Trump orders U.S. steel be used for oil and gas pipelines, while Pa. project sits on foreign-made su
Amid a flurry of executive orders and memoranda issued by his office in the early days of his administration, President Donald Trump on Jan. 24 signed his name to several with potentially significant implications for the oil and gas industry and its opponents.
They included actions meant to expedite the construction of contested pipeline projects like the Keystone XL and Dakota Access, while also requiring American-made steel be used in future pipeline and infrastructure projects as well.
"Going to put a lot of workers, a lot of steelworkers, back to work," Trump said, continuing the delivery of a message so fundamental to the crux and character of his campaign.
But will it? Not everyone is convinced.
In addition to questions about the US steel industry's ability to produce the sheer volume of pipe needed for some of the larger projects in the works, there are also questions about what the directive might mean for those pipeline projects, including at least one in Pennsylvania, with massive stockpiles of foreign-made steel already amassed.
The 200-mile, $2.6 billion Atlantic Sunrise project is one of them. The pipeline, which would cut through 10 Pennsylvania counties if approved, is designed to move Marcellus Shale gas from Susquehanna County in northeastern Pennsylvania as far south as Alabama and to the Cove Point export terminal on the Chesapeake Bay, NPR reports.
Christopher Stockton, a spokesperson for the pipeline's builder, Tulsa-based Williams Partners, confirmed that the company has already purchased foreign-made steel for the project, adding: "While it is always our preference to order domestically when possible, it is correct that some of the ASR pipe was manufactured overseas."
Stockton continued: "We did check with mills in Pennsylvania, but unfortunately there was such a high demand for steel pipe at that time that that there wasn't available mill space to process our order in the timeframe needed. There are actually only four mills in the U.S. capable of producing an order of this size."
Trump promised to bring back Pennsylvania's coal, steel and energy jobs. But can he?
"I don't see a lot of new jobs. I see a recovery of the steel industry to some extent, as long as the enforcement of the tariffs and restrictions on imported steel are there. But I don't see it creating all kinds of new jobs and making Pittsburgh the Steel City it once was."
Stockton said he was unable to provide a breakdown of the dollar value of the foreign-made pipe involved, but again pointed to the project's projected $2.6 billion price tag.
He added: "I think it is important to recognize that the executive order calls for use of U.S.-produced materials and equipment in all pipelines 'to the maximum extent possible.' Clearly a critical fact in making this determination will be an assessment of the ability of mills and pipe manufacturing facilities in the United States to produce sufficient pipeline-quality steel and manufactured pipe to meet the demands of the energy pipeline industry."
A Jan. 30 report by Reuters also raises doubts about the U.S. steel industry's ability to meet that demand due to the capacity constraints referenced by Stockton above. The article goes on to explain that this inability to fill orders for some of the larger pipeline projects could limit the steel industry's ability to capitalize on the promised benefits of Trump's directive. It also mentions that the pipe for the massive, nearly 1,000-mile long Keystone XL pipeline has also already been purchased.
"About half of the pipe was forged in Arkansas, at a plant owned by India's Welspun," the news agency reported. "About a quarter came from a Russian-owned plant in the Canadian province of Saskatchewan, and the rest came from Italy and India."
And while it's unlikely the Trump administration will require companies to ditch the foreign-made steel and pipe they've already paid for, doing so could prove highly problematic.
"Since Williams has already purchased and stockpiled Turkish pipe for the Atlantic Sunrise, it would set Williams back a couple of years if they need to purchase US steel for the pipe," said Dennis Witmer, an energy analyst, engineer and Pennsylvania native.
"[But] I'll be willing to bet that they aren't required to dump their [Turkish-made] pipe."
The vagueness of the Trump memo has led to some confusion within the oil, gas and pipeline industries as well.
Cathy Landry, vice president with the Interstate Natural Gas Association of America, explained: "We are still trying to wrap our head around the current mix of US steel and pipe vs. foreign. The executive memo (this was NOT an executive order) calls for the Commerce Secretary to come up with a plan in six months. We intend to provide info to Commerce when we have it."
Landry added: "Our members are dedicated to using as much US steel as possible."
Meanwhile, the Marcellus Shale Coalition, in an email to PennLive, praised Trump's energy policy approach thus far.
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"American families want common sense policies that encourage the responsible development of our abundant, job-creating energy resources, and it's clear that the new administration agrees," Coalition president David Spigelmyer said.
He added: "...We look forward to working with the new administration on energy and infrastructure-related solutions aimed at creating even more benefits for families, communities and manufacturers, and encourage our leaders in Harrisburg to pursue policies focused on making the Commonwealth more competitive."
The American Petroleum Institute (API) similarly praised the administration's actions toward projects like the Dakota Access Pipeline and Keystone XL.
"We are pleased to see the new direction being taken by this administration to recognize the importance of our nation's energy infrastructure by restoring the rule of law in the permitting process that's critical to pipelines and other infrastructure projects," API President and CEO Jack Gerard said in a written statement.
"Critical energy infrastructure projects like the Keystone XL and the Dakota Access Pipelines will help deliver energy to American consumers and businesses safely and efficiently.
Elsewhere, Trump's pipeline actions have been met with outrage from environmentalists, while his American-produced steel requirement for pipeline projects has raised the eyebrows of economists concerned about the free market and free trade implications.
And while oil, gas and pipeline companies are clearly encouraged by the Trump administration's revival of pipeline projects mothballed by his predecessor, it's unclear to what extent the benefits might trickle down to American steel producers. In truth, it's just too early to tell.
Jim Craft, a professor with the University of Pittsburgh's Joseph M. Katz Graduate School of Business, and a steel industry expert, tells PennLive there are a number of reasons why Trump's directive might not pan out as planned, chief among them being the low cost of oil which continues to deter or loom over proposed pipeline projects.
"The major issue for the production of pipelines is the low cost of oil right now, and that's been a big problem. The major problem has been the import of flat rolled steel from China and other places, Russia and so forth. There may be some short-term bumps in terms of benefits, but as long as the price of oil stays way down, I don't think it's going to increase the use of pipe produced in the U.S. very much."
Pittsburgh's U.S. Steel company could not be reached for comment for this article.
But despite the doubts of those like Craft, the steel industry remains optimistic, with stocks spiking on the heels of Trump's pipeline push announcement and that of his related American-made steel requirement.