Donald Trump’s latest effort to deliver on a key campaign promise—his America-first economic policy—has run into opposition his staunch allies in the U.S. oil industry. But if it succeeds, the administration’s campaign stands to injure Canada more than any other country.
Shortly after taking office, Trump instructed the Commerce Department to come up with “a plan to require oil and gas pipelines [to] use American-made steel,” Bloomberg recalls. According to Trump’s directive, “iron and steel [would] only qualify as American-made if it is fully produced in the U.S., from its initial melting to the later application of coatings.” That plan was due to be presented this past weekend.
Any such measures would be a novel extension of domestic purchasing policies, and of government intervention in the U.S. industrial marketplace, the news agency observes. “While the U.S. has imposed “Buy American” rules on government purchases for decades, it would be unprecedented to force those obligations on privately funded, commercial projects.”
Among those pushing back is the U.S. Chamber of Commerce, Washington’s richest lobby group, which protested in a submission to the administration that “a core feature of the U.S. free enterprise system” is that “private businesses should be free to make purchasing decisions on their own.”
The action responds to lobbying from U.S. steel producers. One of the biggest, Steel Dynamics Inc., urged the administration to impose the requirement as a condition of pipeline approvals by the Federal Energy Regulatory Commission. “Pipeline applications not using domestic pipe from domestic steel should be rejected unless an applicant proves that there is no available domestic pipe made from domestic steel that meets the pipeline’s specifications,” Steel Dynamics told the Commerce Department in a submission.
But the pipeline industry is fighting back, Bloomberg reports, “warning the president that his bid to boost U.S. steelmakers could backfire against their efforts to achieve his goal of ‘American energy dominance.’”
Pipeline companies argue that American factories don’t produce enough of the specialized steel required for pipelines—especially in the larger dimensions needed for long-distance transmission. Absent billions of dollars of investment in new capacity, that shortage would both drive up costs and delay the completion of pipelines intended to delivery U.S. petroleum products to foreign markets.
“Fewer new pipeline projects would run counter to the Trump administration’s goal of expanding U.S. energy production and infrastructure to support the economy, job growth, and national security,” the American Petroleum Institute, American Gas Association, and other industry members argued in a joint statement. Relying solely on steel and parts made entirely in the United States “could lead to long construction delays and higher costs, potentially cancelling planned pipeline projects’ or blocking new ones.
Should Trump attempt to enforce such a measure, Canada would suffer twice. The country is the United States’ largest source of steel, supplying more than 16% of the market, including pipeline sections. The next-biggest supplier, South Korea, accounts for 9%. To the extent U.S.-made pipe displaces imports, Canadian steelworkers have correspondingly more to lose.
Meanwhile, among the pipeliners in the United States that would face higher costs are Canada’s two biggest petroleum transmission companies, Calgary-based Enbridge Inc. and TransCanada Corporation. Enbridge has been snapping up properties in the U.S., and TransCanada is behind the recently revived (sort of) Keystone XL pipeline project (though it has already received a contentious exemption from the Buy American’ rule for that pipeline).