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Texas energy sector wants steel tariff relief

From job losses, to infrastructure headwinds, a Texas oil and gas trade group said tariffs could hurt the domestic industries President Trump has vowed to support.

By Daniel J. Graeber
Texas energy sector wants steel tariff relief
A Texas oil and gas trade group said it was seeking relief for foreign aluminum and steel suppliers to protect the domestic energy sector. File Photo by Larry W. Smith/EPA

May 22 (UPI) -- Washington should give exemptions on steel tariffs to foreign trading partners to offset the negative impacts on the oil sector, a Texas trade group said.

President Donald Trump in April signed off on a 25 percent tariff on steel imports and a 10 percent tariff for aluminum, rattling the nerves of those in the domestic energy sector. Most of the U.S. steel production targets the automotive and manufacturing sectors, leaving the oil and gas industries dependent on a few niche foreign suppliers for infrastructure like pipelines.

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Trump's administration has since offered some relief to some countries working on free-trade agreements with the United States, namely Canada, Mexico and South Korea. In March, the U.S. Commerce Department opened the policy up for exemption requests. Considerations would be made on national security grounds or in cases where aluminum or steel products are considered unique.

In comments to the Commerce Department, the Texas Alliance of Energy Producers, a trade group representing smaller independent oil and gas companies, said those tariffs were a "great concern" for a sector that sees steel representing as much as 20 percent of development cost structures.

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To alleviate the negative impacts, the trade group said it was asking for exemptions for Argentina, Brazil, Canada, the European Union, Japan, Mexico and South Korea.

John Tintera, the president of the trade group, said that steel tariffs would cause the revenue stream to shift from profit to expense, lowering the overall returns from oil and gas reduction. Furthermore, he said, industry jobs would either be lost or not created at all as a result of the tariffs.

"Activity levels will be diminished in commensurate fashion and American consuming households and business will be denied the full benefit of US energy production," he said in a statement. "Further, smaller independent oil and gas producing companies will find it very difficult to absorb these additional costs."

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The Dow Jones closed down 420 points March 1 after Trump announced his tariff move. Broader markets turned lower on concerns the Trump administration was sparking a trade war, even with some of the strongest U.S. allies.

Sandy Fielden, the director for oil and products research at Morningstar, told UPI tariffs would throttle some of the projects the Trump administration has supported, like the Keystone XL oil pipeline. While labor accounts for much of the investment, "steel must be up there," he said after Trump's announcement.

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A March survey of 140 energy firms by the Federal Reserve Bank of Dallas found uneven enthusiasm about U.S. policies, but revealed general optimism.

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"Uncertainty in steel tariff provisions is leading to uncertainty in cost outlook," the survey results read. "Longer term, the tariff has the potential to impact many facets of the industry and could create additional inflationary pressures while it is in place."

The International Energy Agency, however, said investments long-term should offset some of the headwinds from new steel tariffs.

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