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Plains All American pipe exclusion denied

Jul 18, 2018 | 04:43 PM | New York | Dom Yanchunas

Tags  Commerce Department, Section 232, exclusion, welded pipe, line pipe, high frequency welded, American Petroleum Institute, API Marty Durbin


The US Commerce Department has denied a Section 232 exclusion request from Plains All American Pipeline for a certain grade of line pipe, even though there is no domestic producer for that particular item.

Plains All American had applied In April for a tariff exclusion for 26-inch outside diameter, high-frequency-welded X65 line pipe, plain end beveled, in lengths of 70 feet to 76 feet, 1 inch. The company already had ordered the material from Greece's Corinth Pipeworks for a 526-mile pipeline serving the Permian Basin.

US producers Berg Pipe and Dura-Bond Industries filed objections, stating that they would be able to produce similarly sized pipe but using a different weld process. Plains' request had specifically stated that the company always uses high-frequency-welded pipe due to its long-established safety record, but Commerce said no to the exclusion, according to a department docket update on Monday July 16.

Commerce's exclusion rejections are "denying critical needs" and the Plains result "is not the way to achieve the administration's commendable goal of US energy dominance," the American Petroleum Institute (API) said in a press release Tuesday. 

"This ruling ignores the legitimate and critical needs of the natural gas and oil industry for global sourcing of specialty steel products essential to delivering energy to the American families," Marty Durbin, API's executive vice president, said in Tuesday's statement. 

The Plains decision demonstrates that it's not simple enough to establish that there is no domestic producer for a specific item. Complicating the analysis even more, exclusion requests from Shell and Chevron regarding stainless tubing for offshore and other drilling were granted - even though there is a domestic producer.

"For many of the denied exclusion requests, applications were unsuccessful when US capacity was available in some form," said Kim Leppold, senior analyst with Metal Bulletin Research. Some specialized stainless requests were denied even though there is no US maker and "no potential for new capacity in the near future," she said. 

"For these applications, it seems that half of these applications were denied for incomplete submission, although they looked nearly identical to the applications that were granted," Leppold said. "It is confusing to understand the process of denial in those instances."

For the Plains pipeline environment, Leppold said the use of spiral, longitudinal and high-frequency welding "are essentially interchangeable." The exclusion denial may cost the company at least an extra $46.2 million, presuming 526 miles of pipe, or approximately 154,000 tons. 

American Metal Market's pricing assessment for US domestic X65 line pipe stands at $1,550-1,605 per ton. 



 

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