Photo: Andrew Harrer, Bloomberg
Morphing into a political and economic lightning rod, the current Keystone pipeline plan’s fate was decided this week…Permit DENIED. The decision was met with scathing criticisms from Republicans and praise from the President’s supporters. While much of the debate bounded between the two dominant issues; job creation and environmental concerns, few have asked, “Why?” Why do we need another pipeline for Canadian crude?
According to its supporters the TransCanada Keystone XL pipeline will provide the US the security of importing oil from a friendly country. It will bring the US much needed oil supplies. It is privately-funded, costing taxpayers nothing. And, most importantly, it will inject our struggling economy with 20,000 new jobs.
The opposition’s arguments center predominantly on the environmental concerns. The pipeline represents a shot across the bow of the sustainable energy commitment to reduce our reliance on fossil fuels. There are additional concerns with the project’s route through large wetland ecosystems and wildlife migration areas. The pipeline also traverses the Ogallala Aquifer, one of the largest sources of fresh water in the world which, spans 8 states and supplies drinking and agricultural water to millions of people. A leak along the pipeline could pollute these water sources impacting a multitude of Americans and the country’s agricultural heartland. The leak concern is borne from a special permit the company applied for to use thinner than normal steel as a cost saving measure. This coupled with the pipeline’s high pressures, an industry-wide history of maintenance failures and human error related incidents and the route’s passage through an active seismic zone – which experienced a 4.3 earthquake in 2002 - the opposition’s apprehension is understandable.
Now looking through these claims both sides do have merit. Ensuring an oil supply from a US-friendly country is a positive prospect given the troubled regions we import from regularly. The pipeline will also supply our hungry demand for oil. These reasons, however, appear to imply increased supplies from a stable country will reduce prices for US consumers. Unfortunately, irrespective of its source, oil will continue to be a commodity traded on a global, speculative market and prices here will still be subject to the same volatile activity we see now. The project is also touted as privately-funded, costing the US taxpayer nothing, the antithesis to the President’s Jobs Bill and additional stimulus for infrastructure development. What is not discussed are the inevitable subsidies and tax benefits TransCanada will receive from state and federal levels. As with American oil companies, whose subsidies cost millions of dollars each year, how much would the subsidies for the Keystone Pipeline cost in the end?
20,000 new US jobs!
Twenty thousand jobs…taken by itself, this estimate is enough, in this desperate economic climate, to propel this project forward…and fast. We need jobs and a bump of 20,000 will do so much for many hard working, unemployed Americans. Right? Absolutely. Unfortunately, there is a stubborn snag chafing at this optimistic figure. The estimate, from TransCanada itself, is based on counting each annually renewed, workers’ contract as a separate job, essentially counting each job two, three or four times depending on the project’s duration. The State Department’s estimate of 5,000-6,000 jobs may reflect a more accurate assessment. Nonetheless, for a member of the long-term unemployed and their dependents being included in the project’s labor force the high-low estimates matter little compared to the potential of holding a job once more. But is the company unduly inflating the figures to garner public and political support, raising hopes of many living in dire straits?
The opposition’s arguments possess their own merits. The potential damage to wetland ecosystems and migratory wildlife habitats already undergoing pressure from a changing climate is deeply concerning. More disconcerting is the potential contamination of the Ogallala Aquifer which could conceivably impact millions across the the Midwestern US. The company has expressed assurances that all precautions are taken to ensure safety but as the Gulf oil spill illustrated corners are cut and it only takes one accident to cause lasting damage. These concerns gain credibility given recent leaks along the TransAlaskan Pipeline in 2006, 2010 and 2011 resulting in spills of several thousands barrels. These incidents were attributed to maintenance failures and do not include spills associated with sabotage. If the claims of the specially permitted, lower quality steel is true one must ask, where else on the project is quality sacrificed and how will this increase the risk of spills.
Why do we need another pipeline?
Throughout the debate many questions have been asked. Numerous issues raised on both sides yet no one is asking, “Do we really need another pipeline?” The supporters of the pipeline raised the benefit of a grand supply of oil from a friendly neighbor. No more worries about hostile regions holding the US hostage to our demands. While this sounds like the perfect solution, it implies we are not already importing oil from Canada. We are, in fact, the largest importer of oil from Canada which we access through existing pipelines into the US. This oil flows into the 59 million barrel storage facility in Cushing, Oklahoma, owned and operated by New York Mercantile Exchange. This is not the interesting part, however. The interesting, or intriguing part is that these large facilities are full of oil, so full the area is currently going through a massive expansion to significantly increase its storage capacity. With this main oil hub already bursting at its seams, why is the public perception one of desperation? Why is this stored oil not being made available? And if the flow of crude is at such a rate the primary oil storage hub is in need of expansion then why do we need another pipeline? As it turns out the answer to those questions and the real issue revolves around moving the oil out of Cushing to the refineries along the Gulf Coast.
Given this not so impressive revelation – the information was easy to find – a more directed question begs to be answered. If the US is already bringing in more oil than it can handle then why is the focus placed on increasing the supply rather than more effectively dealing with our current overabundance?
The President’s decision on this issue centered around, whether the Keystone XL Pipeline was in the national interest or not. Given the arguments from both sides, was it worth the risks to move forward with the project in its current form? Is it in the nations interest or is it more in the interest of a few large oil companies? And based on the surpluses we currently have, why place human and environmental health at risk with an apparently unnecessary endeavor? In the end, the political volleying has to give way, find substantive answers to these questions and acknowledge the realities that perhaps the money, time and risk can be better managed by focusing resources where they are actually needed.