This Sunday, an estimated 20,000 people will converge on the National Mall in Washington D.C.
to voice their staunch opposition to the proposed Keystone XL project, a 1,700 pipeline connecting the tar sands oil deposits of Alberta, Canada, to oil refineries along the Gulf Coast. The rally, sponsored by the Sierra Club, the Hip-Hop Caucus and 350.org, the grassroots organization founded by the eminent environmental journalist Bill McKibben, promises to be the largest climate demonstration in our nation’s history. The allowance of the measure would have drastic economic effects on the United States.
The proponents of the pipeline have framed their argument using the time-tested dichotomy of jobs versus the environment, implying that sound environmental policy will destroy jobs—a politically potent message in a time of high unemployment. However, I would like to suggest to those who worry about climate change, yet find the jobs line persuasive, that no such tradeoff actually exists. A closer look at the details of the proposal suggests that, all things considered, the Keystone XL may actually have a net negative effect on U.S. employment.
A report from Cornell University’s Global Labor Institute analyzing the claims of TransCanada, the operator of the pipeline, in regards to job creation has found them wanting. According to TransCanada’s own calculations, submitted to the State Department in the application for the project, the proposal would create
a mere 2,500-4,600 temporary jobs for the construction and inspection of the pipeline. As summarized by Canada’s National Energy Board, “the socio-economic impacts of the Keystone XL Project will be of a temporary nature and limited to the relatively short duration of pipeline construction without significant long
term effect on the surrounding communities,” hardly the panacea proponents claim.
TransCanada promises that approval of the pipeline will create an additional 20,000 high-wage U.S. jobs from the manufacture of steel needed for the pipeline, thanks to the company’s pledge to purchase 75% of the steel input from North America companies. This pledge has already been violated. In anticipation of the pipeline’s approval, TransCanada has contracted with two different companies for 50 percent of the required steel. A Russian company, Evraz, would cover 40 percent of the supply, while an Indian company, Welspun, would handle the other 10 percent. This means, of course, that under the best-case scenario, only half of the steel input for the pipe would come from U.S. companies, rather than the promised three-quarters.
Based on TransCanada’s operational history, much of that remaining 50 percent would also likely get purchased from foreign companies, instead of steel manufacturers here at home. For instance, for the Keystone Phase 1 pipeline connecting Alberta to the Patoka, Illinois, oil refinery, TransCanada predominately relied on steel from the same Indian company, Welspun. Clearly, the company’s PR statements promising American jobs bear little relation to reality.
The mention of the Illinois oil refinery above provides a perfect segue into another alleged benefit of the pipeline, lower domestic oil prices. However, as detailed in TransCanada’s own report to Canada’s National Energy Board, approval of the pipeline would raise gas prices in the Midwest by approximately 10 to 20 cents
per gallon. This would occur as the tar sands oil currently routed to the Illinois refinery would instead travel down to the Gulf Coast, where it would fetch a higher price on the international oil market. The resulting spike in gas prices would force Midwest drivers to pay an additional $2 to $4 billion dollars at the pump every year, a huge drain on the regional economy in a period of sluggish growth. Such increased outlays on gas would effectively cancel out any resulting job gains from the pipeline, due to the decreased purchasing power of
Midwest consumers.
Furthermore, the approximately 1 million barrels a day supplied from the proposed pipeline constitutes a measly 1 percent of the global oil supply, meaning the project will have no effect whatsoever on global oil prices. Thus, the pipeline will cause Midwest gas prices to skyrocket in precarious economic times, while exerting no downward pressure on the price paid by other U.S. consumers. TransCanada's claims of lower prices at the pump once again ring hollow.
Even from a purely economic point of view, the alleged benefits of the Keystone XL pipeline fall
apart upon close inspection. When combined with the immense environmental consequences of the project, the decision becomes an easy one. President Obama must reject the proposed Keystone XL pipeline. Hopefully, this Sunday, he hears the voices of the crowd on the National Mall loud and clear.
