PAA Plains All American Pipeline

By Rebecca Elliott 

The U.S. Commerce Department has denied what appears to have been the first request by a pipeline company to be exempted from the Trump administration's 25% tariff on imported steel pipe.

The denial of the request by Plains All American Pipeline LP, disclosed in a regulatory filing, indicates that pipeline companies, several of which have sought similar exemptions, may soon face increased materials costs.

A Plains All American subsidiary asked in April that a specialized pipe it planned to use in a proposed West Texas pipeline be excluded from the steel tariff President Donald Trump announced in March. The project, known as Cactus II, is slated to run from the Permian Basin, America's hottest oil field, to Corpus Christi beginning late next year.

"The product referenced in the above-captioned exclusion request is produced in the United States in a sufficient and reasonably available amount and of a satisfactory quality," the Commerce Department's Bureau of Industry and Security wrote Friday.

Plains said Monday that it was "disappointed" by the decision but intended to move forward with the project as planned. It criticized the exemption-application process, calling it opaque and flawed.

"Collecting a tariff on steel pipe orders for projects like this constitutes a tax on the construction of critical U.S. energy infrastructure, which is a significant unintended consequence of current trade policy and risks U.S. energy security and American jobs," the company wrote in a statement.

The company had said in its exclusion request that no U.S. companies were capable of manufacturing the kind of pipe it ordered from Greece in December.

Plains also warned of possible construction delays in the "hypothetical scenario" in which a U.S. company were able to manufacture the pipe.

"If a purchase order was issued today, the mill would not likely be able to meet the pipeline system's completion targets," James Ferrell, a Plains vice president, wrote in the application.

The Commerce Department hasn't yet ruled on similar requests made by Kinder Morgan Inc., the Williams Cos. or a pipeline unit of Royal Dutch Shell PLC.

Materials usually are the second-costliest part of pipeline projects, after labor, according to energy analytics company LawIQ.

Write to Rebecca Elliott at rebecca.elliott@wsj.com

(END) Dow Jones Newswires

July 16, 2018 21:17 ET (01:17 GMT)

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