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U.S. hits $1.1 billion Texas oil pipeline with steel tariff

By Liz Hampton

July 16. 2018 10:57PM
An oil pump jack is seen at sunset near Midland, Texas, on May 3, 2017. (REUTERS/Ernest Scheyder/File Photo)

A $1.1 billion U.S. shale pipeline on Monday was denied an exclusion to the Trump administration’s tariff on imported steel, the first such ruling on a major energy project since the tariff went into effect.

Pipeline operator Plains All American Pipeline LP’s request was denied because suitable product is available from domestic producers, the Commerce Department ruling said.

The Trump administration this spring slapped a 25 percent tariff on imported steel and 10 percent on imported aluminum to safeguard U.S. jobs. It allowed companies to seek exemptions if metals were not available in sufficient quality, quantity or in a reasonable time.

Several major energy companies, including Kinder Morgan Inc are awaiting rulings.

Plains said it will build its 550-mile (885-km) Cactus II line with steel from Greece, but called the rejection “unjust” because it had ordered steel last year, prior to the tariff decision. Plains did not say how much the tariffs would increase the project’s cost.

“The steel tariff exclusion request review process is flawed and does not allow for an applicant to effectively engage,” said Karen Rugaard, a Plains spokeswoman. “We are reviewing our options to challenge this decision.”

Reviews appear “to rely on comments that are not required to be substantiated, and on a review of undisclosed data by staff without meaningful interaction with the applicants,” Rugaard added.

On Monday, a Commerce spokesman reported 267 exclusion requests had been approved and 452 denied. Another 3,385 of the 26,400 submitted to date were rejected as improperly completed.

Plains is among major pipeline operators trying to address surging oil and gas production in West Texas and New Mexico that have filled existing lines. Small producers in the region have said they may be forced to slow or shut-in new production over the lack of space.

Plains sought to use steel from a unit of Corinth Pipeworks Pipe Industry SA in Greece for its Cactus II. The line is projected to start delivering 585,000 barrels of oil per day from oilfields in West Texas to export hubs along the U.S. Gulf Coast beginning next year.

Plains said in its application that only three steel mills in the world could produce the material required, and none of those are in the United States.

Berg Steel Pipe Corp in Florida opposed the exclusion request, saying it could supply product made with a different process than sought by Plains.

“There are readily available domestic substitutes for the projects subject to Plains’ request for an exclusion,” wrote Ingo Riemer, chief executive of Berg Steel, part of Germany’s Europipe GmbH.

(Reporting by Liz Hampton; Writing by Gary McWilliams; editing by Lisa Shumaker and G Crosse)

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