Waiver is little relief from tariffs for US oil sector

A waiver mechanism US oil and gas companies had hoped would enable them to avoid a 25pc tariff on steel imports has proven to be ineffective.

President Donald Trump's administration so far has removed tariffs on just 0.7pc, or 4,300t, of the 576,000t of steel that oil and gas companies say should qualify for an exemption. The administration has rejected waivers for 190,000t of steel destined for the oil and gas industry, and has yet to reach decisions on the remaining volume.

That data comes from an Argus compilation of 120 tariff exemption requests that oil and gas companies such as Shell, BP, Chevron and Kinder Morgan have filed since the administration set up the waiver process four months ago. Those requests include steel for entire pipeline to as little as 2t of specialty steel destined for offshore wells.

Oil and gas companies initially hoped the waiver mechanism might be used liberally by an administration that made attaining "energy dominance" a priority. Companies in their requests said the steel products they are importing are not made in the US or could not be procured in time for the projects.

But that optimism started to fade last month as the US Commerce Department began denying many requests with two-page letters that frustrated applicants for their lack of specifics. Pipeline groups say they believe requests are being denied based on a handful of objections from US steel companies, to which they are unable to respond.

"Multi-million dollar decisions by the department are reportedly being based simply on whether objections have been filed by unsuccessful bidders and other domestic producers," the Interstate Natural Gas Association of America said.

Waiver denial costs have been the highest for oil and gas pipelines that require large amounts of steel. Plains All-American Pipeline says the 13 July denial of a waiver for 155,000t of steel its 670,000 b/d Cactus 2 pipeline in Texas will cost it $40mn unless it succeeds by filing an appeal.

The costs could grow for other projects if Trump follows through on a threat to impose a 50pc tariff on steel imports from Turkey. Kinder Morgan is awaiting a decision on a waiver request for 151,000t of steel it is importing from the country for its 2 Bcf/d Gulf Coast Express gas pipeline that would serve the Permian basin.

The industry is closely watching upcoming waiver decisions to see if Commerce sticks to the same approach. Among them is a request to remove tariffs on 98,000t of steel for Cheniere Energy's proposed 1.4 Bcf/d Midship gas pipeline in Oklahoma, 39,000t of steel for Shell's offshore division and more than 33,000t of steel for Marathon Oil.