The Department of Commence published a request for comments related to implementation of the January 24, 2017 Executive Memorandum regarding “Construction of American Pipelines.” The short Memorandum directs the Secretary of Commerce to “develop a plan under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law.” The Commerce Department is directed to submit its Plan to the President within 180 days, or by July 23, 2017. The Memorandum also notes that “produced in the United States” excludes manufacture of any components or any assembly done abroad, but provides no further clarification on applicability.
In response to the Memorandum, the oil and gas pipeline industry questioned its implementation and enough steel pipe manufactured in the U.S. exists at present to address all pipeline construction or repair, especially considering existing projects where pipe has already been procured, and stockpiles of pipe maintained by many companies for repair or replacement needs. Over the past several weeks industry has worked with pipeline trade groups to relay its concerns to various government representatives and agencies, including the Department of Commerce and the Department of Transportation. In addition, the White House has since clarified – despite prior comments from the President to the contrary – that the Keystone XL pipeline will not have to comply with the directive since it is under construction and the directive applies to new pipelines or those under repair.
In order to develop the plan required by the Memorandum, the Department of Commerce’s request for comments is directed at companies or individuals involved in pipeline manufacture, construction, operation or maintenance. The Notice is open to any form of comment on the domestic sourcing of pipe materials, but includes eight general questions to prompt input. The Commerce Department’s request for comments has only a three week window, with submissions due by April 7, 2017.
Notably, the request for comments interprets the Executive Memorandum in a more expansive manner than may be appropriate. Specifically, although the Memorandum speaks only about “pipelines,” the Commerce Department expands that by stating: “For the purposes of this notice the term ‘‘pipeline’ refers to any conduit of pipe used for conveyance of gases, liquids or other products. The physical facilities include: Pipes, valves, fittings, connectors, and other iron and steel assemblies or apparatus attached to the pipe.” (emphasis added). The Pipeline Safety Act (PSA), implemented not by the Department of Commerce but by the Department of Transportation and the Pipeline and Hazardous Materials Safety Administration (PHMSA), Office of Pipeline Safety (OPS), does not define “pipeline” specifically, but rather “pipeline facilities,” as including a pipeline, right of way, buildings and equipment. 49 U.S.C. Section 60101(a)(5), (6) and (18). PHMSA regulations define both “pipeline” and “pipeline systems” together to include “all parts of those physical facilities” through which gas or oil moves in transportation. 49 C.F.R. Parts 192.3, 195.2. If the “made in USA” mandate was interpreted to apply to all parts of a “pipeline facility” or “system,” the problems in determining manufacture and assembly locations for all components would be challenging enough, without then ensuring that all parts and assembly take place in America.
It remains unclear under what statutory authority the Department of Commerce will implement its Plan and how it will avoid infringing upon international trade agreements. Operators are encouraged to submit comments to the Department of Commerce, especially on the issues of existing pipe already procured (whether for specific projects or stockpiled for repair or replacement), and as to availability and cost of pipe. It would also be helpful to point out for the Department of Commerce that pipe comes in many different sizes and grades. Clearly, the intent of the January 24, 2017, Executive Memorandum was not to delay or preclude new pipeline construction, repair or replacement, as evidenced by other presidential directives issued to expedite pipeline construction projects. In order to avoid that unintended consequence, the Department of Commerce should: (1) limit its Plan to steel pipe only, not other pipeline components or appurtenances; (2) make allowance and exemption for existing pipeline construction projects and other stockpiles of pipe procured prior to January 24, 2017; and (3) acknowledge and make allowance for the frank reality that there is not sufficient pipe of all types (thickness and grade) currently manufactured in the U.S. to meet the existing and anticipated needs of the oil and gas pipeline industry.
As issued, the Executive Memorandum addresses only “pipelines,” not “pipeline facilities,” thus the Commerce Department should limit its Plan to pipelines only. Similarly, the Executive Memorandum states that the “made in USA” mandate should only apply “to the maximum extent possible” (emphasis added). That acknowledgement should allow the Commerce Plan to clarify that in those situations where no pipe manufactured and/or assembled in the U.S. meets the specifications for a given construction, repair or replacement project, then other alternatives for sourcing the necessary materials may be used.