April 2018, Vol.245, No.4



Trump Infrastructure Plan Might Have Mild Benefits

President Trump’s infrastructure proposal presents a number of what can only be described as possible opportunities for the pipeline and underground water industries, and they are vague at best. 

Moreover, Congress is unlikely to swallow the whole expensive package which covers highways, ports and other infrastructure and would cost $200 billion over 10 years at a time when the federal deficit is swelling from the big tax package passed earlier this year and the congressional budget deal for the current and next fiscal year which pumped billions of new funds into defense and domestic programs. 

The Trump proposal contains some useful deregulatory measures to ostensibly prevent states from using their administration of federal environmental laws to impede pipeline construction. It also contains backing for new underground water infrastructure although it says little specifically about broadband construction except to include it as one of the uses for funds in a new rural infrastructure program. 

INGAA President and Chief Executive Officer Don Santa said at hearings in the Senate Energy and Natural Resources Committee in February, “The permitting principles developed by the White House recognize many of the challenges with the permitting process and suggest reforms that could facilitate the more responsible and orderly development of infrastructure. We hope this is the first step toward more comprehensive permitting reform.”

The infrastructure document mentions pipelines only four times in its 53 pages, and three of those references came within a paragraph endorsing allowing the Secretary of the Interior to approve rights-of-way for pipelines and facilities necessary for the production of energy across National Park Service (NRS) – administered land. Currently pipelines crossing NPS land must be approved by Congress.

With regard to permitting reform, a key objective for the pipeline industry, the Trump deregulatory proposals were vague. The initiative did not specifically mention, much less endorse, House and Senate bills – both of those mild improvements – already introduced, much less endorse them. “We encourage enactment of these provisions as part of an infrastructure bill or via another suitable legislative vehicle,” Santa stated.

The Trump infrastructure initiative does not propose any specific changes to the Natural Gas Act which would either strengthen the hands of FERC or weaken the hands of states such as New York, which has stopped the Constitution pipeline using its authority under Section 401 of the Clean Water Act. Congress last addressed the permitting issue in 2005 when it attempted to strengthen FERC’s role as the lead permitting agency for interstate natural gas pipelines. But Santa said those provisions “have not been entirely successful in accomplishing their intended purpose.” 

The Trump infrastructure permitting initiatives are mostly a vague endorsement of general principles. One proposes designating a single federal agency to make environmental decisions, which potentially could eliminate problems where a federal agency other than the FERC, such as the Interior Department, for example, refuses to allow construction because of damage to endangered species. But that appears to be an endorsement of the “lead agency” provision in a 2005 bill which has not been very effective, according to Santa. And it does not address the blockage of the Constitution pipeline.

The second change would seem to buttress the ability of states such as New York to throw a wrench into environmental approval because it “supports putting infrastructure permitting into the hands of responsible state and local officials where appropriate.” 

The Trump initiative is a bit more specific with regard to water infrastructure endorsing funding of the Water Infrastructure Finance and Innovation Act (WIFIA) program. That is the new EPA program funded at a low level – $30 million in fiscal 2017 – which provides credit assistance to mostly large regional projects, money that leverages private and state funding. On the positive side, the document endorses additional budget authority for WIFIA, and removing the current lending limit of $3.2 billion.

The Trump proposal doesn’t mention the EPA’s Clean Water and Drinking Water State Revolving Funds which receive annual appropriations from Congress. But in what could be interpreted as future impediments to that funding, the Trump plans says: “The flexibility to use Federal dollars to pay for essentially local infrastructure projects has created an unhealthy dynamic in which state and local governments delay projects in the hope of receiving Federal funds. Overreliance on Federal grants and other Federal funding can create a strong disincentive for non-Federal revenue generation.” 

Pipeline Industry Opposes Steel Tariffs

President Trump’s imposition of 25 and 10 percent tariffs on imported steel and aluminum respectively set off alarm bells in the pipeline industry. American Gas Association (AGA) President and CEO Dave McCurdy said, “There is no doubt that a tariff on steel will increase the cost of certain pipelines and components. Our industry has identified a number of specific challenges with obtaining some pipeline materials and equipment that are American made.”

One executive at a major pipe manufacturer for the energy industry, who did not want to be identified, says, “If steel tariffs are put on all imports of steel products of 25%, the added cost will be added onto the cost of pipe for the buyers of line pipe.” He adds that pipeline companies have been calling him worried about the impact of the tariffs.

This company and a number of others have gone to the U.S. International Trade Commission (ITC) repeatedly, and as recently as February, to urge the ITC not to determine that imports of rolled, flat steel and other pipe steel types used for pipelines are injuring a domestic industry because of the products being sold under market value or because a foreign government is subsidizing the manufacture of the product. 

If injury is found, the ITC recommends countervailing or antidumping duties be imposed by the Commerce Department which determines the size of those tariffs. Energy pipe manufacturers such as American Cast Iron Pipe Company (ACIPCO); Berg Steel Pipe; Dura-Bond Pipe LLC; Stupp Corporation and Welspun Tubular USA LLC have argued for allowing foreign steel manufacturers to export steel to the U.S. without having tariffs imposed. Their arguments have been based on the fact that, for example, hot rolled steel for Grade X70 in wall thicknesses above .600-inch - 625-inch have not been available in the U.S. until one U.S. mill started producing test batches last year.

INGAA President and Chief Executive Officer Don Santa said on March 9, “The large-diameter, thick-walled steel used to construct natural gas transmission pipelines is a niche product with unique technical specifications and limited domestic manufacturing capacity. For certain steel products used in pipelines, there is zero domestic availability today.”

Much of the imported pipeline steel comes from America’s allies, Santa added. “About 65% of high-strength plate/coil imports and large-diameter line pipe imports are from NATO countries,” he noted. “The proportion grows to approximately 80% when adding treaty nations, such as Japan and South Korea.”

There will be exemptions from tariffs that the pipeline industry can apply for. But establishment of that process and then consideration of any applications is expected to take many months. P&GJ

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