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Keystone XL pipeline: Good for Big Oil, bad for the economy

Laurie Johnson

Posted February 1, 2012 in Curbing Pollution, Health and the Environment, Moving Beyond Oil, Saving Wildlife and Wild Places, Solving Global Warming

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[We’re] probably looking at…from Montana to Houston, I don’t know, [job creation] in the hundreds...” (Robert Jones, TransCanada’s Vice President for Keystone Pipelines, CNN, November 11, 2011)

 

Interesting quote. TransCanada and its allies can’t seem to keep their numbers straight for the proposed tar sands Keystone XL pipeline. Just the day before, the company released a press statement predicting 20,000 pipeline and 118,000 “spin-off” jobs. In September of 2010, they claimed 13,000 jobs. Two months prior to that, a “study” they commissioned was released predicting 250,000 to over half a million jobs (p. 33). The Republican Party claims over 100,000.  All of these estimates contradict the statement by the company’s own Vice President, even those at the lower end.

Analysts who aren’t trying to make money off the pipeline conclude that it would create far fewer jobs. Researchers at Cornell University project as few as 2,500 jobs, and the State Department up to 6,000 (p.ES-22). Notably, most projections are for short-term jobs associated with construction—something proponents don’t always make clear. (There’s nothing wrong with short-term jobs, any would be welcome, but their temporary nature shouldn’t be in the fine print). According to the State Department, as few as 20 jobs will be permanent (p. 3.10-80) (excluding  “induced” jobs created from wages spent by these workers). (Click here for a good summary explaining the differences across industry and independent analyses, by the Columbia Journalism Review).

So what is going on here?

After failing to convince their own country’s citizens that the pipeline would be good for them, Big Oil and its Congressional protectors have launched what can only be characterized as an aggressive disinformation campaign to build the pipeline. Preying on the fears of America’s unemployed and economically insecure, they are trying to sell it as a national jobs plan and a way to increase national security by reducing dependence on foreign oil.

It’s a cruel hoax. Canadians didn’t fall for it, and neither should we.

The proposed project would construct a 1,700 mile conduit from Alberta, Canada for the world’s dirtiest and most corrosive form of oil (tar sands) right through the heart of America’s farmland —threatening not only the bread basket of the US, but also the world. It promises little to potentially negative economic returns for Americans.

Maybe that’s why President Obama made the bold decision to reject TransCanada’s permit application. With Citizens United giving the oil industry (even more) unlimited influence, and the American Petroleum Institute’s blatant threat to the President to approve Keystone XL or face “huge political consequences,” Obama’s courage shouldn’t be underestimated.

Here’s the truth about the pipeline:

* It will create only a very modest number of jobs. While these jobs are important and could certainly help some workers, industry has grossly overstated its case.

* It might destroy more jobs than it creates:

  • By TransCanada’s own account, Keystone XL is expected to increase oil prices in the Midwest (building a pipeline to the Gulf Coast will eliminate an excess supply of the oil in the Midwest, pushing up prices). As part of its permit application to the Canadian government, TransCanada said (p.21) annual oil company revenues are expected to increase as a result by $2 to nearly $4 billion. In turn, our farmers could see an increase in fuel costs of $2.6 billion dollars or more over 2009 levels…Higher oil prices might be good for the oil industry, but they will increase the cost of living and doing business in the Midwest, negatively impacting its economy and potentially increasing unemployment.
  • Pipeline leaks and spills into aquifers and water ways threaten the livelihoods of a quarter of a million farmers, and businesses providing outdoor recreation and other tourism services. Public health is also threatened, as already evidenced from a major tar sands spill in 2010 along a different pipeline (more below).

* Finally, the pipeline will not reduce our oil dependence or increase national security. The price of TransCanada’s oil will be determined by surging global demand for oil, and OPEC’s monopolistic production decisions that limit the world’s oil supply and increase its price (the cartel (OPEC) has almost 80 percent of the world’s known oil reserves). For all the rhetoric about energy independence and controlling the price of oil, Keystone XL’s marginal contribution to global production won’t amount to a hill of beans.

There is one source of potential long-term job creation about which oil industry has remained silent: jobs created to clean up inevitable spills and leaks. So far, TransCanada has experienced major problems with the section of the Keystone project already completed. In its first year of operation, its so-called safe “state-of-the-art” pipeline has already leaked 35 times, (21 times in Canada, 14 in the U.S--p. 3.13-11). According to the University of Nebraska, approximately 91 major spills can be expected over the 50-year lifetime of the pipeline. Clean up jobs will last longer than that…

There is also the potential for a major disaster. In 2010, the largest tar sands spill in U.S. history devastated the Kalamazoo River with over 800,000 gallons of oil at a price tag of over $700 million. We’re still cleaning it up, a year and a half later.

A worst-case spill from Keystone XL could cause widespread groundwater and river contamination. Any resulting clean up expenditures will strain public budgets, diverting limited resources away from productive investments that generate long term job growth, such as infrastructure, education, and clean energy. 

Finally, there’s public health and the environment. The $700 million figure cited above was just for cleaning up. According to a November 2010 report (p.12) from the Michigan Department of Community Health, almost 60 percent of people surveyed who lived near the Kalamazoo spill experienced at least one adverse health effect following it, including respiratory, gastrointestinal and neurological symptoms (compared to a baseline of less than 5% in a community 15 miles upstream of the spill). Ethics aside, sick people do not make a healthy economy. Nor do the droughts, forest fires, extreme weather, smog pollution, and other impacts associated with climate change: extracting tar sands oil generates three times as much global warming pollution (in addition to generating other pollutants) as does conventional oil.

We should take heed of Canadians' oppostion to transporting Alberta's dirty oil through their own land for their own oil; they are no fools. They know TransCanada’s Keystone XL tar sands pipeline is a terrible project: it promises few if any jobs, puts existing jobs at risk, and threatens water supplies, public health, and the environment. They know the oil industry has one objective and one objective only: to increase profits. It is not to bestow a new supply of cheap oil on the US or reduce unemployment. As PT Barnum famously said, “There’s a sucker born every minute.” Let’s make sure we’re not one of them.

(Updated 2/3/2012 to add climate change impacts).

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Comments

Louis BeauFeb 2 2012 05:20 PM

1 million barrels of oil a day from Canada means 100 Million dollars per day staying in North America.. Seems keeping money invested and working in North America is preferable to the alternatives..

Jim Snyder-GrantFeb 3 2012 04:04 PM

Hi Louis: The proposed pipeline goes to deep water ports in Texas precisely so that the bulk of the oil can be sold overseas -diesel fetches good prices in Europe and South America. The oil flows overseas, the money flows to Transcanada and we in the US just end up taking the environmental risk. Not in our national interest,

Tim MarshallFeb 3 2012 10:33 PM

How many jobs in Texas would be preserved by the access to Canada's bitumen? How much revenue generated through the continued operation of these refineries? The number on export show Valero's best year of export at 15% the other 85% US domestic consumption. Funny no mention of these in the article.

BSFeb 7 2012 09:40 AM

Laurie,

I'd like to correct some mis-information, which seems to run rampant at the NRDC. If you believe your cause is right, why do you have to mislead people?

First, you claim that an excess supply of oil will cause prices to go up. Really? Please review the principles of supply and demand. An increasing supply will cause prices to go down. What will actually happen is that prices of Canadian oil will go up once a transportation bottleneck is removed, but the extra supply will cause an overall decrease in the price of the average barrel of crude. This is simple economics.

You claim that a pipeline spill could contaminate the Ogallala aquifer. Could you please cite your sources? Data? Any supporting evidence at all? Any evidence that ANY oil pipeline has EVER caused widespread ground water contamination? Do you even know what an aquifer is? Do you know that movement in an aquifer is measured in feet per year, meaning that even if oil somehow magically entered the aquifer that it wouldn't actually go anywhere? There are a number of instances where plants (refineries, etc from before we had good environmental regs and protections) have contaminated groundwater. That contamination, which accumulated over years, is always highly localized and never presents a problem to anyone who is not in the immediate vicinity.

BSFeb 7 2012 09:43 AM

Jim--You claim that the oil from Keystone XL would be refined and then exported. First off, if that were true it would provide jobs for thousands of people.

However, the EIA reports that the Texas Gulf Coast has a spare refining capacity of about 100-150 thousand barrels per day. And Keystone XL would bring nearly 1 million barrels per day.

I assume you are aware of new refineries that are being built to export this oil? No? So then I bet you can do the simple math to see that the only thing this oil can do is displace oil imported from places like South America and OPEC.

If this were a pipeline for export, it would be built to the West Coast, where there is easy access to places like China. Since supertankers can't go through the Panama Canal, there's not much point in building an export pipeline to the Gulf of Mexico. And Europe already has all the diesel it needs. It's countries like China and India that are growing.

BS is BSFeb 7 2012 10:56 AM

BS--
I'd like to correct some mis-information, which seems to run rampant in your comments.

Let's work from the bottom up on your comments. First, TransCanda has sated before congress that they would export the oil from the Keystone Pipeline XL. You can see for yourself in this video: http://cspangeek.com/2011/12/transcanada-will-export-keystone-xl-oil/

The original pipeline has caused several spills including one last year that spilled 21,000 gallons of oil in North Dakota. The new pipeline whould cross over the Ogallala aquifer. If a spill would occur over or near the aquifer it would more than likely contaminate drinking and irrigation water for millions of people.
http://switchboard.nrdc.org/blogs/aswift/the_first_keystone_tar_sands_p.html

On prices you can look at this article and read the Cornell study cited with that explains why and how gas price will not decrease and for some will increase 10 to 20 cents per gallon.

Link to last statementFeb 7 2012 10:58 AM

Here is the link to the article about gas prices and the cornell study.
http://mediamatters.org/blog/201201260001

BSFeb 7 2012 12:45 PM

Nice try.

Let me address just one of your claims for now: the idea that the new Keystone line will take volume off of the existing Keystone line:

1. Shippers on the existing line are contractually committed for many years (this was a requirement to even justify the investment in the first pipeline).

2. If oil really was taken away from the central US, there is another pipeline called Capline that ships imported oil from the Gulf up to Patoka. This line has gone from 40,000 barrels/hr to less than 20,000 barrels/hr due to the economy as well as decline in imports of oil from overseas. It doesn't even run every day anymore. If oil were pulled out of the existing Keystone line, Capline would take up the slack.

3. TransCanada doesn't make money on the supposed higher prices in the Gulf. They make money by moving barrels. The first line barely had good enough economics to get built (it's longer and more energy intensive because it's route is lest direct). Do you really think they're going to make one multi-billion dollar investment to destroy another one? Of course not. They'd go bankrupt almost overnight.

4. The new pipeline is meant to carry new Canadian production, not re-route existing production. It's also meant to carry US Bakken crude, which is some of the lightest crude you'll ever find. Currently that crude mostly moves by rail and truck which is less efficient and more prone to spills (i.e. worse for the environment).

I'm glad to see you can Google and post links, but that doesn't mean you understand. I'd be glad to continue this discussion with you, if you'd like. Which point would you like to discuss next?

DougWFeb 9 2012 06:31 PM

"You can see for yourself in this video: http://cspangeek.com/2011/12/transcanada-will-export-keystone-xl-oil/"

All I can see is Ed Marky is an idiot!

The US exports refined product because there is excess refinery capacity compared to current demand. In 2008 the US was a big importer of refined product. The US should shut down refineries so they can stop exporting so Canada can export refined product to US.

But seriously the US is always going to export some diesel as it doesn't use that much. It will import gas for cars that is the way of the world. Why do Americans care if the refined product will be exported? In Canada the left wants to stop the export of crude to get the jobs from refining.

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Switchboard is the staff blog of the Natural Resources Defense Council, the nation’s most effective environmental group. For more about our work, including in-depth policy documents, action alerts and ways you can contribute, visit NRDC.org.

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