Plains All American Pipeline LP filed with U.S. regulators on Aug. 26 to remove a proposed surcharge on its Cactus II oil pipeline, tacked on as a result of the Trump administration’s tariff on imported steel.
The filing comes about a week after U.S. oil producer ConocoPhillips and a unit of Canadian producer Encana Corp. asked the Federal Energy Regulatory Commission (FERC) to reject Plains All American’s proposed tariff surcharge on the 670,000 barrel-per-day (bbl/d) Cactus II pipeline system.
In early August, Plains said it would add a surcharge of 5 cents per barrel to offset increased construction costs as a result of governmental regulation and tariffs. The surcharge was set to go into effect on April 1, 2020.
The United States imposed tariffs on imported steel and aluminum last year to shield U.S. producers from overseas competition. U.S. energy industry trade groups have warned the tariffs could raise costs for companies and consumers.
In their filing, ConocoPhillips and Encana said Plains’ surcharge was premature because the U.S. Commerce Department may still grant the pipeline operator an exemption before the fee goes into effect in April. The companies said surcharges “are generally disfavored” by FERC.
Plains did not disclose the reason for removing the surcharge.
A company representative did not immediately respond to a request for comment.
Plains last year estimated the 25% steel tariff would add $40 million to its costs for the $1.1 billion pipeline, which runs about 550 miles from the Permian Basin of West Texas and New Mexico, the top U.S. shale field, to the U.S. Gulf Coast.
Oil steadied above $60 a barrel on Aug. 22, supported by a drop in U.S. crude inventories and OPEC-led supply cuts, although worries about the global economy weighed
Confusion and concern about the trade dispute with China dragged down prices at the end of the week and will continue to impact markets this week.
Pipeline operators recently have cut tariff rates to the U.S. Gulf Coast, encouraging flows and reducing the spread between Midland and Houston oil prices.