U.S. Grants Jones Act Waiver

Homeland Security seeks to ease fuel supply crunch; Colonial Pipeline reportedly pays ransom to hackers.

May 14, 2021

White House at Dusk

ALEXANDRIA, Va.—In the wake of the Colonial Pipeline shutdown and supply constraints, the U.S. Department of Homeland Security announced that it has approved a targeted and temporary waiver under the Jones Act for an unnamed company to ensure fuel supplies reach critical areas.

Reuters reported that Valero Energy Corp. was granted the waiver that would allow maritime cargo transport between U.S. ports to be carried out on non-U.S. flagged vessels. Marathon Petroleum and Citgo also reportedly have requested waivers, Reuters said.

Alejandro N. Mayorkas, secretary of Homeland Security, said, “In the interest of national defense, I have approved a temporary and targeted waiver request to an individual company. This waiver will help provide for the transport of oil products between the Gulf Coast and East Coast ports to ease oil supply constraints as a result of the interruptions in the operations of the Colonial Pipeline.”

Colonial Pipeline has restarted operations and has reportedly paid a ransom to the cyberattackers that struck its computer systems and forced the shutdown of Colonial’s 5,500-mile pipeline that carries fuel from Texas to New Jersey, the Wall Street Journal reports. Analysts believe it will take several days before supplies return to normal in affected states in the Southeast and Mid-Atlantic.

IRS Dyed Diesel Relief

Meanwhile, the Internal Revenue Service (IRS) announced yesterday that it will halt penalties for the sale of dyed diesel fuel in the states of Alabama, Delaware, Georgia, Florida, Louisiana, Maryland, Mississippi, North Carolina, Pennsylvania, South Carolina, Tennessee and Virginia and the District of Columbia on the highways. This relief will remain in effect until May 21, 2021, and is retroactive to May 7, 2021, and is available to any person selling or using the fuel on highway systems.

During normal times of fuel sale and operation, dyed diesel fuel is not subject to tax as it is normally used for home heating, farming and by local governments, which are exempt uses.

As such, for operators using vehicles with dyed diesel fuel, this relief will only be available if the operator pays the 24.4 cents tax per gallon normally applied for regular diesel fuel used on highways. For those needing to pay the tax, no penalties will be charged by the IRS for failure to make semimonthly deposits of the tax.

The IRS said it will continue to provide more relief as needed and is watching the situation closely. More information can be found on the proper method for reporting and paying these taxes in IRS Publication 510, Excise Taxes.

Waivers and Declarations

Finally, the Federal Motor Carrier Safety Administration (FMCSA) amended its regional emergency declaration from May 12, 2021, to include ethanol. The agency said it will continue to review the emergency declaration and may make additional modifications if needed. The declaration is set to expire on June 8, 2021.

On the local level, more states have issued fuels and transportation waivers along with emergency declarations: