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US energy sector wary of Trump steel directive

10 Apr 2017, 4.54 pm GMT

US energy sector wary of Trump steel directive

Washington, 10 April (Argus) — President Donald Trump's attempts to impose a "Buy American" policy for oil and gas pipelines is worrying energy companies that say it could delay the very infrastructure the administration is trying to support.

US midstream company Energy Transfer Partners says the policy would "severely delay project schedules" and reduce pipeline quality. Magnolia LNG, which is considering building a $4.5bn gas export facility in Louisiana, says it has created uncertainty that could slow final investments. And an energy industry coalition is warning of long construction delays and project cancellations.

The groups outlined those concerns late last week to the US Commerce Department, as the agency crafts a plan for achieving Trump's pipeline sourcing goal ahead of a 23 July deadline. Trump in an executive order directed the agency to write a plan requiring new pipelines to use US-produced steel to the maximum extent permitted by law.

The directive, by Trump's own admission, was hastily pulled together as he was signing a separate order that expedited federal approval of the 830,000 b/d Keystone XL and 470,000 b/d Dakota Access crude pipelines.

"I was signing the order and I said where did they buy the steel? I did not like the answer. I said who fabricated this deal? I did not like the answer," Trump recalled in a 4 April speech to union officials. "I said, ‘From now on we are going to put a clause, got to be made in America.'"

Trump has made the expansion of domestic energy production a top priority, mostly recently by targeting climate regulations. This has at times clashed with a separate Trump goal of supporting domestic manufacturing. His administration exempted Keystone XL and Dakota Access from the steel sourcing requirement, although Trump has claimed otherwise in speeches.

The American Petroleum Institute, the Interstate Natural Gas Association of America, the Association of Oil Pipelines and two other trade groups in the energy coalition are urging the administration to be cautious in its roll-out of the executive order. US pipeline and steel manufacturers have limited production capacity and do not even make certain grades of pipeline, they said.

"If [production] 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 and limiting US pipeline job growth," the trade groups told Commerce on 7 April.

The EU, Canada and Australia filed separate comments the same day that argue any plan from Commerce would need to comply with trade agreements that prohibit non-discriminatory treatment of domestic and imported projects. Canadian steel producers and Korean trade groups also raised similar concerns.

US steel producers were more receptive to the executive order. ArcelorMittal's US division said it supported the president's efforts to boost the amount of US steel in infrastructure.

The White House and Commerce did not respond to a request for comment.

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