Associations related to the oil and gas industry – the Association of Oil Pipelines (AOPL), API and the Associated General Contractors of America (AGC of America) among others — offered a swift response in opposition of President Donald J. Trump’s decision to place a 25 percent tariff on aluminum and steel imports.
The Interstate Natural Gas Association of America (INGAA) called on the Trump administration to exempt the steel products used to build natural gas transmission pipelines because of a scarcity of domestic supply and national security considerations.
“We believe the steel products used to build interstate pipeline infrastructure meet the two, independent criteria on which the president directed the Commerce Secretary to make exemptions: lack of sufficient U.S. production capacity and national security-based considerations,” said Don Santa, INGAA president and CEO.
The large-diameter, thick-walled steel used to construct natural gas transmission pipelines is a niche product with unique technical specifications and limited domestic manufacturing capacity. Federal safety requirements and industry standards require steel specifications beyond those commonly used in markets such as automobiles or building materials.
“Pipelines require specialty steel products not always available in sufficient quantities and specifications from domestic manufacturers,” Santa said. “For certain steel products used in pipelines, there is zero domestic availability today.”
Much of the imported pipeline steel comes from America’s allies, Santa said. “About 65 percent of high-strength plate/coil imports and large-diameter line pipe imports are from NATO countries,” he noted. “The proportion grows to approximately 80 percent when adding treaty nations, such as Japan and South Korea.”
Santa added that U.S. national security depends on pipelines to deliver the energy America needs to heat homes and fuel businesses, power plants and manufacturing. Because of insufficient pipeline capacity, certain areas of our country still rely on imported fuels to meet basic energy needs. In fact, the Boston Globe recently reported that New England turned to Russian LNG to meet demand during a recent cold snap despite having some of the world’s cheapest natural gas – abundant domestic supplies from the Marcellus Basin – only a few hundred miles away.
“The ability to expand pipeline infrastructure in an efficient and predictable manner is critical to the United States realizing the full potential of its domestic energy abundance,” Santa said. “Imports of both pipeline-quality steel, and pipe products, are necessary for timely construction of the new pipeline infrastructure needed to link natural gas producers with industrial, power generation and residential customers, and ensure our national security.”
The AOPL expressed disappointment over Trump’s decision to impose new steel tariffs as it threatens U.S. pipeline construction jobs. Pipeline related articles facing the president’s new 25 percent tariff include iron and alloy steel used to make pipelines and line pipe for oil and natural gas pipelines. These products currently are not sufficiently available in the U.S. to meet pipeline construction demand, according to a press release from the AOPL.
“While we are disappointed the president took this action, it is now crucial the exemption process work to avoid U.S. pipeline workers losing their jobs,” said Andy Black, AOPL president and CEO.
Trump signed a proclamation March 8 imposing a new 25 percent tariff on a range of raw and finished steel products, including line pipe used to construct pipelines. Section (3) of the proclamation does authorize relief from the duties for any “steel article determined not to be produced in the United States in a sufficient and reasonably available amount or of a satisfactory quality.”
On March 6, AOPL and a coalition of pipeline and energy infrastructure trade associations joined together to discourage imposition of new steel tariffs that could threaten American jobs constructing pipeline projects. The groups urged the administration to at least allow exemptions when steel products needed for energy production, processing, refining, transportation, and distribution are not sufficiently available in domestic markets.
Organizations signing the letter, which you can read here, were AOPL, the Interstate Natural Gas Association of America, GPA Midstream Association, Texas Pipeline Association, Natural Gas Supply Association, Center for LNG, Energy Equipment and Infrastructure Alliance and American Exploration & Production Council.
This is important because a study conducted on behalf of the U.S. pipeline industry in May found U.S. domestic steel and pipe production capacity is insufficient to meet pipeline demand, especially for larger diameter or thicker walled pipelines. At 3 percent of the total U.S. steel market, pipeline-grade steel is a specialty product forming a niche market that U.S. domestic steel producers largely exited. The study found a 25 percent pipe cost increase translates to $76 million cost increase for typical pipeline or +$300 million cost increase for major cross-country pipeline project. Just as important, U.S. pipe manufacturing mills (half dozen in the South) are small and can only handle one order at a time, meaning wait times of 1-2 or more years for new pipe orders. The result could be delayed or canceled pipeline projects and jobs lost by U.S. pipeline construction workers.
*Data & Analysis Source: ICF, Feasibility & Impacts of Domestic Content Requirements for U.S. Oil & Gas, May 16, 2017. Read the study here.
While it is too early to tell the future effectiveness of the exemption process, AOPL is hopeful this administration will not allow the loss of good-paying jobs in steel consuming sectors like the U.S. pipeline industry.
API President and CEO Jack Gerard released the following statement:
We are disappointed by today’s action on steel and aluminum tariffs, and believe it is inconsistent with the administration’s vision on U.S. energy policy and economic growth.
We remain concerned that implementing tariffs on specialty steel and aluminum, which many U.S. steelmakers do not supply in the quantities and timelines needed for projects could harm America’s energy renaissance and jobs. Steel and aluminum are central to nearly every part of the U.S. energy value chain – from on and offshore development, to pipelines, refineries, and the local manufacturing facilities that support them.
We will work with the administration for maximum flexibility and consideration in how today’s proclamation is applied to minimize the impacts to U.S. investment in infrastructure, energy development, and building new facilities for America’s future.
AEM president Dennis Slater issued the following statement after President Trump formally announced new import tariffs on steel and aluminum:
The equipment manufacturing industry is profoundly disappointed at President Trump’s actions today to advance import tariffs on steel and aluminum. These “Trump Tariffs” will put U.S. equipment manufacturers at a competitive disadvantage, risk undoing the strides our economy has made due to tax reform, and ultimately pose a threat to American workers’ jobs.
Steel accounts for roughly 10 percent of equipment manufacturers’ direct costs. The price of steel has already risen in anticipation of the administration’s actions, and a 25 percent tariff will only further erode the progress our industry has made over the past year.
Our industry will work tirelessly in the coming days and weeks to convey the negative impacts of these tariffs directly to the Trump administration and members of Congress. President Trump should back away from these tariffs and redouble his efforts instead on policies that will create manufacturing jobs — not put them at risk.
AGC of America
Stephen E. Sandherr, CEO of AGC of America, released the following statement in reaction to President Trump’s announcement:
These new tariffs will cause significant harm to the nation’s construction industry, put tens of thousands of high-paying construction jobs at risk, undermine the President’s proposed infrastructure initiative and potentially dampen demand for new construction projects for years to come. That is because the newly-imposed tariffs will lead to increases in what construction firms are forced to pay for the many steel and aluminum products that go into a typical construction project.
Firms that are already engaged in fixed-price contracts may be forced to absorb these costs, forcing them to cut back on new investments in equipment and personnel. Higher steel and aluminum prices will make the kind of infrastructure work President Trump supports more expensive, forcing federal, state and local officials to cut back on projects they can fund. And the likely trade war these new tariffs prompt will diminish demand for private investment in infrastructure as well as construction demand for manufacturing, shipping and distribution facilities.
Considering the damages these new tariffs will inflict on the construction industry, it is easy to understand why recent, independent studies (link is external) estimate that nearly 30,000 construction workers will lose their jobs because of these new tariffs.
The bottom line is that any short-term gains for the domestic steel and aluminum industries will likely be offset by the lower demand that will come for their products as our economy suffers the impacts of these new tariffs and the trade war they encourage. A better way to cultivate a stronger domestic steel and aluminum industry is to increase federal funding for infrastructure projects that will boost demand for these and many other products.
That is why the Associated General Contractors of America will continue to take every possible step to convince the administration and Congress to reconsider these costly new tariffs and instead enact the kind of new infrastructure proposal that will rebuild our steel and aluminum industries while strengthening our overall economy.