Supply Chain Relief by Way of Partial Lift of Steel and Aluminum Tariffs

The Fabricator - for the original article go HERE:

White House looks to ease supply chain troubles, crack down on Chinese imports from Europe

A key U.S. steel users group voiced mixed feelings about the new U.S.-European Union agreement partially lifting 25% import tariffs on steel and 10% import tariffs on imported aluminum from European countries. The agreement has a dual purpose: easing supply chain problems for a broad cross section of U.S. manufacturers who use steel and tamping down cheap Chinese steel slithering into the U.S. through Europe.

Additionally, follow-on tariff rate quota agreements appear to be in the works with the United Kingdom and Japan, based on two, parallel U.S Department of Commerce statements on Oct. 31. The statements said: “The United States and the [United Kingdom or Japan, depending on the statement] are consulting closely on bilateral and multilateral issues related to steel and aluminum, with a focus on the impacts of overcapacity on the global steel and aluminum markets; the need for like-minded countries to take collective action to address the root causes of the problem; and the climate impacts of the sectors.”

The Biden administration will eliminate tariffs on 3.3 million metric tons of imported European steel, which is the average of those imports between 2015 and 2017. Imports above that level will continue to be subject to duties of 25%. To be eligible for duty-free treatment under the quota, 54 product categories of steel imports must be “melted and poured” in the EU. Manufacturers that won exclusions to import duties in the past will have those exclusions extended to Dec. 31, 2023. Those totals will not be counted against the 3.3-million-ton ceiling.

Aluminum imports allowed in tariff-free amount to 18,000 metric tons for unwrought aluminum under two product categories and 366,000 metric tons for semifinished (wrought) aluminum under 14 product categories. Derivative articles of aluminum are exempt. The U.S. will maintain its aluminum product exclusion process.

The Coalition of American Metal Manufacturers and Users (CAMMU) called the agreement good news, but said, “It is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on our allies. CAMMU is concerned that replacing the tariffs with a tariff rate quota will hurt its members because the threat of tariff reinstatement looms with the surge in steel and aluminum demand expected when the bipartisan infrastructure bill passes.”

The somewhat conflicted view of users parallels the hitches in the view of steel manufacturers expressed by the American Iron and Steel Institute (AISI). Kevin Dempsey, AISI president/CEO, appreciated the Biden administration’s “commitment to addressing the global steel overcapacity crisis and to combatting unfair trade practices in the global steel sector.” But he went on to stress the importance of proper enforcement of the agreement particularly with regard to preventing seepage of cheap Chinese steel into the U.S. through Europe and the need for “new trade approaches to address climate change, including through development of effective carbon border adjustment measures.”

U.S. steel production, which relies heavily on electric-arc furnaces, is regarded as having far lower carbon emissions than the coal-fueled blast furnaces prevalent in China.

Widespread Industry Support for Updated Mechanical Power Press Safety Standard

Industry is showing widespread support for the Occupational Safety and Health Administration (OSHA) to update its current mechanical power press standard with ANSI B11.1-2009 (R2020).

The agency issued a request for information on July 28. The OSHA standard includes requirements for inspecting, maintaining, and modifying mechanical power presses to ensure that they are operating safely as well as a special reporting requirement for injuries to employees operating mechanical power presses. The standard also includes requirements for safeguarding the point of operation.

The Precision Metalforming Association (PMA) told the OSHA the latest ANSI B11.1 standard, which is comprehensive and proven effective, also includes requirements for increasingly popular servo presses and requirements for the composite press production system, including automation.

That said, the Industrial Fasteners Institute wants the OSHA to grandfather older mechanical presses that comply with the 1971 standard. “Older machines may be perfectly safe and functioning properly, but since their wiring was done before the current ANSI standard was issued, then it would be unreasonable to expect a costly, unnecessary upgrade,” the organization said in a statement.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Approach to Bond Rating Under Scrutiny

Strategic Finance - for the original article go HERE:

Lawmakers in the United States are pushing to revamp the bond and credit rating industry and its “issuer pay” model. The U.S. House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing in July 2021 to examine the nationally recognized statistical rating organizations (NRSROs).

Chairman of the subcommittee, Rep. Brad Sherman (D.-Calif.), raised the issue of “unchecked conflicts of interest,” referring to a suspicion that when companies pay a rating agency to rate a corporate bond, the agency is pressured to give the bond a more favorable rating, fearing loss of business.

Sherman is sponsoring the Commercial Credit Rating Reform Act that would require the establishment of a credit rating agency assignment board within the jurisdiction of the U.S. Securities & Exchange Commission (SEC). The board would be responsible for assigning the NRSROs to provide ratings for corporate issuers and issuers of new asset-backed securities. Currently, there are nine rating agencies registered with the SEC as NRSROs. As of December 31, 2019, 95.1% of all credit ratings outstanding were published by the three largest NRSROs: S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings.

Not only is there support for eliminating the “issuer pay” model and diversifying the credit rating industry, but additional corporate disclosure could also be in the cards. The SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC) made a number of recommendations in June 2020, which included requiring companies to make new disclosures regarding their choice of credit rating agencies. One recommendation stated, “We encourage the SEC to partner with appropriate trade groups to develop a set of best practices for choosing NRSROs and, once established, to require corporate issuers to disclose if/why they deviated from them in their annual reports.”

Amy McGarrity, chief investment officer of the Colorado Public Employees’ Retirement Association, agrees that a “conflict of interest lies at the heart of the discussion of improving credit rating quality.” McGarrity chaired the credit ratings subcommittee of the FIMSAC, which suggested the SEC should oversee a random assignment process for both structured products and corporate bond ratings, with at least two NRSROs being assigned to each issue, to provide diversity of views.

But some advocacy groups don’t support the proposed reforms. Michael Bright, CEO of the Structured Finance Association, said, “Over the long-term, our members are concerned a government-controlled assignment system will perversely reduce the incentive to compete on the quality of ratings.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Pipelines Sail into Political Winds in Washington in 2021

Pipeline & Gas Journal - for the original article go HERE.

With the ascension of President Joe Biden and environmentally friendly Democratic agency heads taking over U.S. regulatory and independent agencies, interstate gas pipelines face a host of newly emboldened, top-level appointees – many of them gas pipeline skeptics – who will make their political weight felt across federal permitting and safety requirements. 

In that regard, the biggest impact is likely to be at the Federal Energy Regulatory Commission (FERC), which is apt to give greater consideration to prospective emissions of greenhouse gases when considering applications for construction of new gas transmission pipelines.  

Biden will appoint one of the two current Democratic FERC commissioners as chairman. For pipelines, neither is a particularly appetizing choice. Richard Glick has repeatedly opposed approval of new pipelines because of their impact on greenhouse gas emissions and for other reasons. 

Allison Clements, a Democrat confirmed by the Senate in November, was previously in charge of the Sustainable FERC Project at the Natural Resources Defense Fund (NRDC). Clements’ successor at the NRDC FERC Project is Gillian Giannetti, who wrote a blog in November 2019 headlined “Reform Is Long Overdue for FERC’s Gas Pipeline Reviews.” 

FERC will continue to have a 3-2 Republican-to-Democrat advantage until July 2021 when Biden will have a chance to appoint a Democrat to a Republican seat, allowing Glick, who is likely to be appointed the chairman soon after Biden ascends, to take FERC pipeline approval policy in a potentially radical new direction.  

But the winds of change will probably blow before the FERC majority shifts to 3-2 Democratic. Gillian Giannetti thinks Glick or Clements will immediately begin to develop a climate test that FERC can use when considering applications for new pipeline construction. 

In the past, FERC has been unsure of the extent to which greenhouse gas emissions can be considered, in part because federal court case rulings had left a lot to be interpreted clearly.  

But Giannetti believes the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) make a clear case for FERC considering “direct” GHG emissions, those created by the construction of a project and emissions from operation of the pipeline.  

“Those are the lowest hanging fruits,” she said. Even though she admits those direct emissions are a small part – though not de minimus – of GHG emissions from a project, calculating those would be a good first step, she said.  

Giannetti thinks many in the pipeline industry would agree with factoring direct emissions into the FERC’s consideration of pipeline applications. “I would be shocked if Joan Dreskin disagreed with me,” she said, referring to the senior vice president, secretary and general counsel of the Interstate Natural Gas Association of America (INGAA).  

But Giannetti and other environmentalists believe that ultimately FERC needs to come up with an assessment tool that measures the lion’s share of GHG emissions created by new pipelines, those from upstream and downstream operations. 

Dreskin said FERC already considers direct emissions.  

“Pipeline project developers provide FERC with information regarding the direct GHG emissions from their proposed projects, which include emissions from pipeline construction and operation,” Dreskin responded. “FERC has historically analyzed and reported these emissions. Current NEPA regulations, however, no longer subdivide effects in this manner. We anticipate FERC will continue to consider what were previously referred to as ‘direct effects’ in its analysis.” 

The question is, however, how far does current law allow FERC to go to block new pipeline projects? 

“Were FERC to find that a project is not in the public interest because of GHG emissions, this in my view would be a seismic shift for the agency, and it would have difficulty surviving judicial review,” offered Emily Mallen, who closely follows FERC activities as a partner in Washington with the law firm Sidley Austin LLP. “That said, FERC could deny a pipeline project under the NGA if it found lack of public need, and Commissioner Glick’s dissents have also centered on whether a particular project is really needed.” 

Mallen believes FERC’s consideration of public necessity will become more onerous and affiliate agreements likely will be subject to greater scrutiny going forward. 

“That said, I can foresee no scenario in which FERC will stop allowing affiliate agreements to serve as a basis for project need,” she added. “But the project sponsors may need to put more data into the record to bolster that needs assessment.” 

Mallen points out one other presumably anti-pipeline factor that may rear its head under a Democratic-controlled FERC: environmental justice (EJ), which has the potential to affect a proposed project on communities of color.  

“When it comes to EJ concerns raised in pipeline and LNG certificate matters, FERC has applied its own methodology to the review that is based on the EPA’s Environmental Justice Mapping and Screening (EJSCREEN) tool,” Mallen explained. “If modifications are made to the EJSCREEN tool to strengthen it, this is certain to impact future FERC analyses. Moreover, we’ve seen dissents by Commissioner Glick on FERC’s approach to EJ review that suggests the agency’s approach could shift under a Democratic-led Commission.” 

Almost as certain as tougher reviews for pipelines at FERC is the likelihood that the Environmental Protection Agency (EPA) will withdraw the Trump final rule issued in September 2020, called Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review and referred to as the “Methane Repeal Rule.”  

It did two favorable things for interstate pipelines: 1) canceled the 2012 Obama rule that make transmission pipelines subject to Clean Air rules on volatile organic chemical emissions and 2) canceled a 2016 Obama rule that made transmission pipelines and all other sectors of the oil industry subject to methane restrictions on air emissions. 

Environmental groups such as NRDC, Environmental Defense Fund and Sierra Club are challenging that Trump final rule in federal court, said David Doniger, senior strategic director, climate and clean energy program at the NRDC who oversees the case. 

“In short, we are very confident the court will reject EPA’s methane rollbacks if the case is seen through to decision. The incoming Biden administration is near certain,” he said. “However, to reverse course administratively, reissue the rules and proceed to regulate existing equipment, the case may not actually proceed to decision.”  

What will also be affected by the incoming Biden administration are Trump administration proposed rules that were not finalized by the time Biden was inaugurated. If these were finalized prior to Biden taking office, the Senate with its Democratic majority could potentially cancel those rules via the Congressional Review Act, since they would have been finalized within 60 days of a new administration taking office.

This is being written prior to Biden’s inauguration, so it isn’t known whether two key proposed rules will be finalized or whether they won’t, leaving the Biden administration to make changes or simply cancel the rulemakings outright. 

The first one is the Army Corps of Engineers proposed revisions to nationwide permits that industries use when digging around wetlands with very little environmental damage. Gas pipelines use NWP12 to which the Corps proposed a number of changes, all of them opposed by the INGAA.  

Interestingly, environmental groups opposed the changes, too, though for different reasons. The Corps is likely to hold off issuing a final rule because of numerous controversies about many aspects of its proposal. However, the law says the Corps must reissue NWPs every five years, meaning in this case by 2022. Among changes environmental groups are seeking is one totally eliminating NWP12.  

Another “hanging chad” is the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) proposed rule giving pipelines a new alternative to replacing old pipe when the population density around that pipe increases from a Category 1 to a Category 3 location.  

Instead of having to replace old pipe, which the pipelines prefer not to do because of cost, the Trump PHMSA wants to allow pipelines to use integrity management procedures to assure the safety of that pipe in the now higher density area. This proposed rule has a somewhat lower visibility but still faces opposition from state safety officials represented by National Association of Pipeline Safety Representatives (NAPSR).  

That proposed rule will probably be carried over to the Biden administration. The fiscal 2021 appropriations bill passed by Congress at the end of December included the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020.  

That bill has minimal impact on gas transmission pipelines, but, more importantly, establishes new safety programs for both distribution pipelines and liquefied natural gas (LNG) facilities. So those two gas sectors will likely see the PHMSA begin to roll out new regulatory programs for them in 2021.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Army Corps on Hot Seat over Changes to Pipeline Approvals

Pipeline & Gas Journal - for the original article go HERE.

With the arrival of the Biden administration and the ascension of environmental concerns to provide a spike in political pressure, the Army Corps of Engineers (USACE) may have to rethink its proposed changes to the nationwide permits (NWPs) it issues for all sorts of dredge and fill construction activities around wetlands, including gas and water pipelines.   

The Corps’ proposal last September was in response to a Trump presidential directive requiring federal agencies to review existing regulations that potentially burden the development or use of domestically produced energy resources.  

The proposed changes have created an unusual political dynamic with both pipelines and environmental groups, usually on opposing sides in these matters, opposed to the changes. Only electric utilities support trifurcating NWP 12 into three parts, one for oil and gas pipelines, one for electric and telecommunications pipelines and another for water pipelines.   

But the broad opposition to the proposal may make it difficult for the Corps to issue a final rule prior to the Trump administration leaving town on Jan. 20. If it refuses to make significant changes, or even if it does, the new Congress has an option to delete any final rule within a certain timeframe after a new administration takes office. There is, too, always the option of a legal challenge to any final rule.  

“This is an invitation for litigation, as recently occurred with NWP 12, creating uncertainty and delays for the many industries that rely on the NWP program,” stated Holly C. Pearen, senior attorney, ecosystems, Environmental Defense Fund.  

One of the major changes the Corps proposed was to NWP 12, which pipelines use extensively when doing construction that causes minimal damage to the environment in and around wetlands.   

That construction ranges from large pipeline expansions, maintenance, inspection and repair activities to comply with pipeline integrity requirements and for modernization projects, such as replacing pipeline facilities with newer, more efficient facilities and installing alternative power sources to reduce greenhouse gas emissions from compressor stations.   

The Corps estimates that approximately 47,750 NWP 12 activities could be authorized over the next five years.  

Regarding NWP 12, the Corps proposes two changes. First, it would keep NWP 12 for oil and gas pipelines only and establish an NWP C and NWP D. The NWP C would be for electric utility lines and telecommunication lines, and NWP D for utility lines that convey water and other substances.   

In addition, preconstruction notification (PCN) requirements, which determine if an NWP 12 application for a Clean Water Act permit needs an extra level of review from the Corps district in which the project would take place, would be changed. Five current PCNs would be eliminated, two retained and, most importantly perhaps, a new one added for pipelines over 250 miles (402 km).  

There is a total of 52 NWPs, and they were last issued in 2017 and are in effect until 2022. The Corps wants to “trifurcate” NWP 12 because the overwhelming number of applications are for oil and gas pipeline projects.   

The Corps explained it was subdividing NWP 12 to “… address the differences in how different linear projects are constructed, the substances they convey, and the different standards and best management practices that help ensure those NWPs authorize only those activities that have no more than minimal adverse environmental effects.”  

While the Trump executive order theoretically dictated deregulatory changes, the Interstate Natural Gas Association of America (INGAA) and the American Petroleum Institute (API) both think the NWP 12 changes go in the opposite direction.  

Amy Emmert, senior policy advisor, API, complains, “Proposing three NWPs for the same types of utility line activities when one NWP has been sufficient is the antithesis of streamlining and the USACE’s rationale related to the “potential” need for industry-specific national terms rings hollow, especially when there are ample opportunities available for tailoring activities at regional or case-specific level.”   

With regard to the threat of “best management practices,” which the Corps hopes to impose on oil and gas NWP 12 applications, Steven Kramer, senior vice president, general counsel and corporate secretary, Association of Oil Pipelines (AOPL), argues, “There are no additional best management practices that could be practically or lawfully imposed via NWP 12. Indeed, creating and imposing any such requirements would risk conflict with or redundancy with the many other applicable conditions.”   

Joan Dreskin, senior vice president and general counsel at INGAA, argues pipeline, utility and water pipeline construction are very similar so there is really no reason to have separate and distinct NWP programs for each.   

In fact, the requirements that would be applicable to NWP 12, C and D “are nearly the same,” Dreskin said. “The record does not include, for example, a comparison of the dredge and fill impacts of constructing a 12-inch natural gas pipeline versus the dredge and fill impacts of constructing a 12-inch water pipeline,” she adds.   

Jim Murphy, legal advocacy director, the National Wildlife Federation (NWF), stated, “The use of NWP 12 to authorize massive oil and gas pipelines known to have significant adverse cumulative adverse impacts on aquatic resources violates … the CWA, and the Corps should eliminate NWP 12 authorizations and require individual permits for such pipelines.”  

Jimmy Hague, senior water policy advisor, The Nature Conservancy, argues that if the Corps establishes a mileage threshold in NWP 12, it should be no greater than 25 miles (40 km), not the 250 miles the Corps has proposed.   

The Corps would mandate three PCNs for NWP 12 in which (1) a Rivers and Harbors Act permit is required; (2) the discharge will result in the loss of greater than 1/10th acre of Waters of the United States (WOTUS); or (3) the proposed oil or natural gas pipeline activity is associated with an overall project that is greater than 250 miles in length and the project purpose is to install new pipeline along the majority of the distance of the overall project length.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Getting an Exclusion From Steel, Aluminum Tariffs Just Got Harder

The Fabricator - for the original article go HERE. 

President Joe Biden is unlikely to quickly eliminate steel and aluminum tariffs imposed by former President Donald Trump, particularly because the U.S. Department of Commerce has theoretically given the Biden administration new breathing room in the form of its latest changes to the exclusion process. Many manufacturers argue that they should not be subject to the tariffs because the steel or aluminum they need is not available from U.S. manufacturers, and they use this exclusion process as they seek relief.

U.S. metal manufacturers have complained loudly about that exclusion process since Trump imposed the 25% tariff on steel and the 10% tariff on aluminum in 2018. They cite the time it takes for the Commerce Department to either approve or disapprove an exclusion application and the favor that the agency has appeared to show U.S. steel manufacturers in objecting to those exclusion requests.

But metal manufacturing companies will view the mid-December interim final rule as mostly thin gruel. On the positive side, the Commerce Department established general approved exclusions (GAEs), categories of specific steel and aluminum products that had been reviewed as part of exclusion requests and did not receive any objections. As a result, products found within these GAEs are exempt from the import tariffs, and the product manufacturers do not need to apply for exclusion requests. This change is expected to result in an estimated immediate decrease of 5,000 exclusion requests annually. The Commerce Department reported the possibility of adding more GAEs in the future. Unlike individual exclusion requests, GAEs do not include quantity limits.

Two separate supplements exist for GAEs—one for steel and another for aluminum. The rule added 108 GAEs for steel articles and 15 GAEs for aluminum articles. The two new supplements specified that, to use a GAE, the importer must reference the GAE identifier in the Automated Commercial Environment system that corresponds to the steel or aluminum articles being imported. Agency officials said that the manufacturing community should expect no retroactive relief for GAEs.

The Commerce Department, in consultation with the other agencies referenced in the new supplements, will determine what steel or aluminum articles warrant being included in a GAE. The public will not be involved in requesting new or revised GAEs, but the Commerce Department will use the information provided in exclusion requests to inform its review process for what additional GAEs should be added or what revisions should be made to existing GAEs.

While the new GAEs are a positive development for steel product manufacturers, steel and aluminum producers have their own reasons to be excited about a couple of changes that accompany the new GAEs. In fact, these new developments far outweigh anything being done for the steel users.

The Commerce Department added a new certification requirement for exclusion volumes requested. In the past, applicants for exclusion only had to estimate the total quantity of metal that they needed. Because some administration officials had concerns that some applicants might have exaggerated their raw material requirements, manufacturers seeking relief from the tariffs now have to attest that they have a purchase order for the imported products or that they intend to process the imported metal within the next 12 months. The applicants also must attest that the imported metal is not being used solely as a hedge against current market prices. Without documentation to justify these assertions, a manufacturer will have its exclusion request deemed incomplete and rejected.

In addition, steel and aluminum producers are getting a bit of breathing room when supplying steel to manufacturers that otherwise would be relying on imported sources. In the past, if a company such as U.S. Steel, for example, argued against a particular exclusion request, it had to be able to supply the domestically produced steel “immediately,” which the Commerce Department defined as within six to eight weeks. But a foreign steel producer that objected had no time limit. Now the term “immediately” is retained, but language has been modified to apply the same time standard to U.S. objectors, giving them more “wiggle room.”

Paul Nathanson, executive director, Coalition of American Metal Manufacturers and Users, said the new certification requirement “will make it even more difficult for manufacturers seeking an exclusion for a steel product.” He pointed out that there is no parallel requirement for suppliers to certify they can make the product.

“The rule also sets users up for more denials of exclusions requests by removing the eight-week reasonable delivery time period domestic producers had to meet prior to this change,” he adds.

The Biden Commerce Department will probably issue future regulatory fixes to the exclusion process, but Nathanson argued, “No changes to the exclusion process can adequately address the steel shortages and price spikes that are hurting steel- and aluminum-using manufacturers who are already confronting severe economic challenges caused by the COVID pandemic. Instead of ‘fixing’ the exclusion process, the Biden Administration should terminate the Section 232 steel and aluminum tariffs as quickly possible because of the damage they are inflicting on U.S. manufacturers.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.