HOUSTON—Two U.S. shale producers have challenged an energy pipeline operator's proposed surcharge for the Trump administration's 25% tariff on imported steel, raising the stakes for pipeline builders facing higher construction costs.
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.
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 Pipeline's proposed tariff surcharge on its Cactus II oil pipeline, according to a regulatory filing.
Houston-based Plains this month proposed charging shippers a 5 cents per barrel fee on its 670,000 barrels per day (bbl/d) Cactus II pipeline next April to offset higher construction costs due to the steel tariffs.
"We feel the tariff filing should be denied because it is procedurally incorrect, (and) does not clearly describe or justify the surcharge," ConocoPhillips spokesman Daren Beaudo said in an email.
Encana and Plains did not respond to requests for comment.
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 last year estimated the steel tariff would add $40 million to its costs for the $1.1 billion pipeline, which runs 550 miles (885 km) from the Permian basin of West Texas and New Mexico, the top U.S. shale field, to the U.S. Gulf Coast.
Commerce had rejected Plains' two initial requests for a waiver, and the company has filed a third request, a spokesman had said earlier this month.
Plains CEO Willie Chiang said in a conference call the company would rebate the fee to shippers if the Commerce Department approved its exemption request.
Plains' Cactus II pipeline is the first of three new oil pipelines to begin transporting shale oil from the Permian to the U.S. Gulf Coast. The startup has already begun to lift regional oil prices in West Texas that were depressed due to a shortage of capacity.
Two other energy pipeline operators could also raise their prices if Plains' surcharge sticks, analysts have said. They have pointed to Kinder Morgan Inc.’s Gulf Coast Express, a natural gas pipeline, and an EPIC Midstream crude pipeline, which were constructed after the steel tariffs were levied.
Kinder Morgan and EPIC declined to comment.
Recommended Reading
enCore Energy Appoints Robert Willette as Chief Legal Officer
2024-02-01 - enCore Energy’s new chief legal officer Robert Willette has over 29 years of corporate legal experience.
First Solar’s 14 GW of Operational Capacity to Support 30,000 Jobs by 2026
2024-02-26 - First Solar commissioned a study to analyze the economic impact of its vertically integrated solar manufacturing value chain.
SunPower Begins Search for New CEO
2024-02-27 - Former CEO Peter Faricy departed SunPower Corp. on Feb. 26, according to the company.
Green Swan Seeks US Financing for Global Decarbonization Projects
2024-02-21 - Green Swan, an investment platform seeking to provide capital to countries signed on to the Paris Agreement, is courting U.S. investors to fund decarbonization projects in countries including Iran and Venezuela, its executives told Hart Energy.
M4E Lithium Closes Funding for Brazilian Lithium Exploration
2024-03-15 - M4E’s financing package includes an equity investment, a royalty purchase and an option for a strategic offtake agreement.