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Disappointment in Obama Administration’s Rejection of the Keystone XL Pipeline

November 6, 2015

DALLAS, Texas

Matthew Rooney, Director of Economic Growth at the George W. Bush Institute, expressed disappointment in the Obama Administration’s rejection of the Keystone XL pipeline permit application.

“The long-term growth of the U.S. economy is intimately linked to our trade and investment relationships with Canada and Mexico,” Rooney said, noting that the Bush Institute had studied the North American economy closely in order to develop a “scorecard” of its global competitiveness.  According to that scorecard, which can be found at http://www.bushcenter.org/scorecard/, North America is a highly competitive regional economy thanks to a high degree of industrial supply chain integration.  Those supply chains support America’s global leadership in innovation and advanced manufacturing.  Nonetheless, the scorecard also suggests that there are a number of areas where impediments to trade and investment drive up costs, reducing global competitiveness and hampering job creation and wage growth.  Prominent among these are energy market integration and cross-border infrastructure, both of which Keystone would have helped address.

“Despite North America’s remarkable abundance of energy, there remain wide variations in the cost of energy to consumers and businesses in the region,” Rooney said, noting that this is the result of barriers to the flow of energy.  Keystone, he noted, would have helped overcome a marked price difference for petroleum products between the northern and southern tiers of the United States, contributing to the competitiveness of industry in the southern tier.  Similar differences between electricity prices in different parts of the region also exist, particularly in Mexico, reducing household disposable incomes for families and limiting industrial competitiveness. 

Investment in infrastructure that overcomes these differences should be encouraged, Rooney argued, not blocked by governments.  “Cross-border infrastructure is a slow-motion crisis across both of our borders,” Rooney asserted further.  Canada and Mexico have done a solid job of mobilizing resources, both public and private, to address the longstanding under-investment in infrastructure along the Canada-U.S. and Mexico-U.S. borders, but the United States has lagged.  Part of the reason, Rooney suggested, is the uncertainty surrounding the federal highway bill, while the fact that cross-border needs have to compete with other projects for funding doesn’t help. 

Just as important, however, is the Presidential Permit process, which introduces a level of political uncertainty into the process of planning and building border infrastructure.  “Signing NAFTA means we decided it is in our national interest for legitimate goods and services to cross our borders with Canada and Mexico.  How can it not be in our national interest to build the roads, bridges and pipelines that carry those goods and services?” Rooney asked, noting that there exist numerous layers of technical review for proposed projects at the federal, state and local levels.  Rooney called for the elimination of the Presidential Permit requirement, or at a minimum that it be converted into a time-limited opportunity for the President to rule that a given project would not be in the national interest.  “We should take the political uncertainty out of these decisions,” Rooney argued.  “The market will do a better job of deciding when and where cross-border infrastructure should be built, and how to pay for it.”

For more information on the North America Scorecard or the Bush Institute Economic Growth Initiative, please visit www.bushcenter.org/bush-institute/economic-growth or follow us on Facebook, Twitter, YouTube, Flickr and Instagram.

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