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Proposed steel tariff would hurt US pipelines, industry advocate argues

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The American Petroleum Institute and other industry associations in 2017 told the U.S. Department of Commerce that the oil and gas industry has benefited from diverse steel sources.

Source: Associated Press

An import tariff on steel would create costly complications for oil and gas pipeline operators, which often get their materials from outside the U.S., an industry representative said in response to a Feb. 16 U.S. Department of Commerce recommendation.

Commerce Secretary Wilbur Ross commissioned a study on the national security implications of U.S. steel imports and recommended that tariffs be put in place to decrease the amount of steel coming into the country.

The Interstate Natural Gas Association of America, which represents pipeline operators, argued that the policy, if enacted, would make the oil and gas industry's access to needed materials less secure. "Line pipe is a specialized product that must meet stringent material quality standards to ensure safety. This is particularly true for large diameter, thick-walled pipe that [Interstate Natural Gas Association of America] members often use for interstate natural gas pipeline projects," association spokeswoman Cathy Landy said Feb. 16. "This type of pipe and the steel used to make it are niche products that aren't available off the shelf or even from a wide variety of manufacturers."

Limiting the industry's access to international suppliers could result in pipeline project delays or a reduction in the number of projects these companies pursue, she said. Pipeline operators use steel not only for new-build pipeline projects but also for system repairs, upgrades and modernization.

The Department of Commerce's report indicated that 74% of steel pipe and tube purchases in 2016 were imports, while the nation has exported relatively little steel line pipe in recent years. Having peaked at 525,000 tonnes in 2013, U.S. steel line pipe exports dropped to 60,000 tonnes in 2016, representing an 89% decline in exports over that time frame. These exports were equivalent to about 5% of line pipe imports, the report said.

"[T]here are idled pipe and tube mills in Texas, Ohio, and Alabama. Once production is halted at these facilities it is not always possible to bring back the highly skilled workforce needed to operate them," the Department of Commerce report said. "When steel mill restarts do occur, additional costs are often incurred for specialized worker training and production ramp-up."

Ross' recommendation for limiting imports included varying approaches.

The U.S. could put in place a global tariff of at least 24% on all steel imports from all countries, or a tariff of at least 53% on all steel imports from 12 nations — Brazil, China, Costa Rica, Egypt, India, Malaysia, Korea, Russia, South Africa, Thailand, Turkey and Vietnam — with unlisted countries facing a quota by product on steel imports equal to 100% of their 2017 exports to the U.S.

Alternatively, according to the report, the U.S. could impose a quota on steel products from all countries equal to 63% of each individual country's 2017 exports to the U.S.