bidders that large-lot waivers would be granted on a case-by-case basis, it created commercial expectations that may very well have been binding upon the sale. Furthermore, the Administration s overriding goal appears to have been compliance with its IEA commitment to distribute 30 million barrels to the U.S. market in 30 days, most of it necessarily by vessel. With DOE driving the process and enormous pressure quickly to find the vessel capacity to meet the IEA commitment, MARAD issued non-availability determinations supporting 52 foreign-flag waivers of the Jones Act during the period from July 8 to September 9, and only one shipment, constituting 1% of the drawdown, was carried by a Jones Act vessel. 24 The reasoning behind MARAD s determinations appears to be that there were no vessels available of sufficient size to accommodate each of the entire lots, primarily 500,000 barrels each, as proposed by purchasers in their waiver applications. 25 The Jones Act industry objected strongly to the numerous waivers granted and went public with its dissatisfaction. In August, The New York Times covered the decision to employ foreign vessels to carry the cargo during a time of high unemployment and quoted the American Waterways Operators ( AWO ): The idea was to create American jobs and help the economy. But all the profit from the sale of the oil has gone to traders and oil companies and all the profit from movement of the oil has gone to foreign 23 Id. 24 Id. (statements of Thomas Allegretti, President, The American Waterways Operators, On Behalf of the American Maritime Partnership and John D. Porcari, Deputy Secretary, U.S. Department of Transportation). The 52 waivers were discovered through the Freedom of Information Act, but given imperfections in the process and redactions of certain details, there may be a few more or less than as reported. 25 Id. (statement of Rep. Cummings (D-MD)) (quoting MARAD waiver granted to Marathon Petroleum on July 25, 2011, which stated: You have purchased 1 millions barrels of crude from the SPR, and this portion represents 500,000 barrels... We have found no single U.S.-flag vessel capable to carry the entire lot of cargo in one trip as requested by Marathon. ).
10 Benedict s Maritime Bulletin 102 Second/Third Quarter 2012 shippers and crewmen, and that s galling. 26 In response, Administration officials reported that because the oil was sold mostly in large lots of 500,000 barrels or more, the buyers found it faster and more economical to move the oil on large, 500,000- barrel tankers rather than U.S.-flag barges. 27 Notably, The New York Times reported that, although some of the shortfall was caused by the conflict in Libya, the Administration also stated that it had to get the oil to market quickly to ensure supplies for the summer travel season, which sits uneasily with the national defense basis originally expressed for the waivers. 28 By the time the extent of the waivers became clear, the maritime industry was joined in outrage by legislators from both sides of the aisle and both chambers. In late August, Sen. Mary Landrieu (D-LA), Sen. David Vitter (R-LA), Rep. Charles Boustany (R-LA), Rep. Elijah Cummings (D-MD), Rep. Peter King (R-NY), Rep. Candice Miller (R-MI), Rep. Bennie Thompson (D-MS), and Rep. Peter Visclosky (D-IN) issued a letter strongly urging the Administration to end its practice of waiving the Jones Act for SPR drawdowns. 29 The letter accused the President of handing American jobs to foreign shipping companies when U.S.-flag vessels experienced in coastal movements of oil were ready and available to transport the oil and further charged that the waiver process was exacerbated by a lack of transparency. 30 Not long thereafter, Congress imposed two new provisions restricting the administrative waiver process through appropriations legislation, which in the 112th Congress has been one of the ways to find a vehicle to the President s desk. On November 18, 2011, the Consolidated and Further Continuing Appropriations Act included a provision providing: 26 John M. Broder, Oil Reserves Sidestep U.S. Vessels, N.Y. TIMES (AUG. 23, 2011). 27 Id.; Memorandum from Staff, Subcommittee on Coast Guard and Maritime Transportation, House Committee on Transportation and Infrastructure to Members, Subcommittee on Coast Guard and Maritime Transportation, House Committee on Transportation and Infrastructure at 5 (June 22, 2012) (quoting Sayeh Tavangar, DOE offers more details on SPR auction, PLATT S ENERGY WEEKLY, INSIDE ENERGY EXTRA (June 28, 2011)). 28 John M. Broder, Oil Reserves Sidestep U.S. Vessels, N.Y. TIMES (AUG. 23, 2011). 29 Seafarers International Union, Bipartisan Letter Criticizes Jones Act Waivers (Oct. 2011). 30 Id. Notwithstanding any other provision of law, none of the funds provided in this Act shall be used to make a determination of the nonavailability of qualified United States flag capacity for purposes of 46 U.S.C. 501(b) for the transportation of crude oil distributed from the Strategic Petroleum Reserve unless as part of that determination the Secretary of Transportation, after consultation with representatives from the United States flag maritime industry, provides to the Secretary of Homeland Security a list of United States flag vessels with single or collective capacity that may be capable of providing the requested transportation services and a written justification for not usingsuchunitedstatesflagvessels. 31 The following month, Congress passed another provision as part of the Consolidated Appropriations Act, 2012, which added additional restrictions: Notwithstanding any other provision of law, none of the funds provided in this Act shall be used to approve a waiver of the navigation and vessel-inspection laws pursuant to 46 U.S.C. 501(b) for the transportation of crude oil distributed from the Strategic Petroleum Reserve until the Secretary of Homeland Security, after consultation with the Secretaries of the Departments of Energy and Transportation and representatives from the United States flag maritime industry, takes adequate measures to ensure the use of United States flag vessels: Provided, That the Secretary shall notify the Committees on Appropriations of the Senate and the House of Representatives, the Committee on Commerce, Science, and Transportation of the Senate, and the Committee on Transportation and Infrastructure of the House of Representatives within 48 hours of any request for waivers of navigation and vesselinspection laws pursuant to 46 U.S.C. 501(b). 32 Thus, these laws required the Administration to involve U.S.-flag industry representatives in the waiver process and, as part of that process, to disclose all available 31 Pub. L. No. 112-55, 172, 125 Stat. 552 (2011). 32 Pub. L. No. 112-74, 529, 125 Stat. 786 (2011).
10 Benedict s Maritime Bulletin 103 Second/Third Quarter 2012 U.S.-flag capacity capable of carrying the cargo, including smaller vessels that may be able to carry it collectively not just large tankers capable of carrying entire lots and a written justification for not employing such vessels. Moreover, the laws required the Administration to take adequate measures to ensure the use of U.S.-flag vessels and to notify the committees with jurisdiction over the Jones Act (and therefore the industry) 48 hours before granting any waivers. Because these laws are appropriations restrictions, however, their application extends only as far as the reach of the funds appropriated thereunder for that fiscal year. As of this writing, additional provisions that would further curtail the administrative waiver process are working their way through Congress. The current text of the House s Coast Guard and Maritime Transportation Act of 2011 includes additional restrictions requiring MARAD to publish, on its website, both its non-availability determinations and an identification of actions that could be taken to enable U.S.-flag vessels to meet the national defense requirements in question. 33 Similar language is included in the House s National Defense Authorization Act for Fiscal Year 2013. 34 Finally, the Senate s version of the Maritime Administration Authorization Act for Fiscal Year 2012 includes provisions that require MARAD and the waiving agency to certify that it is not possible to use U.S.-flag vessels, collectively, to meet national defense requirements. 35 On June 27, 2012, the House Committee on Transportation and Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, held a post-mortem hearing to investigate the lack of U.S.-flag participation in the 2011 drawdown and what could be done to improve future participation. Thomas Allegretti, President of the AWO, expressed concern that the Administration had established an informal minimum delivery lot size of 500,000 barrels even though it knew that would exclude the available Jones Act capacity. 36 Although Mr. Allegretti suggested that MARAD had been largely ignored in the process, he laid blame for the purported de facto 500,000-barrel blanket waiver and exclusion of the U.S.-flag at the feet of DOE. Also testifying was John D. Porcari, Deputy Secretary, U.S. Department of Transportation, who rejected any suggestion that the 2011 drawdown had been conducted under a blanket-waiver process. 37 Furthermore, Mr. Porcari indicated that purchasers wanted to ship in lots of 500,000 barrels or greater, consistent with standard industry practice, to capture economies of scale and suggested that smaller lots might not have attracted buyer interest at all. 38 Mr. Porcari also testified that the crude oil supply chains were structured only to handle these larger tankers, and do not have facilities which can accommodate smaller barges. 39 Lastly, the Deputy Secretary countered that MARAD did work to encourage buyers to divide lots into smaller shipments that Jones Act carriers might handle but indicated that there was inadequate data and difficulties identifying specifically the combinations of vessels that might be used to achieve Jones Act movements. Although Mr. Porcari stated that the Department of Transportation s position was that it was important to keep the minimum transportation lot size as low as possible to maximize U.S.-flag eligibility, he opined that if the driving factor was SPR-oil buyers preference for larger lots transported in a single vessel for greater economic and logistical efficiency, then it appeared that a minimum-size threshold would be unlikely to have any effect. Looking Ahead The handling of the 2011 Jones Act waivers created a great deal of controversy and caused problems for all parties involved in the SPR drawdown. Despite relatively well-defined waiver process guidelines, it appears that there was significant confusion among the various parties involved about whether there would be a blanket waiver, whether waivers would in fact be 33 See H.R. 112-2838 410 (2011). 34 See H.R. 112-4310 3509 (2012). 35 See S. 112-1450 6 (2011). 36 A Review of Vessels Used to Carry Strategic Petroleum Reserve Drawdowns Before the Subcomm. on Coast Guard & Maritime Transportation, H. Comm. on Transportation & Infrastructure, 112th Cong. (2012) (statement of Thomas Allegretti, President, The American Waterways Operators, On Behalf of the American Maritime Partnership). 37 A Review of Vessels Used to Carry Strategic Petroleum Reserve Drawdowns Before the Subcomm. on Coast Guard & Maritime Transportation, H. Comm. on Transportation & Infrastructure, 112th Cong. (2012) (statement of John D. Porcari, Deputy Secretary, U.S. Department of Transportation). 38 Id. 39 Id.
10 Benedict s Maritime Bulletin 104 Second/Third Quarter 2012 granted and if so on what grounds, and which agency was performing what role in the process. The Administration had already made commitment to the IEA, and its overriding goal was the swift distribution of the oil to calm the market. DOE appears to have quarterbacked the whole process, including the Jones Act waivers even though it has no formal role in the granting of waivers. DOE, whose only prior experience with SPR drawdowns involved blanket waivers, apparently got out in front of the Jones Act waiver process and issued a blanket waiver. Then, DOE withdrew the waiver and told buyers verbally that waivers would be granted after bid award, on a case-by-case basis, for the large 500,000-barrel lots so that they could be moved in a single vessel. MARAD was under pressure to come to findings regarding U.S.-flag vessel availability that did not derail the process and create an embarrassment for the Administration by causing it to violate its commitment to the IEA. MARAD was further constrained by the pre-bid DOE representation to buyers that waivers would be granted for large lots. In the end, Jones Act operators were outraged at their exclusion, and oil purchasers were dissatisfied with the blanket waiver flip-flop, the lack of clarity surrounding the process, and price risk they bore in bidding under the cloud of a case-by-case waiver process without a predictable outcome. Since February 2012, the Administration has repeatedly indicated that it is considering another SPR drawdown. 40 Although the Jones Act industry has sought a number of legislative measures to increase transparency and oversight by both industry and the Congress, more is needed to fix the process before the next SPR drawdown. Both the oil purchasers and the Jones Act carriers need a process that provides certainty, reduces risk, and manages expectations. To satisfy those needs, the Congress and the Administration should address head-on the question whether and when SPR drawdowns sold in large lots will be divided for shipment on smaller Jones Act qualified vessels, if at all. If the decision will be to permit buyers to determine shipment sizes, they will likely continue to ship in 500,000- barrel cargoes too big for most Jones Act operators, and the Jones Act industry will continue to fight the process with congressional backing. If the large lots are to be divided to fit into Jones Act vessels, then serious advance consideration needs to be given to questions surrounding such a determination, including whether this will repel buyers and how it will depress the prices received from them for the SPR cargo, whether there are real problems with putting smaller lots into the crude oil supply chain, and how the division into smaller shipments will impact the SPR- IEA goal of getting the cargo to market quickly. ***** Bryant E. Gardner is a Partner at Winston & Strawn, LLP, Washington, D.C. B.A., summa cum laude 1996, Tulane University of Louisiana; J.D., cum laude 2000, Tulane Law School. 40 See, e.g., Blake Clayton, Is the White House the New Federal Reserve of Oil?, FORBES, Oct. 12, 2012.