Pipeline Builders Seek Tariff Exemptions


Several major U.S. energy companies, including Hess Corp. and Kinder Morgan Inc., are seeking exemptions from recently enacted steel-import tariffs.

To date, according to Reuters, there have been 21,000 exclusion requests submitted to the U.S. Commerce Department, with more than 500 petitions involving pipes and similar materials. The first decisions on exemptions are slated to be announced later this month.

Previous Action

On June 1, the United States allowed new tariffs on steel and aluminum imports from Canada and European Union countries to take effect, triggering threats of retaliation from some of the country’s major trade partners.

The EU opened a case in the World Trade Organization on that same day in response to the measures, which place a 25 percent duty on steel imports into the U.S. and a 10 percent duty on aluminum imports. The tariffs were first announced in early March and officially went into effect later that month, but for many countries the duties were delayed while the U.S. continued larger trade negotiations.

Canada, the single largest exporter of steel to the U.S., and Mexico were both immediately exempt from the tariffs during U.S. attempts to renegotiate NAFTA, the free-trade agreement among the North American countries. In late April, the U.S. announced that those two countries, along with the EU, Argentina, Brazil and Australia, would have continued exemptions from the tariffs until at least June 1.

Company Exemptions

According to Reuters, the pipeline industry could face steep consequences from the tariffs; roughly 77 percent of the steel used in U.S. pipelines is imported, with benchmark hot-rolled U.S. steel coil prices 50 percent higher than they were a year ago.

Plains All American Pipeline has sought an exclusion for its 500-mile Cactus II oil pipeline, which will connect West Texas oil fields to export docks near Corpus Christi. Later this month, the company expects to receive its first batch of material from Greek manufacturer Corinth Pipeworks SA. The company can only acquire this specific kind of pipe from three mills in the world.

Greg Armstrong, chief executive of Plains All American Pipeline, noted that tariffs and import quotas could harm production growth.

Kinder Morgan is also after an exemption for its $1.75 billion Gulf Coast Express natural gas pipeline; the company ordered 47 percent of its specialized pipe from Turkish steel maker Borusan Mannesmann. Only one U.S. producer could produce what Kinder Morgan needed, and it could not produce the volume necessary in the timeline required.

The U.S. government plans to act on exclusion requests within 90 days of a petition being posted, and refunds on tariffs would be paid once a petition became active. For those companies unwilling to take the risk of a request being denied, it may mean extending project timelines.

“There’s lots of concern that the increased cost in pipe will increase the costs for our oil,” said U.S. Sen. Heidi Heitkamp, D-North Dakota. “You pull on one string in international trade and it unravels in ways you could not have predicted.”


Tagged categories: Economy; Government; NA; North America; Pipelines; Program/Project Management; Steel

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