Cross-border energy integration does not begin and end with one much-maligned pipeline.
These days, it seems that most of the public discourse in North America regarding cross-border energy infrastructure centers around one project: the rejected Keystone XL pipeline. However, as the Bush Institute North America Competitiveness Working Group recently discovered, cross-border energy integration does not begin and end with one much-maligned pipeline.
During last week’s trip to San Diego and Baja California, Mexico, the Working Group toured the first bi-national wind energy partnership between the United States and Mexico: Energía Sierra Juárez. Just south of the U.S.-Mexico border, Baja California’s Sierra de Juárez mountain range contains one of the strongest wind resources on the west coast of North America. Now, thanks to innovation and cross-border integration, the Energía Sierra Juárez wind power generation project is harvesting previously barren land atop the mountains to generate electricity.
Operated by SEMPRA Energy affiliates, the wind farm started sending electricity from Mexico into California during the summer of 2015. Currently, the project’s 47 turbines, each towering around 275 feet high, power 40,000 San Diego homes on average, with a maximum capacity of 155 MW that could power up to 65,000 typical homes. What is more, the developers have plans to add hundreds more turbines in order to expand capacity by close to 700%. Potentially, transmission lines could connect to the Mexican power grid now that Mexico has passed reforms allowing for the private generation and sale of electricity in the country.
So far, Energía Sierra Juárez has generated substantial community and economic benefits on both sides of the border. The project created approximately 650 direct jobs during construction, with the local Mexican labor force accounting for 80 percent of them. Landowners in Mexico currently receive about $2,000 per month in exchange for leasing their land to SEMPRA.
Despite the project’s immediate success, the permitting process that took place prior to construction was far from perfect. Because the project required the construction of cross-border electrical transmission lines, its developer SEMPRA needed to secure a U.S. Presidential permit (just like TransCanada for Keystone XL). Unlike TransCanada, SEMPRA ultimately secured the necessary approval, but only after spending approximately $1 million and waiting five years for a final decision from the U.S. Department of Energy. Famously, TransCanada waited seven years before President Obama denied the application for Keystone XL. In both cases, the protracted delay before issuing a verdict was unforeseeable and unjustified, especially when considering that similar cross-border projects only had to wait two years before securing a Presidential permit.
Canada, Mexico, and the U.S. contain immense resources of energy, from wind and solar to oil and gas. But resources do not pay attention to political boundaries, and they are often found in regions far away from the end-consumer. To create a thriving and efficient North American energy market, resources from all three countries must flow across borders, from seller to buyer. Undoubtedly, cross-border energy projects must receive an appropriate level of regulatory and environmental scrutiny. After necessary consideration, some projects will receive approval, and others may not. Nonetheless, what is most important for businesses, for investors, for policymakers, and for stakeholders is that the regulatory process be fair, consistent, predictable, and insulated from political whims.
Unfortunately, the U.S. Presidential permit process no longer meets these criteria. Illogical delays in permitting stifle innovation and keep billions of dollars of investment capital on the sidelines.
As the Working Group reflected upon its trip to Energía Sierra Juárez, two things became strikingly clear: 1) North America needs more projects like this, and 2) the U.S. permitting process that allows for such cross-border energy projects needs to be reformed. By signing NAFTA twenty-two years ago, the U.S. agreed that cross-border trade within North America is beneficial to the national interest. It’s about time the U.S. Presidential permitting process caught up.
This spring, the Bush Institute North America Competitiveness Working Group will be releasing its recommendations for a better, more integrated North American energy market. Stay tuned as we propose improvements to the U.S. permitting process for cross-border energy infrastructure.
