Pain Expected in Northeast as Infrastructure Shortfalls Bite

Doing business in America’s northeast also means bearing some of the nation’s heaviest cost burdens, whether it be higher state tax rates or more stringent workplace rules.

Now, a U.S. Chamber of Commerce report indicates that companies operating in states including New York and Connecticut face a spike in power prices due to an infrastructure deficit.

Most American businesses have enjoyed a significant reduction in energy costs brought about by the release of natural gas supplies trapped in dense shale formations. Some states, however, are more concerned than others about the purported risks of shale drilling, such as water-supply contamination or man-made earthquakes.

Their resistance hasn’t just been limited to drilling. Lawmakers in various states, including New York, have opposed construction of pipeline infrastructure that could more economically transport fuel from major production hubs. The giant Marcellus shale resource, for example, is already heavily exploited by several nearby states, including Pennsylvania, Ohio and West Virginia, keeping their energy costs down.

“RESIDENTS IN THE NORTHEAST ARE PAYING THE HIGHEST ELECTRICITY RATES IN THE CONTINENTAL U.S., WITH NO RELIEF IN SIGHT IF INFRASTRUCTURE ISN’T BUILT.”

In its report, the Chamber found that a lack of additional northeastern pipeline infrastructure would cost around $7.6 billion in lost gross domestic product by 2020, crimping employment.

“Residents in the northeast are paying the highest electricity rates in the continental United States, with no relief in sight if infrastructure is not built,” said Karen Harbert, CEO of the Chamber’s Energy Institute. “High energy prices are costing the region jobs and income, so maintaining the status quo will be painful.”

Connecticut currently has the third-highest electricity rates in the country, according to the U.S. Energy Information Administration. Massachusetts ranks fourth, Rhode Island fifth, New Hampshire sixth, New York eighth, Vermont ninth, New Jersey tenth and Maine eleventh.

That means northeastern manufacturers on average are paying 62% more for electricity supply than the national average, while residents fork out an extra 44%.

Donald Trump has shown a willingness to address concerns about America’s crumbling infrastructure by pledging a $1 trillion spending package, though funding details remain scant. He’s also shown he’s prepared to defy environmentalists and back controversial energy sources, including the Keystone XL pipeline, which would transport Canadian oil sands to Gulf Coast refineries, and the Dakota Access pipeline, which met stiff resistance from indigenous groups.

Two key northeastern projects, the Constitution and Access Northeast pipelines, have been stalled by legal challenges and resistance from lawmakers, including New York Governor Andrew Cuomo.

Earlier this month, New York state’s Department of Environmental Conservation blocked the Northern Access project following three public hearings. “DEC has denied the permit due to the project’s failure to avoid adverse impacts to wetlands, streams and fish and other wildlife habitat,” the department said. “We are confident that this decision supports our state’s strict water quality standards that all New Yorkers depend on.”

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Ross Kelly
Ross Kelly is a London-based business journalist. He has been a staff correspondent or editor at The Wall Street Journal, Yahoo Finance and the Australian Associated Press.

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