Permian Pipeline Builder to Challenge US Steel Tariff Exemption Rejection

(Bloomberg) -- Plains All American Pipeline LP’s request for an exemption from steel-import tariffs was rejected by the U.S. government, potentially complicating the company’s plan to build a pipeline that would help relieve congestion in the biggest North American oil field.

The special type of pipe Plains sought permission to import is produced domestically in a “sufficient and reasonably available” amount, the Commerce Department’s International Trade Administration said in a filing recommending denial of the company’s request. Houston-based Plains is reviewing its options to challenge this decision, the company said in an emailed statement.

Plains sought the exemption for high-grade steel from Greece as it prepares to begin building the 585,000 barrel-a-day Cactus II pipeline which is scheduled to start shipping crude from the Permian Basin in West Texas and New Mexico to the coastal port of Corpus Christi, Texas, late next year.

“Collecting a tariff on steel pipe orders for projects like this constitutes a tax on the construction of critical U.S. energy infrastructure,” according to the company statement, which added it will move forward with the pipeline project as planned. The commerce department’s decision “is a significant unintended consequence of current trade policy and risks U.S. energy security and American jobs.”

Oil producers hamstrung by a scarcity of available pipeline capacity are counting on a significant build-out to relieve bottlenecks that have crushed regional benchmark prices. As a result of the local supply glut, crude pumped around Midland, Texas, the unofficial capital of the Permian region, sold at an $11.35-a-barrel discount to the national benchmark on Monday.

Any delays in completing new pipes risks further delaying their ability to move supplies to refineries and export terminals hundreds of miles away.

To contact the reporter on this story: Stephen Cunningham in Washington at scunningha10@bloomberg.net. To contact the editors responsible for this story: David Marino at dmarino4@bloomberg.net Anna Kitanaka, Ovais Subhani.