Congress Considers Expanding U.S.-Flag Requirements to U.S. Gulf of Mexico Drilling Activities

Current coastwise laws, commonly referred to as the Jones Act, require the use of Jones Act qualified U.S.-flag vessels in waters under U.S. jurisdiction for certain activities such as, transporting merchandise between two points in the United States. Some activities, however, like the act of drilling do not require the use of a Jones Act vessel. The Deepwater Horizon, for example, was documented in the Marshall Islands even though it was drilling in U.S. waters. A proposal was recently introduced in the U.S. House of Representatives that would require all vessels either drilling or engaged in "support of such drilling" to be U.S. flag, albeit not Jones Act qualified. A U.S.-flag vessel that is not Jones Act qualified generally can have ultimately 100 percent foreign beneficial ownership. The proposal is similar to one included last Congress in a bill (the CLEAR Act) that passed the House. The provision also builds on a 2006-enacted anchor handler provision imposing a similar requirement.