The Keystone XL Energy Project Is Much More Than A Pipe Dream

The Keystone XL Energy Project Is Much More Than A Pipe Dream

October 19, 2011
Originally published in Forbes

A recent study from researchers at Cornell University presented some curious findings on the economic impact of Keystone XL, a proposed multibillion dollar extension linking Canada’s rich supply of crude oil to major U.S. refining hubs.

All told, this megaproject will stretch 1,661 miles from Alberta to Texas’s Gulf Coast region. Immediately upon completion, the pipeline will have the capacity to carry 700,000 barrels per day (bpd) and ultimately the ability to transport 900,000 bpd.

So what did the new study conclude? That a $7 billion investment won’t create jobs and may even cost jobs on net, and that the ability to move an additional 900,000 bpd to refineries won’t have the effect of lowering gas prices.

These claims simply defy economic logic — as well as every previous estimate of the economic impact of Keystone XL. Simply put, the study’s conclusions are specious, even absurd.

The Cornell study, which environmentalists have trumpeted, is born of desperation. Facing a likely go-ahead decision from the U.S. Government, the study is a last ditch attempt to drum up opposition to a no-brainer, market-approved project.

In fact, the Keystone XL pipeline will give our country a more stable and cheaper source of fuel and create thousands of quality American jobs. And taxpayers (think Solyndra) will not risk a dime.

Think of the public-policy benefits of the project, the sound private economics aside.

The United States currently consumes 25% of the world’s energy, but produces less than 5 percent. Heavily dependent on foreign oil, America imports 11 million barrels each day.

This need for foreign oil isn’t going to change anytime soon. The 2010 Annual Energy Outlook projects that over 40 percent of U.S. liquid fuel consumption will be supplied by imports through 2035. Global demand for oil will only rise too – 39% between 2005 and 2030.

Also note that oil imports to the United States from South America aren’t holding steady. Mexico and Venezuela, two historically large exporters of crude oil, have radically reduced production in the past few years, making imports from Canada that much more essential.

A new influx of up to 700,000 bpd from Canada will dramatically increase U.S supplies and in turn drive gas prices down.  A study from Energy Policy Research Foundation found a greater supply of Canadian oil could save Gulf Coast refiners almost $500 million annually in transport costs, which, in turn, would mean lower prices for consumers at the pump.

Keystone XL’s impact on cost is simple: a supply of plentiful and easily accessible oil drives down prices for gasoline and other consumer staples.

Construction of Keystone XL will also deliver added jobs and tax revenue at a time when the country needs both. The project requires land to be prepared, miles of pipe to be welded and installed, and 30 new pumping facilities to be built and operated. Thousands of new construction jobs will be immediately necessary.

According to the Canadian Energy Research Institute, by 2019 employment directly related to Keystone XL could grow from 80,000 jobs to 179,000. If the flow of Canadian oil through the United States remains unchanged, however, total employment from the Keystone line will peak at 94,000 in 2019.

The respected Perryman Group found that across the entire economy, an increase in stable oil supplies would create 250,348 permanent jobs from gains in U.S. economic activity. Personal income gains from these jobs would amount to $6.5 billion, stimulating $2.3 billion of retail sales.

These compelling arguments about the benefits of Keystone XL have been giving environmentalists indigestion. Little surprise that the Cornell study is authored by a board member of Greenpeace Canada and financed by Goodman Group, a consulting firm that puts the interest of its environmentalist clients first.

The projections for employment are so low one wonders if the study examined the right pipeline project. But the study changes the game by calculating how many “green” jobs are foregone by the pipeline project to reach its conclusion.

But what does America need more of? Jobs financed by the private sector? Or bubble jobs created by government subsidies? Jobs that generate tax revenue? Or jobs that cost $1.3 million in government loans each, as in the Mojave Solar Project, recent recipient of $1.2 billion in taxpayer largesse compliments of the Department of Energy.

Opponents of Keystone XL are grasping at straws. This pipeline will lower gas prices, create quality jobs, and generate revenue — exactly what America needs right now.