State Department Finds No Environmental Objections to Keystone XL Construction

On January 31, the State Department released its final Environmental Impact Statement on the Keystone XL pipeline, concluding once again that its construction would have a net neutral effect on carbon emissions.

The study also confirms that the pipeline itself would have little to no impact on Canadian oil sands extraction rates or on global oil consumption. Canada will continue to develop the oil sands and consumers will continue to buy oil for the foreseeable future with or without the Keystone XL.

The relevant questions surrounding the pipeline’s construction are who will benefit from the development and transit of this resource and how will it make its way from Canada to the world market?

Economic Benefits of the Keystone XL

The Keystone XL is a job creator. The number of jobs that will accrue from the project ranges from a low of 2,000 (Cornell University Global Labor Institute) to the recent State Department’s report which projects 42,100, but even the most modest estimates concede that some direct and indirect jobs will be created. The construction of just the southern leg of Keystone XL has already created 4,844 direct jobs, not even accounting for indirect jobs. However, the majority of the jobs are only temporary—as is the nature of construction. The State Department noted that once the project is finished, it would support 50 jobs: 35 permanent positions and 15 temporary contractors.

The Keystone XL will also generate revenues. The State Department concluded that the pipeline’s construction will inject approximately $3.4 billion into the economy, and employment earnings will total $2.05 billion. In its first year of operation alone, Keystone would generate property taxes of approximately $34.5 million distributed among 31 counties in three states. Short-term revenues from sales and use taxes will total roughly $65 million in states that have sales and use taxes.

Pipeline vs. Rail

In the absence of Keystone XL, TransCanada is pursuing the Energy East Pipeline Project, connecting oil from Alberta and Saskatchewan to refineries in Eastern Canada, and Enbridge’s Northern Gateway Pipeline to western Canada is awaiting federal government approval.

Until then, more Alberta oil will be transported by rail despite the fact that the US Department of Transportation considers pipelines the safest mode of oil transport, carrying significantly less risk than rail. The derailment in Lac Megantic, Quebec leading to 47 deaths last summer and the evacuation of Casselton, North Dakota following the explosion of a train carrying oil in December bring DOT’s assessment into sharp relief. The State Department estimates rail transport will likely result in an additional 6 deaths per year and will lead to an increased number of oil spills and leakage as well.

While pipelines are generally safer, the State Department concluded that the Keystone XL pipeline was safer than other typically constructed pipelines in the US. This is not surprising since TransCanada has voluntarily agreed to fifty-seven additional safety measures and invested $1.4 billion in pipeline safety and management programs, in response to a 2013 State Department Environmental Impact Statement.

Next Steps

TransCanada first applied for the Keystone XL permit in 2008, and the project has been subjected to five federal reviews and dozens of public meetings. A ninety-day interagency period, allowing various federal agencies to submit comments on the pipeline began with the release of the State Department report. A concurrent thirty-day window for public consultation began on February 5 to conclude on Friday, March 7 calling for public comment on whether or not the Keystone XL is in national interest.

President Obama faces no hard deadline for a decision on whether or not to approve the Keystone project and, in so, may opt to delay his decision past the midterm November elections, unless pressure from Canada and domestic voices force his hand.

The Canadian element will play out in the next coming few weeks as Obama meets with Prime Minister Stephen Harper at a trilateral summit in Mexico. Dr. Alexander Moens, senior fellow at the Fraser Institute, has noted that declines in both merchandise and service trade add increased political pressure from the Canadian side, given that in 2012, Canada’s trade surplus with the U.S. fell sharply from $77 billion to $35 billion.

The Keystone XL Pipeline will have a minimal environmental impact but has become a symbol by many in the environmental community of what they see as America’s untenable reliance on fossil fuels.

However, in the absence of credible energy alternatives, we will continue to consume oil and Canada will continue to produce it, so heralding production by an invaluable ally that has proven itself an admirable steward of the environment seems to be in the US national interest. Our interest is also served by reaping the economic benefits from Canada’s bounty at a time when there are three unemployed Americans for each job opening. Given the facts, it is difficult not to conclude that approval of the Keystone XL Pipeline is in the United States’ national interest.

By: Jonah Bennett – International Research Intern and Karla Jones – International Relations Task Force Director.

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