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US, China near trade deal that could head off further LNG tariffs, lobbyist says

China and the U.S. are close to a trade deal that would head off a potential March 2 hike in tariffs on U.S LNG exports, new American Petroleum Institute CEO Mike Sommers said Jan. 8.

"We're hopeful we can get a deal soon," Sommers, the new head of the oil and gas industry's largest trade group, said after the group's annual State of American Energy event in Washington D.C. He said that the API is in "close contact" with U.S. Trade Representative Robert Lighthizer and the U.S. negotiating team in Beijing and that Lighthizer is aware of how important LNG exports are to the U.S. gas industry's future growth.

"He doesn't want this to continue, either," Sommers said of Lighthizer.

China imposed a 10% tariff on U.S. LNG cargoes in 2018 in retaliation for a 10% tariff on a basket of Chinese exports to the U.S. While the trade war is at a cease-fire, that truce ends March 2 if no deal is reached, with U.S. tariffs on Chinese goods scheduled to increase to 25%. Presumably, China would escalate tariffs on U.S. goods to match but has never specifically said it would hike tariffs again on LNG, a vital fuel for China's growing economy.

The API would like the U.S. to return a freer trade stance in place before President Donald Trump invoked quotas and tariff hikes on a variety of products imported to the U.S. from all over the world, Sommers said in a news briefing before the event. "We want retaliatory tariffs to end and not expand," Sommers said. "Let's settle this trade dispute quickly. We're confident we'll fill those [Chinese] markets quickly."

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"China's retaliatory tariffs carry the risk of losing a vital energy market, which can mean losing American influence where we need it," Sommers said in his keynote speech. "Our position at API is pretty straightforward: Fight back against anti-American trade practices — just do it in ways that don't undermine America's economic leadership, driven in large part by energy."

While Sommers is optimistic that a deal is close, Lighthizer is a trade hawk who is reported to want even more concessions from the Chinese, including more protections for U.S. intellectual property.

Also at issues is series of quotas on imported steel imposed by Trump. "This is a major issue for us," Sommers said, adding that the API is working with Congress and the administration to lift the steel quotas. He said at least one pipeline company in Midland, Texas, could not finish a project because it could not get the right steel parts. "This is not good for business," Sommers said. "Steel is a major issue with the industry."

Gretchen Watkins, president of Royal Dutch Shell PLC's Shell Oil Co., said the steel quotas have begun to slow some of Shell's U.S. projects. "We have benefited from the trade agreements we have," Watkins said. "When we have a problem importing, that can be a hindrance. Projects under construction need free trade to continue."

President Susan Dio of BP PLC subsidiary BP America Inc. echoed Watkins' comments. "We have global supply chains" and trade policies that do not recognize the world will have negative impacts, she said. Trade policy "does effect investment decisions," Dio warned.

At the event, Sommers reiterated many of the API's traditional positions, calling for greater access to oil and gas reserves on- and offshore, streamlined permitting processes for upstream and midstream projects, and renewed attention to midstream infrastructure to get oil and gas to markets and ports for export to the globe.

Before coming to the API in 2018, Sommers spent two decades in Washington and chief of staff for Rep. John Boehner, an Ohio Republican who was speaker of the House. Most recently, Sommers was the head of the American Investment Council, a trade group for private equity firms.