President Obama not impressed

The economic benefits of approving the U.S. portion of the Keystone XL pipeline focus on two related areas—U.S. industrial growth and more jobs for Americans.  Opponents of Keystone generally do not deny that increases in both those areas will occur.  But those for and against the project have considerable disagreements over the actual numbers comprising those increases.  Regarding jobs, the estimates on how many temporary and permanent jobs Keystone will generate are all over the map. 

Those favoring the pipeline tend to agree with figures offered by TransCanada, the company seeking to extend its pipeline 852 miles into the United States.  Others doubt the veracity of the benefits TransCanada claims will accrue for U.S. manufacturing, indirect jobs, and local communities through which the pipeline would run.  Also, some analysts assert that building the pipeline will result in job loss in the Midwest. 

The U.S. Department of State (DOS) has estimated that the U.S. portion of Keystone XL would potentially support approximately 42,100 average annual jobs across the United States over a 1- to 2-­year construction period, of which approximately 3,900 would involve constructing the pipeline and its components.  Collectively, this employment would potentially translate to approximately $2.05 billion in earnings in the United States, said the DOS.

But one study (Pipe Dreams: Jobs Gained, Jobs Lost by the Construction of Keystone XL) released in 2011 by Cornell University’s Global Labor Institute (GLI) and frequently cited by Keystone opponents, paints a different picture.  In a DOS public hearing on Keystone, GLI’s Sara Skinner, one author of the report, charges that TransCanada’s claim that it will direct $7 billion into the U.S. economy is less than half of what will actually enter the United States, with the remainder being spent in Canada or already spent.  In addition, Skinner disputes TransCanada’s assertion that the project will create 7,000 temporary construction jobs over a 2-year period.

“According to TransCanada’s own data supplied to the State Department, the project will create no more than 2,500 to 4,650 temporary direct construction jobs for two years,” said Skinner.  “And only 10 to 15 percent of the total Keystone XL workforce will be hired locally.”  Skinner has also said that Keystone will funnel oil now being used to supply gasoline to the Midwest market to the Gulf Coast.  This will raise Midwest gas prices by 10 to 20 cents a gallon and cause job loss in that area of the country, says Skinner. 

As is apparent in comparing DOS’s and Skinner’s figures, part of the problem in understanding the employment impact of Keystone is whether the emphasis is on jobs directly or indirectly associated with the construction of Keystone. 

Presidential Permit

Technically, the fate of the U.S. portion of Keystone XL is now in the hands of the DOS, which must sign off on the Presidential Permit needed by TransCanada to build the pipeline on U.S. soil.  By Executive Order, Presidential Permits are granted for projects that connect the United States to other countries provided those projects “would serve the national interest.” 

Under the National Environmental Policy Act (NEPA), the DOS must also assess the impact of the proposed pipeline on the environment.  In March 2013, the DOS released a draft supplemental environmental impact statement (DSEIS) on Keystone.  Approximately 1.2 million public comments were received on the DSEIS.  The DOS says it will factor those comments into its final EIS.  Other federal agencies will have up to 90 days to comment on the final EIS once it is issued.  In addition, DOS’s Office of Inspector General (OIG) is currently investigating allegations that the firm hired by the DOS to conduct the EIS has “secret” ties to TransCanada.  OIG’s final report is not expected until January 2014, and a final decision on the permit is unlikely before then. 

While the DOS is nominally overseeing the permitting process, Keystone XL will not enter the United States absent acceptance of the project by President Obama.  So far, the president has not said much to encourage proponents.  Perhaps most telling is Mr. Obama’s statement in his July 2013 climate change address that the project would be approved only if it “does not significantly exacerbate the problem of carbon pollution.”  Based on that statement, the president appears to be sharing the climate concerns about extracting the oil sands resources in Alberta, Canada—the product Keystone is intended to transport—as expressed by the EPA in its comment on DOS’s DSEIS. 

“As recognized by the DSEIS, oil sands crude is significantly more GHG intensive than other crudes, and therefore has potentially large climate impacts,” wrote the EPA.  “The DSEIS reports that lifecycle GHG emissions from oil sands crude could be 81 percent greater than emissions from the average crude refined in the U.S. in 2005 on a well-to-tank basis, and 17 percent greater on a well-to-wheels basis.” 

Perhaps more importantly, the EPA was not convinced by a DOS market analysis that led the DOS to assert that mining of Alberta oil sands will be unaffected whether or not Keystone XL crosses the border.  The EPA recommended that the DOS conduct a more careful market analysis of the feasibility of transportation options, such as rail that TransCanada might use if Keystone XL is not built.  The EPA also found the DSEIS short on information about how TransCanada planned to mitigate GHG emissions from the extraction activities. 

‘Not a jobs plan’

If the president’s concise statement on Keystone in his climate address was not enough to deflate the hopes of proponents, he made his thinking clearer in a speech in Chattanooga several days later when discussing the Republican approach to creating middle-class jobs.

“But I've got to tell you, just gutting our environmental protection, that’s not a jobs plan,” said the president.  “Gutting investments in education, that’s not a jobs plan.  They keep on talking about this–an oil pipeline coming down from Canada that’s estimated to create about 50 permanent jobs–that’s not a jobs plan.”

This was not the first time the president appeared to scoff at the employment potential in Keystone.  His statements, moreover, hardly echo some of the optimistic employment figures included in DOS’s DSEIS and are more in line with the GLI study.  Some analysts in fact believe that 50 permanent U.S. jobs directly connected to Keystone after the project is completed is an exaggeration.  For example, in a recent House hearing, Anthony Swift of the Natural Resources Defense Council (NRDC) said that after construction, Keystone XL will only employ between 35 and 50 people—and some of these positions will be filled in Canada.  “That’s less than two percent of the long term employment benefits you could expect from [building a new] shopping mall,” said Swift.

State/local support

But Keystone’s proponents are powerful and vocal, and include many lawmakers, some of who voiced their opinions on its jobs-creating potential in the House hearing.  What is often overlooked in the debate is that Keystone XL is just the latest phase in a four-phase TransCanada project in which 1,817 miles of pipeline are either operational or under construction in the United States.  That background has given TransCanada considerable credibility in the U.S. business sector and with some U.S. communities.

Here are some of the views contained in the written testimony. 

“The proposed pipeline would cross into the U.S. through Phillips County in Montana. The pipeline will cross through 5 other counties in our state. As the pipeline passes through, more than 800 good-paying jobs in Montana will be created and thousands more across the nation.  This economic development will mean better schools, stronger infrastructure throughout our state.”
—Rep. Steven Daines (R-MT)
 
“The unemployment rate in Port Arthur, where one of the southern terminuses of the pipeline will be, is currently 15.7 percent.  Many of those unemployed are young adults. This pipeline will help put those folks back to work in high paying, good jobs.  And, on top of that, the pipeline is expected to bring $2.3 billion in new spending for the Texas economy.  There are currently nearly 13,000 refinery workers in Texas and this pipeline will help keep those jobs and create even more.  
“It is important to remember, this is not all about oil.  In addition to the roughly 22 gallons of gasoline that a barrel of oil produces, a typical barrel also produces 4 pounds of charcoal briquettes, 12 cylinders of propane, a quart of motor oil, and petrochemicals used in the productions of all kinds of pharmaceuticals, plastics, cosmetics and foodstuffs.  All of the industries that line the Houston ship channel use oil to make these different products.  These industries need a constant reliable source of crude.  Why would our government not want these domestic industries to have a clean, safe, and reliable source of crude that would last for many years to come?”
—Rep. Ted Poe (R-TX)

“Welspun was chosen as the largest U.S. supplier for the U.S. portion of the Keystone XL pipeline by TransCanada.  In all, we produced over three hundred and thirty thousand tons or 700 miles of thirty six inch API grade X70 pipe for TransCanada on this project.  This project so far has generated over 600 jobs for over 1-1/2 years at Welspun alone, this is not counting any of the indirect supporting jobs that are required to operate our plant on a daily basis.
“Given the delays in the approval process, TransCanada has asked Welspun to store the pipe in Little Rock and asked us to apply protective coating so that the pipe can be stored outside without harming the epoxy coating applied to the pipe that is intended to protect the pipe while it is in the ground.
“TransCanada has made it clear that if  KXL is not approved, the outlook changes fairly significant as pipe for the Keystone XL will be redeployed to other TransCanada projects or re-sold to other companies, reducing the pipe production levels in 2014 and beyond. Thus, TransCanada can almost overnight be transformed from our biggest customer to our biggest competitor.”
—David J. Delie, president and CEO, Welspun Tubular

“TransCanada has executed a Project Labor Agreement (PLA) with LIUNA, the International Union of Operating Engineers, the United Association of Plumbers and Pipefitters, the International Brotherhood of Teamsters, and the International Brotherhood of Electrical Workers that will cover the construction of the Keystone XL.  Other aspects of construction, including pump stations, will be performed by other unions within the Omaha and Southwest Iowa Building and Construction Trades and the Omaha Federation of Labor.
“It is indisputable that jobs will be created and supported in the extraction and refining of the oil, as well as in the manufacturing and service sectors.  It is also clear that the construction and maintenance of Keystone XL will have a ripple effect of consumer spending that will have a positive impact on the states and communities where the pipeline will be located.”
—Ron Kaminski, business manager, Local #1140 Laborers’ International Union of North America

“The positive economic impact of the [Phase I] TransCanada Keystone Pipeline in the Norfolk area was nothing short of amazing.  They brought 750 new jobs into the area. TransCanada became our 3rd largest employer in our area for the five months their team was working on the project.   We believe that our partnership and positive experience with TransCanada and the Keystone Pipeline helped us to lead northeast Nebraska in economic success over the past few years.
“At the end of the day, we experienced a $10 million economic impact in Norfolk and the Madison County area.  Please keep in mind that this was all happening at a time when most areas of the country were experiencing the peak of the recession.”
—Dennis Houston, president and CEO, Norfolk, Nebraska, Area Chamber of Commerce

It is clear from this testimony as well as from the views of Keystone opponents that everyone has his or her own job numbers to back up their approval or disapproval of the project.

House testimony on the economic impact of Keystone XL

William C. Schillaci