Cornell Report Busts Myth of Keystone XL Job Creation

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Proponents of the controversial Keystone XL pipeline project would like you to believe that, if approved, its construction will put hundreds of thousands of Americans to work. This is plainly untrue, according to a new report by the Cornell University Global Labor Institute.

TransCanada, the Canadian company behind the project, has spent the past few years making ambitious claims about the jobs that would be created by construction of the pipeline, which would carry diluted bitumen (or DilBit) crude 1,700 miles across six Great Plains states, 1,904 waterways, and the nationโ€™s largest freshwaterย aquifer.

These jobs claims have grown more optimistic as the project has found itself the subject of increased scrutiny. This National Wildlife Federation post rounds up TransCanadaโ€™s mysteriously rising jobsย claims:

In 2008, a report included in TransCanadaโ€™s Presidential Permit application for Keystone XL to the State Department said they anticipate โ€œa peak workforce of approximately 3,500 to 4,200 construction personnelโ€ to build the pipeline. In 2010, TransCanada put out a press release that said, โ€œDuring construction, Keystone XL would create 13,000 jobs and further produce 118,000 spin-off jobs.โ€ In 2011, TransCanada put out a fact sheet that said Keystone XL would โ€œcreate about 20,000 construction and manufacturingย jobs.โ€

In reality, according to the exhaustively researched Cornell report, even the earliest, most modest claims seemย unrealistic.

In fact, in Pipe Dreams? Jobs Gained, Jobs Lost by the Construction of Keystone XL, the institute says more jobs could actually be destroyed than created by theย pipeline.

Letโ€™s dive into the Cornell research. Here are a few of the reportโ€™s main findings that, by my reading, were mostย convincing.

ยปย The industryโ€™s US jobs claims are linked to a $7 billion KXL project budget. However, the budget for KXL that will have a bearing on US jobs figures is dramatically lowerโ€”only around $3 to $4 billion. A lower project budget means fewerย jobs.

That $7 billion figure is everywhere in TransCanadaโ€™s literature, but $1.6 billion of that is for the Canadian portion of the pipeline, which wouldnโ€™t impact American jobs. Another $1.3 billion is already committed to be spent, whether or not the pipeline is approved. Only $3.9 billion in the projectโ€™s budget for both the U.S. and Canadian portions of the pipeline, according to TransCanadaโ€™s own financial statements. The report calculates that only between $3 to $4 billion would be spent within the U.S.

ยป The project will create no more than 2,500-4,650 temporary direct construction jobs for two years, according to TransCanadaโ€™s own data supplied to the Stateย Department.

ยป The companyโ€™s claim that KXL will create 20,000 direct construction and manufacturing jobs in the U.S is notย substantiated.

Based on jobs information provided by the company for the Environmental Impact Statement, on-site construction and inspection would create 5,060-9,250 person-years of employment (labor terms for one person working full time for one year). This equals 2,500-4,650 jobs per year over twoย years.

More troubling are the numbers for local jobs. TransCanada and proponents of Keystone XL have been barnstorming in local communities along the pipelineโ€™s route with promises of jobs. But the Cornell report finds that โ€œjust 500 to 900 workers are expected to be hired locallyโ€”roughly 10-15% of the total workers hired.โ€ Hereโ€™s the state-by-state breakdown, based again on data provided to the State Department byย TransCanada:

  • Montana: 93 and 257 jobs for residents inย Montana
  • South Dakota: 121-333 jobsย ย 
  • Nebraska: 90-248ย jobs
  • Kansas: 6-18ย jobs
  • Oklahoma: 41-113ย jobs
  • Texas: 156-470ย jobs

Some empirical evidence backs up this bias against local hiring. During construction of Keystoneโ€™s Phase 1, TransCanada employed a total of 2,580 workers in South Dakota, but only 282 workers were residents of theย state.

ยป There is strong evidence to suggest that a large portion of the primary materialย input for KXLโ€”steel pipeโ€”will not even be produced in the United States. Aย substantial amount of pipe has already been manufactured in advance of pipelineย permitย issuance.

TransCanada has already signed contracts for nearly 50 percent of the steel pipe for the project. A Russian company, Evraz, will manufacture roughly 40 percent in Canadian mills, and an Indian company, Welspun, is likely to produce the rest. Shipping and customs records reveal that TransCanada has already imported over 70,000 tons (nearly 10 percent of the total required in the project) of the carbon steel pipe from Welspun since April of thisย year.

ยป The industryโ€™s claim that KXL will create 119,000 total jobs (direct, indirect, and induced) is based on a flawed and poorly documented study commissioned by TransCanada (The Perryman Group study). Perryman wrongly includes over $1 ย billion in spending and over 10,000 person-years of employment for a section of the Keystone project in Kansas and Oklahoma that is not part of KXL and has already beenย built.

Specifically, the faulty Perryman study redefines the KXL project to include Keystoneโ€™s Phase 2, a 298 mile 36-inch pipeline from Steele City, Nebraska to Cushing, Oklahoma that was built in 2010 and fully in-service as of February 2011. In other words, Perryman included more than $1 billion in prospective spending that has alreadyย occurred.

Finally, most troubling takeaways of Pipe Dreams was buried on page 25 of theย report.

Based on TransCanadaโ€™s own figures provided to the Canadian government, operating costs for the U.S. section of their pipeline are minimal, and new permanent American jobs created would likely be as few asย 50.

The report goes on in its final section to discuss the ways that construction of Keystone XL could actually cost America jobs, based on increased fuel costs and the expenses related to accidents and spills. The data and research behind these theories is far from complete, but it certainly raises a valid concern. More work should be done studying the economic and labor impacts of accidents and pollution, and the real economic costs of bypassing the Midwest with this crude needs to be betterย examined.ย 

Of course construction of a massive 1,700 mile long steel pipeline will create some jobs. But TransCanada’s claims are vastly overstated, and the contradictions between the figures in their public outreach and their official submissions to the government are startling. It’s impossible to know now if Keystone XL would be a net job creator or if it would cost America jobs. But that deep level of uncertainty should be a big redย flag.ย 

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Ben Jervey is a Senior Fellow for DeSmog and directs the KochvsClean.com project. He is a freelance writer, editor, and researcher, specializing in climate change and energy systems and policy. Ben is also a Research Fellow at the Institute for Energy and the Environment at Vermont Law School. He was the original Environment Editor for GOOD Magazine, and wrote a longstanding weekly column titled โ€œThe New Ideal: Building the clean energy economy of the 21st Century and avoiding the worst fates of climate change.โ€ He has also contributed regularly to National Geographic News, Grist, and OnEarth Magazine. He has published three booksโ€”on eco-friendly living in New York City, an Energy 101 primer, and, most recently, โ€œThe Electric Battery: Charging Forward to a Low Carbon Future.โ€ He graduated with a BA in Environmental Studies from Middlebury College, and earned a Masterโ€™s in Energy Regulation and Law at Vermont Law School. A bicycle enthusiast, Ben has ridden across the United States and through much ofย Europe.

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