US Oil Companies Challenge Pipeline Surtax for Steel Tariff: Depot

HOUSTON (Reuters) – Two American shale producers have challenged the energy pipeline operator's proposed surtax for the Trump administration's 25 percent tariff on imported steel, which is an added challenge for pipeline builders facing higher construction costs.

The United States last year imposed tariffs on imported steel and aluminum in order to protect US producers from foreign competition. US business groups in the energy sector warned that tariffs could increase costs for businesses and consumers.

American oil producer ConocoPhillips (COP.N) and a unit of the Canadian producer Encana Corp (ECA.TO) on Monday asked the Federal Energy Regulatory Commission to reject the Plains All American Pipeline business (PAA.N) proposed surtax on its Cactus II pipeline, in accordance with a regulatory filing.

This month, Houston-based Plains has proposed charging shippers 5 cents a barrel on its Cactus II pipeline (670,000 barrels a day) next April to offset costs. higher construction rates due to steel prices.

ConocoPhillips, Encana and Plains did not immediately respond to requests for comment.

In their submission, ConocoPhillips and Encana stated that the Plains Surcharge was premature, as the US Department of Commerce could still grant an exemption to the pipeline operator prior to the implementation of the fee in April. The companies said the surcharges "are generally disadvantaged" by the FERC.

Last year, Plains had estimated that the steel tariff would add $ 40 million to the $ 1.1 billion pipeline cost, which spans 550 km of the Permian basin in western Texas and New Mexico, the main American shale deposit, up to the US Gulf Coast. .

The US Department of Commerce has rejected Plains' original two waivers, and the company has filed a third application, a spokesman said earlier this month.

Plains Chief Executive Officer Willie Chiang said at a conference call that the company would reimburse shippers if the Commerce Department approves its waiver request.

The Plains Cactus II pipeline is the first of three new pipelines to begin shipping Permian shale oil to the US Gulf Coast. The startup has already begun to drive up oil prices in the West Texas region, which were depressed due to a lack of capacity.

Two other energy pipeline operators could also raise prices if Plains surtax is maintained, analysts said. They indicated that Kinder Morgan Inc (KMI.N) Gulf Coast Express, a natural gas pipeline and EPIC Midstream pipeline built after steel pricing.