Trump’s Keystone move creates uncertainty for Saskatchewan steel producer

Trump’s Keystone move creates uncertainty for steel producer

SHAWN MCCARTHY

OTTAWA — The Globe and Mail

Published Wednesday, Jan. 25, 2017 6:30PM EST

Last updated Wednesday, Jan. 25, 2017 6:53PM EST

 

 

Donald Trump’s plan to approve the Keystone XL pipeline may come at a steep cost to Saskatchewan, as the U.S. President’s “Buy American” order threatens jobs at Western Canada’s largest steel factory, located in Regina.

Premier Brad Wall welcomed Mr. Trump’s move to revive the contentious pipeline project as beneficial to Canada, but there are fears the new administration may force TransCanada Corp. – and indeed other pipeline companies – to buy American-made pipe for expansion projects.

Russian-owned Evraz PLC owns the 60-year-old steel mill in Regina.

The factory employs more than 1,000 people and is a major supplier of large-diameter steel pipe to TransCanada and Enbridge Inc., which is awaiting a state permit to commence a rebuild of Line 3, its main crude-export line to the U.S. Midwest.

Mr. Trump’s executive orders on Tuesday invited TransCanada to reapply for a presidential permit for Keystone XL and instructed the State Department – which handles such applications – to expedite a decision. He also indicated the administration’s intention to approve the Dakota Access pipeline, despite fierce opposition from local indigenous communities and their supporters, who argue their treaty rights are being violated.

Both projects face some hurdles before construction can begin, including TransCanada’s need for a permit in Nebraska for the Keystone XL project. Opponents have threatened to launch lawsuits to block the pipelines, but Washington lawyer James Rubin said Mr. Trump has wide latitude in issuing executive orders and expediting decisions, as long as it all follows a reasonable process.

The revival of the Keystone XL project was greeted warmly by federal and provincial leaders in Canada, who see it as a shot in the arm for an industry that is struggling with low prices and fears that a shortage of pipeline capacity is looming unless new projects are built.

But for the pipeline industry’s Canadian suppliers, Mr. Trump’s announcement was a mixed blessing, creating uncertainty about their ability to compete for business in the U.S. market.

In another executive order, the President instructed his Commerce Department to “develop a plan under which all new pipelines, as well as retrofitted, repaired or expanded pipelines, inside the borders of the United States … use materials and equipments produced in the United States, to the maximum extent possible and to the extent permitted by law.”

A spokesman for Evraz said the company welcomed the presidential order on Keystone XL – which was rejected by then-president Barack Obama 15 months ago – but would not say whether the Buy American order would force it to move work to U.S. mills it owns.

“We have large-diameter pipe facilities both in Canada and in the U.S.,” Christian Messmacher said in an e-mail. He added: “I’m afraid I cannot comment” on the impact of Mr. Trump’s executive order.

Two years ago, the company announced a $200-million investment in the Regina plant to expand its capacity to produce the large-diameter pipe. In its 2015-16 budget, Mr. Wall’s government provided a tax rebate aimed specifically at boosting Ervaz’s investment in added export capacity.

Jeremy Harrison, Saskatchewan’s Economy Minister, said he met with officials in Congress as well as representatives of the Trump administration in Washington last week and left feeling assured that Canada is not likely to be affected by Buy American sentiment south of the border.

He said Saskatchewan steel makers such as Evraz have production facilities on both sides of the border and are poised to benefit from new pipeline construction such as the Keystone XL project.

“I think the concerns are not particularly directed at Canada. I think the concerns are directed to the south, toward Mexico, and with regard to countries outside North America – China particularly,” he said. “I think that there’s an understanding of the importance of the trade relationship between Canada and the United States and just how integrated these supply chains are.”

However, trade lawyer Lawrence Herman said the Trump administration would not be swayed by rules under the North American free-trade agreement or the World Trade Organization that would guarantee Canadian producers do not face discriminatory treatment.

“This isn’t about the niceties of trade law or the NAFTA or the WTO agreement,” Mr. Herman said. “It’s how a New York property developer operates. Canada wants Keystone, TransCanada wants Keystone, and the U.S. alone has the power to give it – on Trump’s terms and conditions.”

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on January 26, 2017, in economic impact, oil, other minerals, political. Bookmark the permalink. Leave a comment.

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