Should the Keystone XL Pipeline Be Constructed?

Two weeks ago, President Obama was forced to rule on the Keystone XL pipeline. He had hoped to push the proposal off until 2013 when election year politics would not play a part. However, pressed to make a decision, the President argued he did not have enough time to the project's environmental impacts fully - and therefore rejected the project. Since the pipeline hits home on an issue Matt and I both feel strongly about -- the US' energy future -- and it came up in our previous debate on Solyndra (which you can catch up on here), we decided to tackle this issue in a complete post.

Opening Statement by Stephen (1/30/12):

Rejecting Keystone XL shows us so much about the liberal agenda. It is anti-jobs, anti-consumer, and pro-environmental crusades (but not even good at that). Honestly, the debate seems so one sided, I'm really looking forward to seeing what reasons there are for not constructing this. Here's why we should have:

1 – The pipeline would have employed 13,000 Americans to construct it, 7,000 manufacturing jobs, and 118,000 spin-off jobs. This is in addition to all the businesses that would prosper along the route. At a time when unemployment is at 8.5%, why wouldn't we like this? Even Obama's own jobs council advised that the US must embrace an “all-inapproach” to the energy sector, and further went on to promote safe development of pipelines. #jobcreationfail

More after the jump...

2 – Keystone XL also would have created jobs at Gulf coast refineries, and even been exported to Latin America, achieving the president's goals of increasing US exports. #exportingfail

3 – It would reduce our dependence on oil from parts of the world that are hostile towards us. Yes, Canada is a foreign nation, but when we say we want to reduce our dependency on foreign oil, I don’t think we’re talking about NAFTA partners like Canada. Instead, Mr. Obama (who came into office with the hopes of improving international relations) decided to push away a close ally. #internationalrelationsfail

4 – Climate change, which some leftist opponents really want to combat (and end our use of oil/drive up costs to promote a green agenda) won’t even be reduced. One, Canada will bring the oil to the market. So instead,they will build the pipeline to the pacific and send it (via tanker, yes largercarbon footprint and higher chance of spill) to China (who also doesn’t have the same standards we do for production). Two, we will still consume the same amount of oil, which we will also import via tanker. #climatechangepreventionfail

4a – Environmental concerns over the Keystone XL pipeline were nonsense. First, Obama’s State Department – which reviewed the pipeline for three years... so much for cutting red tape! – did not find any serious environmental issues. One ofthe major environmental concerns was “137 federally restricted and regulated noxious weeds”, will Obama tell nearly 160,000 people they don’t have a job because we’re concerned about weeds? Two, there’s already 21,000 miles of pipeline under Nebraska, so concern about the aquifers are also misguided. Additionally,as the American Enterprise Institute’s Kenneth Green pointed out, the oil would have to flow uphill… Three, like I said above, China will still burn the oil,but will get it from oil tankers instead of a pipeline. #oilflowsuphill #noxiousweeds #environmentalprotectionfail

5 – It would have put the consumer first. Existing pipelineshave caused a regional glut, which is why West Texas Crude is cheaper than other types of crude. Thus, moving crude towards the Gulf and allowing it to flow to the east would reduce prices on the East Coast. #protectingtheconsumerfail


****
Posted by Matt (2/2/11):

To hear Stephen tell it, liberals like myself hate jobs, consumers, and energy - and will stop at nothing to impose our radical environmentalist agenda on America, economy be damned. The real truth behind Keystone XL is a bit more complicated, and mostly revolves around the fact that none of the arguments in favor of it stand up to scrutiny. Since I don't have much space and, like Stephen, have a lot to say on this topic, let's refute the three worst claims my opponent made in his opening statement:

1 - Inflated Jobs Numbers.
Stephen cited a study commissioned by TransCanada, the very oil company seeking to build the pipeline (lots of credibility there), claiming that 120,000 new jobs would be created by the project. The truth is that TransCanada's own original permit application for the pipeline in 2008 estimated “a peak workforce of approximately 3,500 to 4,200 construction personnel." That's a pretty big discrepancy. Additionally, in the only independent analysis of the pipeline's job creating potential, the Cornell Global Labor Institute concluded that Keystone XL would result in no more than 1,400 temporary construction jobs.

It gets worse: the so-called "spin-off" jobs that Stephen referred to as part of that 120,000 figure include the following:

51 dancers and choreographers, 138 dentists, 176 dental hygienists, 100 librarians, 510 bread bakers, 448 clergy, 154 stenographers, 865 hairdressers, 136 manicurists, 110 shampooers, 65 farmers, and (our favorite) 1,714 bartenders.
(The Washington Post)

510 bread bakers? Really? You have to wonder whether TransCanada actually had someone study this, or whether a bunch of their executives just sat in a room getting hammered and pulling numbers out of a hat. The jobs argument for Keystone XL is a crime against any semblance of honesty. #reliablesources

2 - The Bogus Foreign Oil/Consumer Argument
The Keystone XL pipeline would not lessen America's dependence on foreign oil, because the oil from the pipeline is designed to be exported to Europe and Latin America. What's more - the pipeline would actually raise gas prices in the Midwest, by diverting stored regional oil reserves to the Gulf Coast, where they could be sold for a higher price. What's more - since the revenues TransCanada would earn on those exports are tax-free, the American taxpayer would not see any benefit at all. #disappearingarguments

3 - Environmental Risks Are No Big Deal
You can always expect a stridently pro-business-at-all-costs conservative such as my opponent to minimize environmental risks, but considering the other massive oil pipeline operated by TransCanada (Keystone 1) spilled twelve times in its first year of operation, I'm a bit more skeptical. Remember the BP oil spill? I don't know about our readers, but I'm of the view that putting a leaky oil pipeline over an aquifer providing fresh water to 2 million Americans is not a good idea. As for the State Department review that Stephen mentioned, it was conducted by a TransCanada contractor - like the inflated jobs estimates, we should take this with a very large grain of salt. #cronycapitalism #boughtandpaidfor

In conclusion - before we move on to what promises to be a lively back and forth on this, let's break down the absurdity of this situation: A foreign oil company asked to build an oil pipeline across the heartland of the United States that would create a minimal amount of temporary construction jobs while exposing Americans to all of the risks from the pipeline and none of the rewards. It then commissioned its own study with laughably inflated employment claims, and contracted out its own environmental review of the project - and still almost succeeded in winning approval.

Remind me why TransCanada should have any credibility or why building this pipeline is in any way a good idea?

****
Stephen's First Response (2/4/12):

First, let’s look at the argument Matt makes. Even if he’sabsolutely correct (spoiler alert: he’s totally wrong), is that a good enoughreason to not construct the pipeline? Even if it will only create 1,400 temporary construction workers, is that a good enough reason to not approve it?The shovel ready jobs Obama wanted in 2009 were temporary, and guess whatconstruction jobs always are. You don’t need to keep people on after they finish the bridge…

1 - Another liberal misunderstanding of labor markets. Apparently in Matt’s world, pipes just magically appear and don’t need manufacturing. Futhermore, these construction workers are going to be extremely busy! In the original 36-month project, which was 2,147 miles long, 9,000 construction workers were employed. Using that same ratio (which seems incredibly reasonable and scientific), we get 7,126 workers. As for spin off workers, this might also be amazing, but economists look at how much wealth will be createdand figure out what would be used. Amazingly enough, more people with money will want bread, which (crazy, I know!) will require someone to be employed to bake it! Matt, can you petition the government to send me a subsidized check onyour behalf? You didn’t get much out of economics.

2 - More liberal economic misconceptions. First, there are more jobs -- when oil arrives at Gulf Coast refineries it will need to be refined and shipped. Second, not all will go to Latin America (but besides, why is this a bad thing?), and enough will be sent East to meet demand. Assuming otherwise is just a flat out assertion. Third, better go study up on supply and demand. A regional glut is causing a market imbalance, so if you reversed the flows, the east coast (too) would see reduced prices while the Midwest saw prices balanced out. Come on: you’ve heard of supply & demand right? More supply doesn’t equal higher prices.

3 - If the pipeline happens either way, then the environmental risk isn’t eliminated. If anything, it’s exacerbated because we’re including overseas transportation. BP happened with new techniques, not the safest way to transport oil. Besides, do the laws of physics cease to apply in Nebraska? Then why would we think oil will flow uphill to the aquifer?

****
Posted by Matt (2/6/12):

One core weakness I’ve noticed in the conservative economic argument, which sadly seems to have afflicted Stephen as well as his congressional and media counterparts, is the basic assumption that a belief in the infallibility of free markets also constitutes a superior understanding of them. Liberals don’t misunderstand markets. We’re just better at managing them. Here's another run-down of why Stephen's pro-Keystone argument is trash:

• Yes the steel for Keystone XL, in its entire monstrosity, will need to be manufactured before workers can lay that pipe. It just so happens that TransCanada plans to have the steel manufactured in India, which is an awfully long commute from the states on the pipeline’s route. Not too many American jobs created there.
• While I will admit to thinking that your dig at my economic background and thinly-veiled reference to our prior debate on higher education was pretty funny, I think you may have gotten as little out of math as I am alleged to have gotten out of economics. The problem with your argument isn’t that more workers with money will want bread – it’s that there won’t be that many workers with money to want bread, because the pipeline will not create nearly as many jobs as its proponents claim. Remember how the only independent analysis of Keystone XL found that it would create just 1,400 temporary construction jobs? Unless there’s going to be one bread baker for every 2.75 workers (find me a construction worker – or anyone – who has a personal assistant dedicated to baking bread and I might be more inclined to support your argument), those economic multiplier figures are awfully high.
• I’m not sure where the support for your contention that the pipeline’s oil will be sent to the East Coast, or anywhere else in the United States, comes from, but with overall demand for oil decreasing in the US, the oil from Keystone XL has export product written all over it. So I’m not sure how that lowers gas prices in the non-Midwest. What it does do is raise gas prices in the Midwest by sending that oil overseas, to the benefit of oil company shareholders but certainly not average citizens.
• Back to the environment – your argument that “the pipeline will happen either way, and the damage will be worse elsewhere” is total bs. While that may be the case, there’s a fundamental difference for policymakers between an oil spill in the heart of America and an oil spill somewhere else. For the sake of our climate, I don’t want Keystone XL or anything like it getting built at all. But the larger debate isn’t about how we prevent oil spills. It’s about whether or not to expose Middle America to the risk of a spill over a major aquifer. Given TransCanada’s lackluster safety record, that’s a terrible idea.

Your move.

****
Stephen's Closing Argument (2/6/12):

Ok, so really, let's break this argument down to its very core. If you could create just 1 job, that requires no government money to create, according to Matt, we shouldn't. Pure and simple, Matt is saying the private sector should not be allowed to create even small amounts of jobs. Why they shouldn't be able to do this, remains a mystery. Furthermore, Matt's ENTIRE argument is that it won't be that many jobs. Fine, let's assume Matt's 100% correct. Why would that be a good reason to not create 1,400 temporary jobs? Remember that all the stimulus jobs that the government created from its $814B plan (according to the administration) cost $271,000/job (btw Matt supported all of this). Since this was focused on infrastructure construction, it's fair to assume that they employed, drum roll please, construction workers (it was actually the goal to put construction workers back to work since they were hit hardest from the housing collapse)! Yay! According to Matt you can only hire construction workers if it costs the taxpayer money, duh. Maybe TransCanada's problem was not luring Matt in by getting governmental aid. If they could have received $270,000/job Matt would have been all over that. Environmental concerns? Well, since neither of us are scientists of any means, I'll defer to this man whose spent 40 years studying the very aquifer in question.

To finish up defending my position that Matt is vastly understating the total jobs the pipeline would create, I'll be running a little economic modelling in the comments below. I invite our readers to comment with me.

Finally, Matt, you're assertion that the pipeline would only benefit shareholders is totally off. Goldman Sachs believes TransCanada's EPS will rise between 5 to 10% due to a reduction in capital expenditures from the pipeline not occurring. Whoops, guess corporate greed wins again. Only this time they didn't get the enjoyment of firing people, the government did it for them.

****
Posted by Matt (2/6/11):

Hard to blame Stephen for blatantly mischaracterizing my argument, when the pro-Keystone position is so tenuous. Anyone reading this debate knows that my ENTIRE argument is not about jobs. Jobs play a big role in it, because they are being presented as the main case for the pipeline by its proponents, and are the main criticism against Obama for rejecting it. But at the end of the day this is about risks versus rewards.

RISKS

• A foreign oil company with a terrible safety record wants to construct a massive oil pipeline that will cut its way through six US states and over a major aquifer.

REWARDS?

• TransCanada is not going to sell any of that oil in the US; it's all going overseas, and will take a surplus of Midwestern oil with it, raising gas prices.

• Since the oil will be exported from a foreign trade zone, the government will not collect any taxes on it, meaning taxpayers will not be rewarded in any way.

• Steve can run all the economic models he wants for the jobs impact, but I'll trust the Cornell Research Group, which has still run the only impartial study on the jobs potential of Keystone XL: 1,400 temporary construction jobs. Not an acceptable amount, given the risk that America is being asked to take on. That's why TransCanada tried to cook the numbers and overstate their jobs claims by a factor of over 100 (their study said KXL would create 120,000 jobs, an argument which Stephen repeated).

Yes Steve I read your link attempting to allay the environmental concerns of pipeline opponents. No I'm not convinced that settles the safety issue. Part of the aquifer would still be in danger, and non aquifer-related spills are also generally not very good for land and people. People like Stephen think we should trust oil companies when they give us reassurances on safety. I don't.

Lastly, after unsuccessfully attempting to discredit my economic bonafides, I see that my opponent has gone to strategy #2 in the conservative playbook - refer to liberals as private enterprise-hating socialists when they disagree with letting industry do whatever it wants. But actually I'm a pretty big fan of private business, which is creating 15 times more jobs in clean energy right now than Keystone XL would create at the very highest end of State Department estimates (which are higher than in the independent study). If Stephen and his conservative brethren really cared about jobs, and not just about making it easier for oil companies to enrich themselves, they would stop flying off the handle about this pipeline and figure out how we can accelerate the development of truly domestic sources of energy.