Keystone XL Economics Part II

Following up on Collin’s article yesterday, I want to add an additional perspective on the economics of the Keystone XL pipeline.

First off, while the State Department report on the Keystone XL pipeline suggested that the pipeline will probably not increase greenhouse gas emissions, a report by the nonpartisan Congressional Research Service found that the pipeline would increase greenhouse gas emissions anywhere between 3 and 21 million metric tons annually, assuming that the pipeline will accelerate tar sands oil production. This is mainly due to the fact that refining tar sands oil is far more energy intensive than refining normal crude oil.

Another environmental issue the pipeline raises is the risk of oil spills and potential drinking water contamination. The pipeline runs above the Ogallala Aquifer, which supplies water to 2 million people in Texas and New Mexico. Complicating matters further, according to a New York Times article citing federal reports, the agency tasked with monitoring and enforcing safety standards for the pipeline, the Pipeline and Hazardous Materials Safety Administration, is

“chronically short of inspectors and lacks the resources to hire more, leaving too much of the regulatory control in the hands of the pipeline operators themselves.”

Lastly, it doesn’t even look like the pipeline will create any significant increase in employment of US workers. According to a report by the Cornell University Global Labor Institute, the pipeline will create roughly 2,500-4,650 temporary construction jobs for two years, while creating as few as 50 permanent US pipeline jobs. The State Department’s estimate falls along the same lines, estimating the creation of 5,000-6,000 temporary jobs, while noting that the project would not have a significant impact on long-term employment in the US.

The President now must decide whether potential environmental damage and drinking water contamination is worth the benefit of a few thousand temporary jobs.

2 Replies to “Keystone XL Economics Part II”

  1. Last week Marcia McNutt, Science magazine’s editor in chief and a vocal critic of the Keystone Pipeline, was interviewed on NPR.
    She now supports the pipeline for environment reasons because the alternative is worse: tanker trucks and tanker RR cars. Given that the oil production will happen in Canada regardless of the US position, the pipeline is a less risky means of transportation than the alternatives.

  2. That’s a good point. However, while oil production in Canada will happen regardless, in that piece she notes that the pipeline would be by far the cheapest method of transporting the tar sands oil, which would incentivize increased production of tar sands oil over what is currently being produced. I don’t think people against the pipeline necessarily believe that blocking it will stop tar sands oil production, but hope that it will at least limit the rate production and transport of tar sands oil, and thus slow the rate of forest degradation in Canada.. And as for safety, I’m not entirely convinced, but it may well be the best of some bad options.

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