Alliance of Energy Producers Fight Trump’s Steel, Aluminum Tariffs

(June 1, 2018) — The Texas Alliance of Energy Producers (TAEP), in comments to the U.S. Department of Commerce’s Bureau of Industry and Security, is calling for exemptions under the Trump administration’s tariff plan for imported steel and aluminum. To alleviate or mitigate impacts to Texas and U.S. energy production, the organization is seeking that nations supplying oilfield steel goods, most notably Canada, Mexico, South Korea, Argentina, Brazil, and Japan, as well as the European Union, be exempted from tariffs.

The pushback also includes calls for product exemptions to be granted across the entire energy industry, rather than company by company, for steel products, and that no import quotas be imposed on oilfield steel goods, either by voluntary agreement or by proclamation. Further, TAEP, which represents primarily smaller, independent oil and gas companies, wants any information provided by individual companies in the product exclusion process to be treated as confidential business information. Finally, that any tariffs paid in advance of country or product exclusions granted at a later date be rebated to oil and gas firms.

“Steel is a primary input in the development of oil and gas production in Texas in terms of drilling, ongoing production, and delivery to market,” TAEP points out in its comment letter. “Depending on location, intracompany economics, and other factors, steel typically accounts for 10% to 20% of the overall oilfield cost structure. As such, the imposition of tariffs, and the potential imposition of quotas by agreement or fiat and the resulting steel cost increases, is of great concern to our member companies, and Texas and domestic oil and gas producers.”

The alliance adds that tariffs themselves will lead to cost increases for oilfield steel, oil country tubular goods (OCTG), and line pipe (LP) in particular. Beyond that, shortages of oilfield steel products will develop—and are already developing further driving up costs to oil and gas producers. It emphasized that a sizable number of products are not available domestically, especially OCTG, and costs have already risen significantly and will likely continue to do so.

“As revenue is shifted from profit to expense as a result of these higher costs, the effective revenue received from oil and gas production will be lowered,” TAEP asserts. “Industry jobs will either be lost or not created in the future as a result of that shift. Activity levels will be diminished in commensurate fashion and American consuming households and businesses will be denied the full benefit of U.S. energy production.”

The organization adds that smaller, independent oil and gas producers will find it difficult to absorb additional costs, and will likely not possess the resources to undergo the arduous process of applying for product exemptions at the individual company level. “They will therefore be subject to the full weight of cost increases as a result of the imposition of tariffs and/or quotas. We ask that BIS and the Department of Commerce in this comment process undertake the full understanding of the effects of unavoidable cost increases on the U.S. domestic oil and gas producing industry.”

(SOURCE: The Weekly Propane Newsletter, June 4, 2018. See subscription information at BPNews.com)