North American Oil & Gas Pipelines

MAY 2018

North American Oil & Gas Pipelines covers the news shaping the business of oil and gas pipeline construction and maintenance in North America, including pipeline installation methods, integrity management innovations and managerial strategies.

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34 North American Oil & Gas Pipelines | MAY 2 018 By Bradley Kramer P ipeline industry advocates have reacted negatively to U.S. President Donald Trump's move to impose tar- iffs on imported steel and aluminum announced in March. The American Petroleum Institute (API), the Association of Oil Pipe Lines (AOPL) and the Interstate Natu- ral Gas Association of America (INGAA) swiftly denounced the decision, which would affect iron and steel alloys used to make line pipe and other supplies for cross-country pipeline projects, as well as possibly impact jobs in the industry. Citing national security, Trump released a Presidential Proclamation on March 8, announcing his intent to impose a 25 percent tariff on imported steel and a 10 percent tariff for imported aluminum, regardless of the country of origin. The API stated that implementing this trade policy could create confusion in supply chains, unnecessary costs and impacts to U.S. capital improvement projects and threaten industry jobs. On March 22, the president announced a modification to the steel and aluminum tariffs, suspending them for certain countries before they take effect. The tariffs on steel and alu- minum imports from Argentina, Australia, Brazil, Canada, Mexico, EU member countries and South Korea would be suspended until May 1, "pending discussions of satisfactory long-term alternative means to address the threatened im- pairment to U.S. national security." By May 1, Trump said he will decide whether to continue to exempt these countries from the tariffs based on the outcome of those discussions. For those countries not exempted, the tariffs went into effect on March 23. According to the March 22 statement, the president retains broad authority to further modify the tariffs, including by re- moving the suspensions or suspending additional countries. Furthermore, the process for directly affected parties to ap- ply for an exclusion for specific steel or aluminum products that they need remains in place, as announced in Presiden- tial Proclamations 9704 and 9705 and subsequent Federal Register notices by the U.S. Department of Commerce. U.S. Secretary of Commerce Wilbur Ross, in consultation with other administration officials, will evaluate exclusion re- quests for products, "taking into account national security considerations." In that evaluation, according to the White House state- ment, Ross will consider whether a product is produced in the United States of a "satisfactory quality or in a sufficient and reasonably available amount." A tariff on imported steel would increase costs and encour- age U.S. companies and consumers to buy domestically pro- duced steel instead. At the moment, American producers find it cheaper to import steel from Canada, China and Europe. However, the iron and alloy steel used to make pipelines for oil and natural gas pipelines are not sufficiently available in the United States to meet today's pipeline construction de- mand, according to a March 8 statement by the AOPL. At 3 percent of the total U.S. steel market, pipeline-grade steel is a specialty product forming a niche market that U.S. domestic steel producers largely exited, according to the association. While higher tariffs on steel imports may cause U.S. com- panies to purchase more domestically produced steel and possibly create more jobs for steel mills, the result in the pipe- line industry could be staggering cost increases. The AOPL cited a May 2017 study, "ICF, Feasibility & Im- pacts of Domestic Content Requirements for U.S. Oil & Gas," which found a 25 percent pipe cost increase would translate to $76 million cost increase for a typical pipeline or a cost increase of $300 million for a major cross-country pipeline project. In addition, U.S. pipe manufacturing mills (of which there are about a half dozen in the South) are small and can only handle one order at a time, according to the associa- tion, meaning wait times of up to two or more years for new pipe orders. The result could be delayed or canceled pipeline projects and jobs lost by U.S. pipeline construction workers. API president and CEO Jack Gerard emphasized the need to ensure U.S. oil and natural gas investments in American infrastructure, facilities and jobs can continue. "The actions taken today are inconsistent with the Ad- ministration's goal of continuing the energy renaissance and building world class infrastructure," Gerard said in a March 1 statement. "The U.S. oil and natural gas industry, in particu- Trumped Up Steel

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