Despite planning, steel tariffs could lift US energy, pipe costs longer term: Enbridge official

While higher US steel tariffs may have muted impacts on pipeline projects in the near term, an official with Enbridge said June 12 that if they persist longer, they could drive up energy costs.

US President Donald Trump on June 3 signed an executive order doubling tariffs on aluminum and steel imports from 25% to 50%, with the stated goal of bolstering national security and supporting domestic industries.

Trump's rollout of various tariffs early in the administration was met with measured responses from the oil and gas pipeline sector. Some companies stressed that the administration's efforts to end project permitting quagmires could be more important for their bottom lines.

In a wide-ranging June 12 interview with Platts, Mike Fernandez, Enbridge's chief communications officer, said "the tariffs will impact the industry over time," however, because on a world scale, both US and Canadian steel costs more.

For projects currently being built, "most people have already got their orders in, they're probably stockpiling pipes and steel to be made in the pipes," Fernandez said.

By raising tariffs, there is a sense that it will force people to then use US steel, and that could be true as the cost of buying steel from elsewhere becomes even with the US or more expensive.

"But that cost is going to be passed on," Fernandez said. "That may short-term create a good at some steel plants, but it's going to enhance the price of energy or the price of building with steel," he said.

Material costs for pipelines

Amy Andryszak, president and CEO of the Interstate Natural Gas Association of America, also raised concerns about the elevated steel tariffs.

"The tariff situation is constantly evolving, however, any increase to the cost of materials or component parts will make the cost of developing pipelines more expensive, and a 50% tariff rate on all steel will make it more expensive to build the pipeline infrastructure that this country needs," Andryszak said in an emailed statement June 12.

From an overall perspective, Enbridge's Fernandez said there are some policies of the current administration that clearly benefit a company like Enbridge, whereas others "may put a little bit of pinch in what we're trying to do." And two to four years from now, the policy picture could be entirely different, he said.

"So, what we need to do is kind of take a deep breath, think about longer term, how does this work with what we need to do?"

Enbridge is a huge player in the North American midstream, moving 30% of oil and 20% of natural gas and serving as the largest gas utility on the continent, Fernandez said. It is also a top 10 player in solar and wind in the US. The diverse holdings mean "we've got to look at this in 27 different ways" when assessing policy implications, he added.

One benefit to Enbridge has been the Trump administration's willingness to pursue a fast-track US Army Corps of Engineers review for its Line 5 crude oil replacement project in Michigan, citing the president's energy emergency declaration. The Army Corps released a draft environmental impact statement May 30.

Expedited Army Corps water permits are among multiple steps the administration has taken through executive action to try to speed permits for oil and gas and other fossil fuel facilities.

Along with strong demand, that posture is expected to drive an upswing in project applications.

But, Fernandez cautioned that some processes are "embedded in law."

"Fundamentally, what we would love Is regulatory reform that is durable," Fernandez said. "In other words, it's one thing to greenlight projects or fast track projects, and we love that, but it would be even better if there was a way to change the laws and regulations that have gotten in the way," he said.

In a May 9 earnings call, an Enbridge official said the company was considering expansions at three US Gulf Coast gas storage facilities and expects to make multiple announcements of projects to serve rising power sector demand in North America.

Cynthia Hansen, president of gas transmission and midstream, cited Appalachia as a particularly promising area for data center opportunities for Enbridge's Texas Eastern Transmission pipeline.