On January 6th, TranCanada announced that it would be filing suit under the North American Free Trade Agreement (NAFTA) and would be seeking $15 billion in damages. The pipeline was introduced in 2008 but was rejected in November of 2015, and with the rejection President Obama gave three primary reasons for the rejection:
- The State Department does not foresee this being as beneficial to our economy as others presume.
- The pipeline will not make gas cheaper.
- The pipeline does not enhance our “energy security,” and we must focus on generating a clean energy economy.
In response, a TransCanada spokesperson made the following statement: “TransCanada has been unjustly deprived of the value of its multi-billion dollar investment by the U.S. Administration’s arbitrary and unjustified denial. It is our responsibility to take the actions we deem appropriate to protect our rights.”
While free trade and arbitrary regulation are something that should be avoided in the marketplace, I believe the Obama Administration has rightfully denied TransCanada’s Keystone Pipeline, but for all the wrong reasons. To say that the government should pick the winner and losers of an energy market to focus on a clean energy economy is cronyism at is essence. To say that the government should reject a project because it does not foresee economic benefit or cheaper gas prices is central planning and cronyism at its essence, as well.
However, this is not the big issue with the proposed pipeline. If the pipeline were to be accepted, we would not be escaping cronyism within our government in the least. TransCanada proposed a pipeline that will be 1,179 miles long and ending in Nebraska where it will meet up with already existing pipelines. However, there is very little mention from the Obama Administration or TransCanada about the private property that would be seized under eminent domain because of the pipeline.
The project would seize the private property of other landowners across several northern states, namely South Dakota, Nebraska, and Montana, if deals were not reached with the owners of the property. This is undoubtedly anti-market behavior from the side of the federal and state governments for the sake of the TransCanada company.
According the company, it has reached agreements with private property owners in South Dakota and Montana, and would not have to use eminent domain. Yet, this is not the case for landowners in Nebraska. Furthermore with eminent domain seizures above the heads of so many South Dakotans and Montanans, did these landowners really have much choice? If they were to deny the company of sale, TransCanada would most likely use eminent domain to their advantage, which would not be opportune for the landowners.
Conservatives and libertarians should be skeptical of the reasons this Administration has rejected the Keystone Pipeline, but they should also take another look at what is being proposed. This proposal is not inherently free-market and further degrades private property rights for individuals within the United States.