Industry assails Trump’s ‘Buy America’ steel plan
President Trump is facing criticism from oil companies, pipeline operators and foreign governments for his proposal to require that domestically produced steel be used in pipelines that are built in the United States.
The oil and pipeline sectors say Trump’s “Buy America” idea would increase costs, add to uncertainty and threaten his goal of boosting the domestic fossil fuel industry.
“A number of hurdles unique to pipeline-grade steel and pipe manufacturing must be overcome to expand domestic pipeline production and manufacturing,” a coalition of oil, natural gas and pipeline associations wrote to the Commerce Department, which took preliminary public comments on the matter up until last week.
“If these 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 U.S. pipeline job growth,” they wrote.
“Fewer new pipeline projects would run counter to the Trump administration’s goal of expanding U.S. energy production and infrastructure to support the economy, job growth, and national security.”
The coalition includes the American Petroleum Institute and the Interstate Natural Gas Association of America.
The United States Chamber of Commerce said in its comments that while the federal government has a long history of sourcing requirements for projects that use federal funds, “imposing similar mandates upon privately funded commercial projects would be unprecedented.”
Moreover, each time the government has added a domestic sourcing rule, “the resulting experience has been higher overall construction costs, increased compliance burdens, reduced competition, and disruption of supply chains without significant American job creation,” the Chamber wrote.
Trump first outlined his proposal four days after he was inaugurated, as part of a package of executive actions that worked toward approval of the Keystone XL and Dakota Access pipelines, among other infrastructure priorities.
“From now on, we’re going to be making pipeline in the United States. We build the pipelines, we want to build the pipe,” Trump said at the time.
In speeches since then, Trump has frequently gone back to that presidential memorandum as an example of his commitment to domestic manufacturing and energy production, though he often incorrectly states that the Keystone and Dakota Access pipelines were required to use U.S. steel.
The White House said those pipeline projects and others that are currently being developed would be exempt from the “Buy America” rule.
“I was signing the order, and I said, where did they buy this steel? I didn’t like the answer. I said, who fabricated the steel? I didn’t like the answer,” Trump said at a recent union event. “I said, from now on we’re going to put a clause — got to be made in America. We want American steel, made in America.”
Trump asked the Commerce Department to develop a plan in which all new and reconstructed pipelines would have to use steel, iron and other products manufactured completely in the United States, to the extent allowable by law.
Not every comment to Commerce was negative. Steel producers, for example, said they are ready and able to meet the demand for their product that the order would create.
“It is in the economic and national security interest of the United States to promote and defend the broad capability of domestic steel producers to supply the energy sector, and to not allow American energy independence to be undercut and undermined by a reliance on foreign sources and suppliers,” wrote U.S. Steel Corp., one of the nation’s largest steel producers.
But pipeline companies expressed skepticism that they could get the materials they need domestically.
“If the US pipeline industry were constrained to only domestic steel and pipe mills, we do not believe the domestic producers have sufficient capacity,” said Energy Transfer Partners, which operates numerous pipelines, including Dakota Access.
“The impacts of such a restriction are expected to severely delay project schedules, drive up costs, decrease availability, and lower quality.”
Some companies said that Trump’s January memorandum is already wreaking havoc on markets, even though there’s no final action yet.
“The specter of ‘Buy America’ being possibly implemented for pipeline projects has already created a negative impact on the pipeline market, and our business specifically,” said Evraz, a multinational steel products company.
“Evraz operates a carefully integrated North American steel supply chain that depends on the free flow of goods between the U.S. and Canada to serve customers in both markets and preserve the viability of well-paying middle-class jobs in both countries.”
Foreign governments and their embassies also raised objections, warning that domestic sourcing requirements could run afoul of trade pacts.
Canada’s government wrote that it “has serious concerns regarding the plan that the Department has been asked to develop given the negative impact the envisioned restrictions would have on our shared supply chains and the Canada-U.S. trade relationship.”
It warned that the restriction would create a “negative precedent, increase the regulatory burden and be contrary to fundamental World Trade Organization and North American Free Trade Agreement obligations.”
Mexico, Australia and the European Union were among the other foreign interests to raise objections.
Under Trump’s memorandum, Commerce is due to submit a plan to Trump by late July on the “Buy America” policy. If the department decides it wants to impose a new regulation to implement its plan, it would need to go through an extensive regulatory process, including opportunities for public comment.