Big Oil not so big on Trump's buy American plan

This is why we can’t have nice things.

That whole Buy American plan which was the theme of last week wound up getting buried in the mainstream press by all of the Russia, Russia, Russia noise (as usual), but some people were clearly paying attention to the idea. One group was composed of the major players in the energy sector, not so affectionately known on the left as Big Oil. But unlike virtually every day since the inauguration, this time they weren’t cheering for President Trump. In fact, they were teaming up with the Chamber of Commerce to discourage any plan to mandate the use of American steel in pipeline construction projects. (Bloomberg)

Donald Trump’s allies in the oil industry are warning the president that his bid to boost U.S. steelmakers could backfire against their efforts to achieve his goal of “American energy dominance.”

The intense lobbying effort comes as the Commerce Department faces a Sunday deadline to give the president a plan to require oil and gas pipelines use American-made steel, an idea Trump embraced in the initial days of his presidency. While the U.S. has imposed “Buy American” rules on government purchases for decades, it would be unprecedented to force those obligations on privately funded, commercial projects.

The blueprint from Commerce Secretary Wilbur Ross will set the stage for further protests from the oil industry, the U.S. Chamber of Commerce and developers, including The Williams Companies Inc. and Energy Transfer Partners.

In one sense you can at least partially see the point being made by the Chamber of Commerce in this argument. They’re saying that, “a core feature of the U.S. free enterprise system is that private businesses should be free to make purchasing decisions on their own.” And that’s pretty much true, falling under one of the bedrock ideas of capitalism in a free market. A perhaps slightly more jaded attitude might be to point out that, like any other business, energy companies want to dredge every last dime of profit they can out of a project and if there’s cheaper steel to be had from France, that’s the deal you go for. (Also unassailable logic in the cold light of day.)

Pipeline construction – and even more importantly, pipeline politics – is a somewhat unique animal, however. It’s not the sort of undertaking you can just launch into on your own and accept the risk for your success or failure. If your pipeline crosses state lines, and particularly if it crosses the Mexican or Canadian borders, the government is involved as a sort of “partner” in the deal from day one. Not a welcome partner to be sure, but it is what it is. There are permits and permission to be obtained, government studies and environmental impact reports to be generated and generally enough red tape to choke a T-Rex. And if you’re going to be doing business, it requires some accommodations for your “partner” in Washington from time to time.

That might sound like a deal with the devil (or perhaps the Mafia would be a better comparison), and perhaps it is. But it’s also reality. So if the current administration wants you to use American steel there’s a pretty good case to make that you’ll need to do it and just factor the extra cost into your estimates. But if it manages to expand employment and spur development in the U.S. steel sector, is that really such a bad thing? If our steel industry got back up to full speed, prices would likely come down as volume increased. It might actually pay off in the end.