BEIJING: Plains All American Pipeline said it will tack on a fee for users of a new oil pipeline to pay for the cost of the Trump administration’s imported steel tariffs, becoming the first US operator to do so.
In addition to steel levies announced last year, President Donald Trump said on Thursday he plans to expand US tariffs to $300 billion of Chinese imports in a trade dispute that has increased costs for US consumers on everything from steel to electronics.
Houston-based Plains will begin charging shippers a 5 cents per barrel fee on its 670,000 barrel-per-day (bpd) Cactus II pipeline next April to offset higher construction costs from “governmental regulation and tariffs,” according to a filing with the Federal Energy Regulatory Commission.
Plains last year estimated the 25 percent steel tariff would add $40 million to its costs for the $1.1 billion pipeline, which runs 550 miles (885 kilometers) from the Permian basin of West Texas and New Mexico to the US Gulf Coast.
The Trump administration last year imposed tariffs on imported steel and aluminum to shield US producers and jobs from overseas competition. It was one in a series of tariffs imposed by Trump since becoming president in 2017.
“This is an example of how harmful trade policies such as steel tariffs and quotas are hurting the US energy industry, economy, and potentially energy consumers,” said Natalia Sharova, a spokeswoman for the trade group American Petroleum Institute.
Two other new pipelines could also raise their prices if Plains’ surcharge sticks, three analysts said. They pointed to Kinder Morgan Inc’s Gulf Coast Express pipeline and an EPIC Midstream pipeline, which were constructed after the steel tariffs were levied.
“There’s certainly a risk of them passing on inflationary costs,” said Kendrick Rhea, an analyst at industry researcher East Daley Capital.
“This is an issue for the next go-around of pipelines,” added Matthew Blair, an analyst at Tudor, Pickering, Holt & Co.
Kinder Morgan declined to comment. EPIC did not immediately respond to requests for comment.
Plains Chief Executive Officer Willie Chiang last year told a congressional hearing that the tariffs on critical energy projects could have “significant unintended consequences that could undermine important progress toward realizing American energy independence, strengthening national security and improving the balance of trade.”