US President Donald Trump's Jan. 24 order that the Keystone XL and Dakota Access pipelines be built "using materials and equipment produced in the United States" was clumsy on its surface. TransCanada Corp. had long ago acquired the line pipe for Keystone XL (though some might need to be replaced by now) and the Dakota Access project was almost entirely in the ground.
The order, notwithstanding widespread media coverage to the contrary, also never happened. Three pipeline-related executive orders were issued that day. Two separately expedited the approval of each pipeline. The third directed the Secretary of Commerce to within 180 days develop a plan under which all new pipelines-including repairs, expansions, etc.-use US-produced materials "to the maximum extent possible."
While this last qualification is maddeningly vague, it at least lacks the comedic value created by visions of already acquired pipe being allowed to sit forever or already buried pipe being excavated only so that both could be replaced by Made-in-the-USA goods.
Comedy removed, however, some of the details of this third order were distressing:
"Produced in the United States shall mean with regard to iron or steel products, that all manufacturing processes for such iron or steel products, from the initial melting stage through the application of coatings, occur in the United States."
We are left to wonder what the term means regarding equipment, which was not explicitly addressed in the order.
Reactions
Oil and gas industry reaction to the order was pointed. The American Petroleum Institute, American Gas Association, Association of Oil Pipe Lines, and Interstate Natural Gas Association of America all voiced concerns, saying the order would lead to both higher costs and project delays, and formed a pipeline steel team with member companies to analyze the order's potential effects.
The associations' sentiments were echoed by midstream and downstream operating companies (Williams Cos., EQT Midstream, Energy Transfer Partners, and Magnolia LNG among them), pipe producers (including Evraz North America, Stupp Corp., and TMK IPSCO), and the governments of Canada, Alberta, and Saskatchewan.
The American Line Pipe Producers Association, however, issued a statement maintaining that its member companies have "substantial production capacity" available and could meet much of US demand.
"We have already made substantial new investments in new equipment and in our workers, so we can meet the demand for American-made line pipe," said Mike O'Brien, vice-president of sales for American Cast Iron Pipe Co., parent of American Steel Pipe, which manufactures in Birmingham, Ala. "We want to maximize the use of US pipeline made from US steel and raw materials."
Stupp went into greater detail, noting that one of its two pipe mills is idle and that the other is operating at 20-30% capacity, rates it says are typical of other large-diameter US producers. Stupp added 150,000-180,000 tons/year of spiral-weld line pipe capacity at its East Baton Rouge Parish mill as recently as June 2009.
Middle ground?
Perhaps a middle ground could be reached requiring that pipe be made at US mills but not using exclusively US steel. Such a development would reinvigorate US pipe makers while also allowing pipeline projects to proceed in a timely and cost-effective manner. By contrast, implementing the order as written would retard growth in not just the line pipe making and pipelining businesses, but in so doing in the greater oil and gas industry as well.
Reasonably priced pipe is needed now. One would like to think that the combination of giving US pipe mills a shot in the arm and keeping the country's hydrocarbon expansion on track would be worth the small "defeat" involved in having to moderate the language of the executive order addressing this topic.
Here's hoping at least some in the current administration share this perspective.
