Report: Keystone XL job claims are exaggerated

TransCanada’s claims that an estimated 20,000 construction and manufacturing jobs would be created if the Obama administration approves the controversial Keystone XL pipeline are “significantly inflated,” according to a new analysis of the project released today.

The assessment, by the Cornell University Global Labor Institute, concludes that “the construction of Keystone XL will create far fewer jobs in the U.S. than its proponents have claimed and may actually destroy more jobs than it generates.”

The economic effects of the project have emerged as a major issue during public meetings this week along the pipeline’s 1,700 mile route, and they are a key factor in the State Department’s analysis of whether Keystone XL is in the “national interest.” Secretary of State Hillary Clinton is expected to make that determination before the end of the year, possibly as early as mid-November.

Project backers, including TransCanada Corp., the American Petroleum Institute and the Teamsters Union, have touted studies showing that 20,000 direct construction and manufacturing jobs would be created during the two years Keystone XL is built. API also has argued that the pipeline and related development of Canada’s oil sands could indirectly support hundreds of thousands of jobs.

The latest study from Cornell’s labor institute says those claims are flawed, because they are pegged to a potential project budget of $7 billion, which could be nearly double what really goes into construction of the U.S. portion of the pipeline. According to TransCanada’s permit application, the capital cost of the U.S. portion of the project is estimated to be $5.4 billion.

The Cornell analysts also say that if Keystone XL’s construction results in potentially higher gasoline prices in Midwest markets by raising the cost of oil sands crude sold to refineries, the additional fuel costs would suppress other spending and ultimately kill jobs.

Keystone XL would link oil sands developments in Alberta, Canada with Gulf Coast refineries, expanding an existing pipeline that now ends in Cushing, Okla. Because the oil sands crude is now essentially trapped in that Midwest market — without easy transport options to east Texas — refineries in the region have been able to buy it at a discount. If Keystone XL is approved — expanding the U.S. market for oil sands crude and giving Gulf Coast refineries easier access to the product — the discount is sure to disappear.

Sean Sweeney, director of the Global Labor Institute, said the findings show that “the United States should be highly skeptical of KXL as an important source of American jobs.”

But even one new job in the U.S. is a benefit that shouldn’t be dismissed, said Rayola Dougher, a senior economic adviser for the API. She said it made no sense for “people in their ivory towers (to be) fighting against even one job” that could be created by the project.

And even if job-creation claims turn out to be half of what has been forecast — 10,000 instead of 20,000 — Dougher said that is a major “opportunity” for the United States.

Dougher also noted another possible economic benefit from the pipeline — that U.S. oil money would be going to a country that spends heavily in America. “Every dollar we spend on Canadian oil, they spend 90 cents on the United States,” Dougher said.

In a statement, API called the Cornell report’s conclusion “preposterous.” The trade group added:

“The Keystone XL pipeline promises to be a massive job creator, and to attempt to stop its approval is an affront to the 25 million Americans who are either unemployed or underemployed.”

The fight over the economic effects of Keystone XL is just the latest battle over the pipeline, which has pitted environmental advocates against the oil industry for the three years that TransCanada has been pursuing a presidential permit for the project.

The fate of Keystone XL lies in the Obama administration’s hands, because it would cross the U.S.-Canada border.

Environmentalists worry that the pipeline would expand the marketplace for diluted bitumen and synthetic crudes that are estimated to produce more greenhouse gas emissions over their entire life cycles — from production to combustion — than some alternatives. Conservationists and some landowners along the planned route also have sounded the alarm about possible spills that could taint groundwater supplies, particularly the Ogallala Aquifer that supplies drinking water to roughly 2 million people.

Oil industry leaders and congressional Republicans argue that Keystone XL is essential to supply the U.S. with crude from a friendly North American ally.

In recent days, foes of the project have raised questions about how a TransCanada representative lobbied the State Department for approval. Before that, environmentalists were flagging concerns that the diluted bitumen and synthetic crude oil that would be carried by Keystone XL could be more corrosive than the crudes carried by other pipelines, upping the risk of erosion and spills.

9 Comments

  1. KB

    I doubt if the folks at Cornell have ever even seen a pipeline or a rig, much less a bbl of oil.

    #1
  2. David Gower

    No cost to tax payers and creating jobs. Hello feds, approve this deal and get out of the way!

    #2
  3. olddispatcher

    Note to Cornell…..

    In the real world there are oils which are more corrosive than others. The pipeline industry found this out about 100 years ago.

    So this magic new product was created, a liquid known as ‘anti-corrosion fluid’, and it is injected into the line at pumping stations along the way.

    Then came the rise of the ‘smart-pigs’, which allowed the few remaining humans to monitor the insides of a pipeline and spot corrosion before it can really get started and do some internal damage.

    And there are those that walk among us still, Engineers they are called, that understand these things. Perhaps you should talk to some of them and see what they think of your findings. I know it all sounds like Magic, and maybe it is, but it sure enough works for other pipelines and I see no reason it would not work for this one.

    #3
  4. Adam

    Cornell is basing its data extrapolation on a guess that oil costs will go up in the midwest, which will raise costs to consumers in the midwest. However, they convenivently forget to account for the benefits of lower overall gasoline prices for the rest of the country. For some reason, Cornell thinks that only midwest consumers spend money for gas.

    By their logic, I would argue that any oil produced in Canada should not be allowed to leave the country since that would only make gas prices higher in Canada.

    #4
  5. Mike H.

    olddispatcher: Yes, there’s anti-corrosives around for crude oil. But, remember how BP decided to skip cleaning pig runs on that North Slope crude line, causing any anti-corrosives inject to be useless. And, they didn’t bother with any smart pig runs. The results? A crude oil pipeline shut down in 2006 that affected crude prices all over the world. One of the world’s largest energy companies got penny wise, pound foolish.

    Now, as far as jobs, look at the number of jobs REX created, and for how long. That was the most recent large, long pipeline build in the US.

    #5
  6. meetwoodflac

    why was it necessary for Cornell to weigh in anyway? Their familiarity with oil is limited to stains in their parking lots at best. Worthless study and a real indictment of academia.

    #6
  7. olddispatcher

    Mike…..

    I was trying to work in the BP/North Slope thing but I could not figure out a way to do it without making it look like I was bashing BP.

    All the tools in the world are no good if they are not used.

    But anyone who has been in the pipeline business for more than a week understands they have to be maintained. If your line is not pigged you are saving a few hours of work each month and watching your means of operation desolve before your eyes. Cutting corners, as BP did on the North Slope, never saves money.

    The point I was trying to make was that I am not sold on their theory of the pipe caving into the Earth just because of the type of crude run through it. I know of some sour crude lines that have been running for many years, but they have also been maintained by many people with many dollars during their lifespan.

    And they don’t leak.

    #7
  8. Woodlands Dad

    Whoa there, big fella; if any jobs numbers have been inflated it is the in the area of green jobs, not in the oil and gas sector. Obama is the biggest liar of jobs created, not the Keystone pipeline people.

    #8
  9. Mike H.

    olddispatcher: There’s been other pipelines that have also cut corners on maintenance, leading to disaster. EPNG ignored several internal corrosion incidents, until 12 people died near Carlsbad in 2000. Their suppliers did not always supply pipeline quality gas, yet they didn’t have a sure fire way to monitor corrosives there. EPNG didn’t run cleaning pigs on mush of their lines to sweep out the “junk” in it.

    Then, the Varanus Gas Pipeline failure in Australia, where they had to replace a lot of pipeline, it sounds like they ignored external corrosion. It was so bad they couldn’t just put in a short bypass, leading to big financial losses for industries they supplied.

    It would not be that tough for someone like API to run a short closed loop pipeline to study erosion rates with tar sands crude. I do know some products pipelines had valve stem seal failures with oxygenated gasoline, that sounds like that particular issue was not well studied beforehand.

    #9