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NatGas, Oil Groups Urge Global Sourcing of Steel for Pipelines

A quintet of trade associations representing the majority of U.S. pipeline operators engaged in transporting natural gas, natural gas liquids, crude oil, refined petroleum products and carbon dioxide, said Friday they support President Trump's call for the use of American steel pipeline construction, but warn that there are serious hurdles to be overcome.

"If these hurdles are not overcome, government action to increase domestic steel and pipe production could have the unintended result of reducing or significantly delaying new pipeline projects, limiting U.S. pipeline job growth, and hurting American consumers," according to joint comments filed with the United States Department of Commerce Office of Policy and Strategic Planning by the American Gas Association (AGA), the Association of Oil Pipe Lines (AOPL), the American Petroleum Institute (API), the Interstate Natural Gas Association of America (INGAA) and GPA Midstream Association (GPA).

Just days after his inauguration,Trump signedmemorandums ordering the Commerce Department to submit a report to him on ways to streamline the federal permitting process for domestic manufacturers within 60 days, and for Commerce to develop a plan to maximize the use of American steel for pipeline construction within 180 days.

"We are, and I am, very insistent that if we're going to build pipelines in the United States, the pipes should be made in the United States," Trump said at the time. "[This is] going to put a lot of steel workers back to work. We will build our own pipeline. We will build our own pipes, like we used to in the old days."

The trade associations said in their comments with the Commerce Department that they "support President Trump's objective to grow domestic jobs and boost the U.S. economy by reinvigorating American manufacturing...However, a number of hurdles unique to pipeline-grade steel and pipe manufacturing must be overcome to expand domestic pipeline production and manufacturing." Any plan put together by Commerce in response to Trump's memorandum "should recognize that global sourcing of steel is currently essential for the continued growth of America's energy pipeline infrastructure and the U.S. economy overall," they said.

The associations said they are concerned that domestic sourcing requirements could undermine the ability to achieve the positive economic impacts, including job growth, associated with pipeline manufacturing and construction, and have the potential to adversely affect maintenance activities and reliability of existing pipelines.

"An advantage of trade is that it allows economies to specialize in areas where they have a competitive advantage. The specialized steel, pipe, and equipment required to construct and maintain pipelines necessitates tight controls on chemical composition, mechanical properties and quality. Manufacturing facilities need advanced equipment and state-of-the-art processes to achieve this result. Current domestic capacity to produce certain materials and equipment used to construct, operate, and maintain energy pipelines is limited," they said.

"Domestic steel and pipeline manufacturing industries would need time to boost their capability to meet the unique demand and support the continued growth of America's energy pipeline infrastructure. The companies that currently supply the U.S. pipeline industry have spent considerable time and resources perfecting their processes. New entrants would need to consider these costs relative to the size of the niche market for pipeline materials and equipment."

The associations believe that several considerations "are essential" for Commerce's plan:

  • Consider the constraints for materials and equipment that cannot be procured domestically in adequate quantities, at the necessary technical specifications, and in time to meet market demand;
  • Consider potential impacts to reliability of existing pipelines if materials and equipment cannot be sourced within the time necessary to meet maintenance requirements;
  • Consider the potential for domestic sourcing requirements to have the unintended consequences of reducing or delaying investment, and consequently reducing jobs, in the U.S. energy industry and in pipeline construction;
  • Consider the cost and service implications, for industry and for consumers, of any potential domestic sourcing requirements;
  • Consider excluding pipeline projects that already have shipper commitments and/or pending or issued federal or state permits, such as interstate projects with a pending or issued FERC certificate, projects that have been approved by the state agency responsible for intrastate transmission and distribution pipelines, and projects that are subject to federal or state agency siting or permitting review;
  • Consider the varied operational characteristics, pipe and equipment needs, and regulatory frameworks of transmission, gathering, and distribution pipeline systems; and
  • Consider the multiple factors that affect sourcing decisions made by pipeline operators and production decisions made by steel and pipe mills and equipment manufacturers.

While Trump's memorandum directed the development of a domestic sourcing plan "'to the extent permitted by law,' neither the presidential memorandum, nor the Federal Register notice, nor any other information now available, provides the legal authority for any such requirement," the associations said. "Therefore, to assist in the development of a plan that complies fully with the president's instructions, the associations request that interested stakeholders are given a meaningful opportunity to provide advance comment on the possible legal limitations and ramifications of any plan."

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