US shale producers oppose pipeline operator’s steel tariff surcharge, submit federal filing

Tuesday, 20 August 2019 23:14:36 (GMT+3)   |   San Diego

According to a report from Reuters, two US shale producers have submitted a regulatory filing with the US Federal Energy Regulatory Commission (FERC) to challenge an energy pipeline operator’s proposed surcharge for Section 232 costs.

Plains All American Pipeline’s (PAAN) has proposed adding a 5 cent per barrel surcharge on its 670,000 barrel-per-day Cactus II pipeline, effective April 2020, as a way to offset higher construction costs due to the 25 percent steel tariffs imposed in early 2018.

US oil producer ConocoPhillips and a unit of Canadian oil producer Encana Corp. are asking the FERC to reject the proposed surcharge because it is “premature.” The companies claim that the US Department of Commerce (DOC) could soon grant the pipeline operator an exemption before the fee goes into effect, and surcharges are in general “disfavored” by the FERC.

PAAN estimated that the Section 232 tariffs would add $40 million to its costs for the $1.1 billion pipeline, which runs 550 miles from the Permian basin of West Texas and New Mexico to the US Gulf Coast. The US DOC had previously rejected PAAN’s two initial requests for a waiver; the company has filed a third request.

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