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Page added on July 22, 2017

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America-First Pipeline Plan Draws Ire of American Oil

Public Policy

Donald Trump’s allies in the oil industry are warning the president that his bid to boost U.S. steelmakers could backfire against their efforts to achieve his goal of “American energy dominance.”

The intense lobbying effort comes as the Commerce Department faces a Sunday deadline to give the president a plan to require oil and gas pipelines use American-made steel, an idea Trump embraced in the initial days of his presidency. While the U.S. has imposed “Buy American” rules on government purchases for decades, it would be unprecedented to force those obligations on privately funded, commercial projects.

The blueprint from Commerce Secretary Wilbur Ross will set the stage for further protests from the oil industry, the U.S. Chamber of Commerce and developers, including The Williams Companies Inc. and Energy Transfer Partners.

“A core feature of the U.S. free enterprise system” is that “private businesses should be free to make purchasing decisions on their own,” the Chamber of Commerce, the biggest-spending business lobby in Washington, said in its comments to Ross.

The effort illustrates how Trump’s “America-first” agenda pits his allies against one another and underscores the challenges of fulfilling the president’s protectionist stance. As with Trump’s promises to restrict immigration from Muslim-majority nations, rework former President Barack Obama’s health care law and overhaul the tax code, the reality of implementing this idea has been more difficult than the president initially posited.

Trump kicked off the pipeline-focused effort during his fourth day in office, by issuing a presidential memorandum compelling the Commerce Department to determine how to require American material in all, retrofitted, repaired or expanded U.S. pipelines “to the extent permitted by law.” Under Trump’s directive, iron and steel only qualifies as American-made if it is fully produced in the United States, from its initial melting to the later application of coatings. The memo was hastily produced, not subject to lengthy administration debate or scrutiny.

Separately, the Trump administration is investigating whether foreign steel threatens U.S. national security — a probe that could lead to tariffs or quotas on those imports.

While pipeline developers have praised Trump’s approval of projects that stalled under Obama, including TransCanada Corp.’s Keystone XL and Energy Transfer’s Dakota Access, they warn America-made requirements could undercut that progress. More than three quarters of pipe used in oil and gas projects begins as imported steel, according to one industry study.

“Fewer new pipeline projects would run counter to the Trump administration’s goal of expanding U.S. energy production and infrastructure to support the economy, job growth and national security,” said a coalition of oil industry trade groups, including the American Petroleum Institute and the American Gas Association. Relying solely on U.S.-produced pipeline-quality steel and components “could lead to long construction delays and higher costs, potentially canceling planned pipeline projects or blocking new pipeline projects.”

Energy Transfer said that when it purchased pipe for three U.S. projects simultaneously, it effectively consumed the entire domestic capacity.

It’s not clear how the U.S. government could enforce the mandate, though multiple federal agencies can play a role permitting pipeline projects and scrutinizing their operations.

Steel Dynamics Inc., one of the largest domestic steel producers, recommended the Trump administration impose an American-made requirement through the Federal Energy Regulatory Commission, which reviews proposals to build interstate pipelines to ensure they comply with safety, security and environmental standards.

“Pipeline applications not using domestic pipe from domestic steel should be rejected unless an applicant proves that there is no available domestic pipe made from domestic steel that meets the pipeline’s specifications,” Steel Dynamics told the Commerce Department in written comments.

Many steel producers, including ArcelorMittal USA LLC, Nucor Corp., and U.S. Steel Corp., say Trump’s plans could help revive the industry, which is struggling to compete amid a worldwide glut of the product.

“At a time when the domestic steel industry faces unprecedented challenges resulting from massive global overcapacity and surges of unfairly traded imports, domestic preference provisions are even more critical to stimulating domestic production and employment throughout the steelmaking supply chain,” Nucor said in comments to Commerce.

But pipeline builders argue many steel mills have elected not to invest in producing a specialized pipe that meets industry standards for integrity and strength that make it usable in oil and gas pipelines. Fewer still produce large pipe with very thick walls — the kind typically used for long-distance projects. About 77 percent of steel used in U.S. pipelines today begins abroad — with roughly half of the pipe foreign sourced and the remaining half made in the U.S., using imported steel, according to a study from ICF International Inc. cited by the American Petroleum Institute.

The Alliance for American Manufacturing told the Trump administration it shouldn’t be swayed by arguments there isn’t enough capacity to churn out the steel pipe the oil and gas industry requires. Supporters point to Philadelphia-based Sunoco Logistics’ plans to fully source its 350-mile Mariner East 2 pipeline with 75,000 tons of domestically produced steel. That project is evidence that U.S. companies can meet the oil industry’s needs, the manufacturing alliance said.

Buy America

“Buy America” preferences are now set for government-funded projects, such as highways and passenger-rail systems. But trade lawyers say putting similar requirements on commercial endeavors would be difficult — and might be illegal.

“Current law does not authorize the U.S. government to impose domestic-origin requirements on privately owned, operated and funded pipelines,” said Scott Lincicome, a trade attorney with White & Case LLP. It also is inconsistent with the rules of the World Trade Organization — the same forum the U.S. has used to object to other countries’ local-content requirements.

“The United States is one of the top complainants when it comes to local-content requirements around the world, so it would be quite a reversal of policy for the United States itself to institute such measures for pipelines,” Lincicome said.

RIGZONE



4 Comments on "America-First Pipeline Plan Draws Ire of American Oil"

  1. bobinget on Sat, 22nd Jul 2017 1:31 pm 

    It was Donald that brought up ‘pardons’.
    Today’s Tweet;

    Donald J. Trump ✔ @realDonaldTrump
    While all agree the U. S. President has the complete power to pardon, why think of that when only crime so far is LEAKS against us.FAKE NEWS
    4:35 AM – 22 Jul 2017
    11,213 11,213 Retweets 44,250 44,250 likes
    Twitter Ads info and privacy

    Why would an innocent person insist he can pardon himself?

    If Trump calls for sanctions on Venezuelan oil, it’ll
    only reinforce Ven’s ties to Russia and China.

  2. Sissyfuss on Sat, 22nd Jul 2017 7:47 pm 

    We have met the enemy and it is the Chamber of Commerce. Odd but true.

  3. Makati1 on Sat, 22nd Jul 2017 11:35 pm 

    “In this country, there is essentially no sense of responsibility for the spread of terrorism, the crumbling of states, the destruction of lives and livelihoods, the tidal flow of refugees, and the rubblization of some of the planet’s great cities. There’s no reasonable assessment of the true nature and effects of American warfare abroad: its imprecision, its idiocy, its destructiveness. In this peaceful land, it’s hard to imagine the true impact of the imprecision of war, American-style. Given the way things are going, it’s easy enough, however, to imagine the scenario of Tamim Ansari writ large in the Trump years and those to follow: Americans continuing to bomb the rubble they had such a hand in creating across the Greater Middle East.

    And yet distant imperial wars do have a way of coming home, and not just in the form of new surveillance techniques, or drones flying over “the homeland,” or the full-scale militarization of police forces. Without those disastrous, never-ending wars, I suspect that the election of Donald Trump would have been unlikely. And while he will not loose such “precision” warfare on the homeland itself, his project (and that of the congressional Republicans) — from health care to the environment — is visibly aimed at rubblizing American society. If he were capable, he would certainly create a plutocracy of the rubble in a world where ruins are increasingly the norm.”

    http://www.tomdispatch.com/post/176310/tomgram%3A_engelhardt%2C_bombing_the_rubble/#more

    The end of America as an empire would be the best thing that could happen in this world. Bring it on!

  4. rockman on Sun, 23rd Jul 2017 4:00 pm 

    Here’s a thought: instead of selling $BILLIONS of SPR oil in a depressed market just make the same money by forcing the DOD sell fuels to the different services at cost. From:

    https://www.washingtonpost.com/investigations/at-the-pentagon-overpriced-fuel-sparks-allegations–and-denials–of-a-slush-fund/2017/05/20/c5ff4bf4-31b2-11e7-9dec-764dc781686f_story.html?utm_term=.879390952788

    At the Pentagon, overpriced fuel sparks allegations — and denials — of a slush fund

    “The Pentagon has generated almost $6 billion over the past seven years by charging the armed forces excessive prices for fuel and has used the money — called the “bishop’s fund” by some critics — to bolster mismanaged or underfunded military programs, documents show.

    Since 2015, the Defense Department has tapped surpluses from its fuel accounts for $80 million to train Syrian rebels, $450 million to shore up a prescription-drug program riddled with fraud and $1.4 billion to cover unanticipated expenses from the war in Afghanistan, according to military accounting records.

    The Pentagon has amassed the extra cash by billing the armed forces for fuel at rates often much higher — sometimes $1 per gallon or more — than what commercial airlines paid for jet fuel on the open market.

    Under a bureaucracy that dates to World War II, the Defense Department purchases all of its fuel centrally and then resells it at a fixed price to the Air Force, Navy, Army, Marine Corps and other customers, who pay for it out of their own budgets. The system is intended to reduce duplication and promote efficiency.”

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