Trump: Keystone, Dakota Access pipeline makers must buy US steel

Trump: Keystone and Dakota pipeline builders must buy US-made steel

President Donald Trump on Thursday said the companies behind two hotly contested oil pipelines must use U.S. steel in their projects.

Trump ordered the Department of Commerce last month to develop a plan that would require any company that builds a pipeline within U.S. borders to use American-made materials and equipment. But he has previously stopped short of language suggesting a requirement in public statements, instead saying he would like the projects to be built with U.S. raw steel and pipes.

The Commerce Department has not yet issued a report on the requirement, but Trump on Thursday said the companies behind the Keystone XL and Dakota Access pipelines would "have to buy" pipes made from U.S. steel.

"And you're going to be doing pipelines now, you know that, right?" Trump told United States Steel CEO Mario Longhi during a meeting of business leaders at the White House.

"We put you heavy into the pipeline business because we approved, as you know, the Keystone pipeline and Dakota, but they have to buy, meaning steel, so I'll say U.S. steel, but steel made in this country and pipelines made in this country."

Trump signed memos to move the projects forward after President Barack Obama blocked their progress amid protests by environmentalists and Native Americans.

The requirement to use U.S. steel would create challenges for TransCanada because much of the pipe for its Keystone XL project has already been manufactured.

More than 50% of pipeline for Keystone sitting idle

In 2012, TransCanada said 50 percent of the pipes used to build the project would come from a plant in Little Rock, Arkansas, operated by Indian conglomerate Welspun. The remaining pipe would be made in Canada, Italy and India.

A spokesperson for TransCanada declined to comment on whether the plan had changed.

It is unclear how the mandate would affect Energy Transfer Partners, since all but a small portion of its Dakota Access pipeline has been built. Energy Transfer expects the project to be ready to ship oil on April 1.

Some free market advocates have criticized the proposed requirement, saying it would amount to government telling private businesses how to procure their materials.

Last month, Trump publicly suggested foreign-made pipes need to be chopped up before being sent overseas, which compromises their integrity. That description is inaccurate, representatives of TransCanada and the Association of Oil Pipe Lines told CNBC.

Trump puts more pressure on pipeline makers

Longhi told CNBC earlier this month that U.S. Steel does not currently make the pipes used in the Keystone and Dakota Access pipelines, but his company and American manufacturers are "absolutely" prepared to start manufacturing them.