Top Stories
Top Stories

UPDATE 2-U.S. oil firms challenge pipeline surcharge for steel tariff -filing

Collin Eaton

(Adds details, background on steel tariff costs, Plains' exemption requests to U.S. Commerce Department)

HOUSTON, Aug 20 (Reuters) - Two U.S. shale producers have challenged an energy pipeline operator's proposed surcharge for the Trump administration's 25% tariff on imported steel, raising the stakes for pipeline builders facing higher construction costs.

The United States imposed tariffs on imported steel and aluminum last year to shield U.S. producers from overseas competition. U.S. energy industry trade groups have warned the tariffs could raise costs for companies and consumers.

U.S. oil producer ConocoPhillips and a unit of Canadian producer Encana Corp on Monday asked the Federal Energy Regulatory Commission to reject Plains All American Pipeline's proposed tariff surcharge on its Cactus II oil pipeline, according to a regulatory filing.

Houston-based Plains this month proposed 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 due to the steel tariffs.

ConocoPhillips, Encana and Plains did not immediately respond to requests for comment.

Plains last year estimated the steel tariff would add $40 million to its costs for the $1.1 billion pipeline, which runs 550 miles (885 km) from the Permian basin of West Texas and New Mexico, the top U.S. shale field, to the U.S. Gulf Coast.

The U.S. Commerce Department had rejected Plains' two initial requests for a waiver, and the company has filed a third request, a spokesman had said earlier this month.

Plains CEO Willie Chiang had said in a conference call the company would rebate the fee to shippers if the Commerce Department approved its exemption request.

In the filing, ConocoPhillips and Encana said Plains' surcharge was premature because the Commerce Department may still grant the pipeline operator an exemption before the fee goes into effect in April. The companies said surcharges "are generally disfavored" by FERC. (Reporting by Collin Eaton Editing by David Gregorio and Nick Zieminski)