US pipeline backers make big promises about jobs, growth
TransCanada has quickly filed a new application to build Keystone XL, one of two big oil pipelines being given a second chance by President Donald Trump. Former President Barack Obama rejected the Keystone XL in 2015. The Army halted construction of the Dakota Access pipeline last month.
The move by Trump fulfills a campaign promise to revive the projects, which he says will create thousands of jobs and generate taxes for states and communities. However, the number of jobs created and the economic benefits have been hotly debated. Many experts believe any impact on the US economy will be small. Despite Trump’s executive orders, both projects face likely court fights by environmental groups, and the Keystone XL pipeline faces uncertain demand from oil shippers.
JOBS
According to a 2014 report by the US State Department, Keystone XL would support about 42,100 jobs including about 3,900 workers directly involved in construction. Workers, including those indirectly supported by the pipeline, would earn about $2 billion.
Once construction ends and oil starts flowing, the pipeline would support just 35 permanent jobs, according to the report. The Dakota Access project has created about 12,000 construction jobs, according to project leader Energy Transfer Partners LP. But most sections of the pipeline are finished and most of the jobs are too.
ECONOMIC IMPACT
The State Department said that construction of Keystone XL would contribute around $3.4 billion to the nation’s output. The companies building the Dakota Access pipeline say they have spent more than $3.5 billion and would spend “hundreds of millions a month” to finish the work.
Those sums, however, are insignificant in the $18 trillion US economy. The XL pipeline would contribute about 0.02 percent to the nation’s gross domestic product. “The macroeconomic implications of the latest executive orders on their own will be relatively minor, in our view” although Trump’s orders “reinforce the message that the federal government has become much more pro-business,” said Jim O’Sullivan, chief US economist at High Frequency Economics.
Environmental groups say the pipeline companies are overstating the economic benefits of their projects and understating the impact of using tar-sands oil, which they say generates higher carbon emissions in production than other crude. A civil engineer at the University of Nebraska concluded that TransCanada also significantly underestimated the likelihood of major pipeline spills.
TAXES
The State Department estimated that Keystone XL would generate $70 million in additional state and local taxes during construction and $55.6 million in property taxes once the pipeline begins operating.
The Dakota Access companies estimate that the project will result in $156 million in sales and income taxes during construction and $55 million in annual property taxes.
OIL
Keystone XL would carry about 830,000 barrels a day from Alberta to Nebraska. TransCanada, which is seeking $15 billion in damages from the United States over the 2015 rejection of its previous application, said it reapplied on Thursday. The State Department has 60 days to make a decision.
At an investor conference earlier this week, TransCanada CEO Russell Girling was optimistic but not convinced that Keystone XL can get built because of uncertainty about demand from oil producers.
“I believe the economics for this project are still there, but we’ll see,” Girling said. “This wasn’t in our planning horizon in the middle of last year. We only have just reengaged with our shippers on that topic.” Afolabi Ogunnaike, an analyst with Wood Mackenzie, said rising costs, continuing opposition from environmentalists, and competition from two other planned pipelines will complicate XL’s future. —AP