President Trump’s proposed 25% steel tariffs will obviously affect industries beyond the domestic steel producers. One of those industries is the oil and gas industry. From first producers to pipeline companies to liquefied natural gas (LNG) transporters, steel is an essential material for the necessary infrastructure.
At the recent CERAWeek energy conference in Houston, Senator Lisa Murkowski (R, Alaska) voiced concern over the effects the steel tariffs are likely to have on a planned natural gas export terminal in Alaska, which is part of a $43 billion joint development deal with China-based companies involving an 800-mile pipeline. According to Murkowski, the tariffs could add $500 million to the cost of the terminal. The project is aimed at selling more LNG to Asia, including South Korea, a principal U.S. natural gas importer. On the heels of the United States becoming a net natural gas exporter in 2017, Murkowski said,
Higher prices for steel–which accounts for a significant portion of project costs–could easily set us back.
Murkowski is not alone in her disagreement with the President. Senator John Cornyn (R, Texas) has also criticized the protectionist attitude driving the proposed tariffs for its potential negative affect on industries in his state of Texas.
The oil and gas industry is especially concerned because the type of steel used in pipelines and other energy infrastructure comes at a higher cost because of its unique grade and quality, which led many domestic producers to abandon that market. Steel already accounts for a large portion of the production costs, and the tariff would add to that already high cost.
Industry leaders plan to ask the Trump administration for an industry-wide exemption from the tariffs, but it is unclear how the administration will react. GAMB will continue to monitor this issue as it develops and encourages anyone possibly affected to contact us with questions.