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Keystone XL and Two Other Things That Won’t Happen in 2015


Keystone XL and Two Other Things That Won’t Happen in 2015

January 9, 2015

This article originally appeared  MarketWatch.

Columnists and bloggers are spewing lists of what will happen in 2015, what should happen in 2015 and what Congress’ priorities should be for 2015. It’s far easier to say what won’t happen in 2015.

We won’t spend hours watching the World Cup or the Olympics because they aren’t happening in 2015. Most of us won’t spend Tuesday, Nov. 3, waiting for election returns, although citizens of Kentucky, Mississippi and Louisiana will elect governors and state representatives, and Chicago Mayor Rahm Emanuel will find out if he has won reelection.

Here are three more things that won’t happen in 2015.

No Keystone XL pipeline. On Friday, Nebraska’s Supreme Court allowed the pipeline’s construction to proceed. But neighboring South Dakota is starting over in its permitting process. South Dakota approved TransCanada’s  application to build the pipeline in 2010, but the construction permit expired in June 2014. The process in South Dakota could be more time-consuming than in Nebraska.

This means that even if Congress votes to construct the Keystone XL pipeline, and miraculously overrides President Obama’s threatened veto, the pipeline may not be initiated in 2015.

That’s bad news for our refineries along the Gulf of Mexico, which could be refining Canada’s heavy crude and blending it with light crude from North Dakota.

Over 40 groups and individuals have filed petitions with South Dakota’s Public Utility Commission to broaden the approval process to matters that were not considered in 2010. Those groups iinclude the Standing Rock Sioux Tribe, the Rosebud Sioux Tribe, Boettcher Organics and the Sierra Club, as well as a number of independent individuals. The goal of most groups is to stall South Dakota’s approval of Keystone XL.

At a Jan. 6 meeting of the South Dakota Public Utility Commission, regulators allowed the re-approval process to continue. But in a December meeting, the opponents were granted “party status” in the approval process, meaning they can cross-examine witnesses and request documents from TransCanada. Sure enough, on Jan. 6, Dakota Rural Action requested documents from the commission.

The Public Utility Commission is anticipating months of debate. It will hold ano ther five hearings in February, March and April to consider what testimony will be permitted. Evidence will be presented at hearings in early May. Kristen Edwards, staff attorney at the commission, told me: “We’ll consider more meetings as necessary.”

No federal minimum-wage legislation. President Obama will continue to call for a $10.10 minimum wage, and the Service Employees International Union will continue to organize protests for a $15 minimum wage, but Congress will not pass either one. If the federal minimum wage did not rise during a Democratic Congress with a Democratic president (2009-2010), and during a split Congress with a Democratic president (2011-2014), it’s not going to rise with a Republican Congress.

The debate over the minimum wage has moved to the states, and any further increases over the next two years will come from state legislatures or from ballot initiatives. This is less harmful than a federal law, because costs vary by state, and states should have the right to decide on their minimum wages. It is not surprising that it is states with higher minimum wages than the federal level, such as California and Massachusetts with their $9 hourly rates, that are seeking equivalent or higher rates for the rest of the country, so that the high-wage states can regain competitiveness.

No carbon tax. Despite the hopes of many environmentalists and academics, the U.S. will not implement a carbon tax in 2015. Neither House Speaker John Boehner nor Senate Majority Leader Mitch McConnell support the tax. This is good news for the economy, because a carbon tax would raise the cost of goods produced in the U.S., making it more advantageous to buy cheaper imports from countries without such a tax. Proponents of the tax suggest putting tariffs on imports in proportion to their carbon content so that U.S. companies would not be at a disadvantage, but the quantities are hard to calculate and tariffs might be illegal under WTO regulations.

The love affair with carbon taxes stems from a concern that carbon dioxide, a byproduct of energy use, is raising global temperatures and causing global warming. By taxing carbon dioxide, Congress would take action to reduce energy use. Many academic economists favor the carbon tax for restructuring the tax system, seeing it as an alternative to an individual income tax, a corporate income tax or a European-style cap-and-trade system.

A typical carbon tax of $20 per metric ton of carbon dioxide, rising at a nominal rate of 5.6% a year, could bring in $1.2 trillion over 10 years. But a major problem with the carbon tax is that it is regressive. Because low-income people spend a larger percent of their income on energy than high-income people, a carbon tax would have to be accompanied by transferring benefits to low-income groups.

Carbon-intensive sectors such as coal would be the biggest losers under the new tax. Lawmakers from coal-producing regions are influential and would demand a share of the revenues.

In 2015, we’re fortunate that we will escape a carbon tax and a minimum-wage hike. But we’d be better off if construction would start on Keystone XL. And some of us will sorely miss the World Cup.


Diana Furchtgott-Roth, former chief economist of the U.S. Department of Labor, directs Economics21 at the Manhattan Institute. You can follow her on Twitter here.

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