State Sen. Jim Brewster was angry when he heard in June that U.S. Steel was about to close a plant in McKeesport that made pipe to transport natural gas.
“When I have a plant shut down with 175 to 200 jobs, I have a problem with that,” said Mr. Brewster, a Democrat who is a former mayor of McKeesport and whose late father worked at a pipe plant in the city.
When he heard from U.S. Steel officials that a big part of the reason for shutting down the plant was that the oil and gas industry here was buying a lot of pipe made in other countries, he got angrier. Before that, Mr. Brewster said, “I hadn’t given much thought to where the pipe was coming from.”
There is no requirement that drillers use domestic steel, but Mr. Brewster believed the industry should work to provide American jobs.
The Marcellus Shale Coalition, which represents natural gas drillers and their suppliers, said a “high-level survey” last summer found 90 percent of the casing used by coalition members was manufactured in North America, but that “some casing strings are not as readily manufactured in U.S. or North American mills.”
Mr. Brewster wanted more detailed information about pipe in both oil and gas wells, so he asked his staff to look into where the pipe used in Pennsylvania wells was coming from. They used well record data from the state, which since October 2012 has required drillers to indicate the country of origin for every section of pipe that goes into a well.
Because of errors by drillers filling out the forms, and delays by Pennsylvania Department of Environmental Protection staff in filing the forms, Mr. Brewster’s staff was able to find properly prepared records on only 709 of the 4,473 wells that were drilled between Oct. 5, 2012, and Oct. 30, 2014.
About half of the 709 wells used all American-made pipe; about one-third used some combination of domestic and foreign pipe; and nearly 20 percent of the wells used just foreign pipe.
Foreign pipe used came predominantly from six countries: Canada, Austria, South Korea, Turkey, Russia and China.
“I wasn’t happy about it,” Mr. Brewster said of the results of his study.
Most of the more than 20 industry representatives contacted for this story said they would prefer to buy American-made pipe, but because of cost and because of problems with compatibility between the pipe they need and the pipe that is available from American manufacturers, they can’t.
“I think people in this business would rather deal with U.S. manufactured goods,” said Fred Fesenmyer, chairman and CEO of family-run Minard Run Oil Co. in Bradford that used all Canadian pipe in its wells. “But price is the king here.”
The Marcellus Shale Coalition said in a statement that “[o]ur members remain committed to sourcing their supply chain needs locally, when and where possible, to meet their specific procurement and engineering guidelines.”
Needs can differ not just from company to company, but well to well.
The diameter of the pipe a company makes might be different from what a driller needs, or the thickness, or whether it’s welded or seamless, and, in particular, what type of threading or couplings it has that binds segments of pipe together and keeps it from leaking.
The result, said Courtney Boone, spokeswoman for U.S. Steel: “If we don’t make the pipe they want, then they can’t buy it from us.”
That’s true even if the companies have closer than typical relationships with a manufacturer.
Dan Dinges, president and CEO of Cabot Oil & Gas, for example, has sat on the U.S. Steel board of directors for the past four years.
But even though Cabot buys some of its pipe directly from U.S. Steel, it buys most of the pipe for its wells from a foreign firm, Voestalpine of Austria.
That information would have been a business secret before 2012, when the state Legislature rewrote much of the state’s Oil & Gas Act in a piece of legislation known as Act 13.
It required drillers for the first time to say in which country the pipe that went into a well — as well as pipe used in pipelines — was manufactured.
“The PUC believes this reporting requirement creates an awareness of the issue and will encourage companies to use domestically produced steel,” wrote Robert Powelson, chairman of the Pennsylvania Public Utility Commission (which gathers the country-of-origin data on pipelines) in a column.
The pipe that Mr. Brewster had his staff look into is commonly referred to in the industry as Oil Country Tubular Goods, or OCTG. It can be a variety of diameters, grades and thicknesses, depending on the well, how it is drilled and where it is drilled. In some cases there is simply no American-made pipe available that meets specifications. Some types of pipe are used in only the first 100 or so feet at the top of a well, while more than a mile of smaller-diameter pipe could be used in a well.
“If you’re going to spend $400 million to build a welded pipe plant, you’re going to look around and see where you can make the most money — like with the 5 1/2-inch pipe” of which a driller might need 10,000 or more feet for one well, said Piotr Galitzin, chairman of TMK-IPSCO, a company owned by Russian steel giant TMK.
Even Range Resources, which regularly is praised by officials for buying nearly all of its pipe directly from U.S. Steel’s American plants, has to buy some of its 20-inch casing from England because it can’t get a steady supply of it here, a spokesman said.
Cabot buys all of its 5 1/2-inch pipe — 10,000 to 15,000 feet per well — from Austria.
George Stark, Cabot’s spokesman, said American manufacturers haven’t been able to provide pipe that meets “standards” required for the 5 1/2-inch pipe it is required to use in Susquehanna County, where it drills the bulk of its wells.
“Hey, we don’t set the standards; API sets the standards,” he said, referring to the American Petroleum Institute.
When it was pointed out that at least four companies have drilled horizontal shale wells in Susquehanna County using American-made pipe, according to Mr. Brewster’s report, Mr. Stark said that surprised him.
“I didn’t realize that,” he said. “That’s impressive.”
He could not explain why those companies were able to use 5 1/2-inch American-made pipe there, when Cabot was not.
Whatever is keeping Cabot and other drillers from buying more American-made pipe, Mr. Brewster said he hopes his report encourages them to find a way to overcome that barrier.
“My argument is this: Why aren’t [the manufacturers and drillers] talking? If I ran the Marcellus Shale Coalition, the first thing I’d do is say, ‘Let’s sit down with domestic steel producers and see if we can’t close this gap.'”
Ms. Boone, of U.S. Steel, said those conversations are already going on.
“We’ve expanded our research and development so we have additional connection options, so that Cabot and others can buy more pipe from us,” she said.
Mr. Brewster concedes his aims are personal. On Thursday, he showed a reporter the now-shuttered U.S. Steel pipe plant in McKeesport and said, “The workers are still around. We have this industrial land that’s already been cleaned up. I’d like to see some jobs out of this.”
“There’s not a bigger fan than me of the oil and gas industry,” he said.
When he was mayor of McKeesport at the start of the Marcellus Shale boom, he came up with the idea to drill a natural gas well right in town — not one of the massive, horizontal Marcellus wells, but a conventional, shallow, vertical well.
Through a friend of a city administrator, the city reached an agreement with Penneco, a small natural gas and oil driller based in Delmont, and had it drill on a 25-acre parcel of land next to Renziehausen Park that the city acquired.
“I wanted to prepare McKeesport for this industry,” said Mr. Brewster, who was mayor until 2010 when he was elected state senator. “This was part of the dream to save my city.”
Mr. Brewster’s staff research showed that on the wells that Penneco drilled from 2012 to 2014, it used mostly Canadian-made pipe.
This article was written by Sean D. Hamill from Pittsburgh Post-Gazette and was legally licensed through the NewsCred publisher network.