US rejects steel tariff waiver for Kinder Morgan

President Donald Trump's administration has denied a request from Kinder Morgan to waive tariffs on steel it imported to build its $1.75bn Gulf Coast Express natural gas pipeline.

The decision will mean tariffs on about half the steel for the 514-mile pipeline being built to move 2 Bcf/d of gas from the Permian basin to Agua Dulce, Texas. Kinder Morgan requested the tariff exemption nearly a year ago, in part because it said US mills could not hit the tight deadlines for the project. The company bought the pipe before Trump announced the tariffs in March 2018.

But the US Commerce Department, in two orders published on 23 April, rejected the company's request to lift tariffs on 151,000 metric tonnes of 42-inch-diameter pipe imported from Borusan Mannesmann in Turkey. The agency said that type of pipeline was produced in the US in a "sufficient and reasonable amount."

Kinder Morgan declined to comment.

Trump initially set steel import tariffs at 25pc, but in August he doubled them to 50pc for steel imports from Turkey. Kinder Morgan in regulatory filings said it expected first deliveries of the pipeline to begin July 2018 and conclude by the end of 2018. The company declined to answer further questions on the timing of delivery.

Plains All-American Pipeline said that tariffs to import a similar amount of steel cost it $40mn. Plains last year unsuccessfully asked the administration to waive tariffs for its 562-mile Cactus 2 crude pipeline between the Permian basin and Corpus Christi, Texas. The company in July 2018 filed another waiver request for the project that is still pending.

Steel tariff expenses, while significant, remain a fraction of the costs of building major oil and gas pipelines. And they pale in comparison to cost-overruns for other projects being constructed. Dominion Energy earlier this year said the construction costs of its 1.4 Bcf/d Atlantic Coast gas pipeline had increased to $7bn-$7.5bn, up from early estimates of $5bn, in part because of court-related permitting delays.

The Gulf Coast Express pipeline is scheduled to be in service in October, Kinder Morgan chief executive Steven Kean said. Oil and gas producers are counting on the project to increase takeaway capacity in the Permian basin, where pipeline constraints have lowered prices. Gas prices at the Waha Hub in West Texas last month averaged -$0.25/mmBtu.

The pipeline industry has criticized the steel tariffs and the Trump administration's process for considering waivers. The Interstate Natural Gas Association of America said that waiver process was "fundamentally flawed." The trade group said its members prefer to buy from US mills but are often unable to do so because of insufficient manufacturing capability and capacity.

Despite criticism from industry groups and many Republican lawmakers about the tariffs, Trump shows no signs of removing them.

"232 Tariffs make Pennsylvania and USA more prosperous/secure by bringing Steel and Aluminum industries BACK," Trump said yesterday on Twitter, referring to the section of the trade law the administration has used to impose the duties. "Tariffs are working. Pittsburgh is again The Steel City."

The number of people employed in metal manufacturing industries, including steel production, has increased slightly under Trump, from 368,500 workers at the start of his term to 381,000 in April.