Alan: Since Canada's tar sands' oil is already under development and will be burned in any event, I encourage Obama to approve the Keystone pipeline so that another Republican "pipe dream" "goes up in smoke." Lest we forget... The Republican Party has accomplished nothing notable in decades while, "on the downside," The GOP is responsible for starting The Iraq War (thus animating terrorism and destabilizing the entire world) while simultaneously toasting the economy.
Pipe Dreams: How Many Jobs Will Be Created By Keystone XL?
By Ellen R. Wald
One of the few sectors that has gained a full head of steam during the weak U.S. economic recovery is the energy industry. Many pundits and politicians see it as a jobs panacea. During the presidential debates last October, the two candidates claimed that the energy sector would create anywhere from 600,000 to 3.5 million jobs.
Numerous experts advance differing economic impact projections in order to support their positions on energy policy and proposed projects. The truth is that accurately estimating the number of jobs that could be created is impossible. As we consider the claims the backers of the proposed Keystone XL Pipeline are making as to its potential economic benefits, it’s instructive to consider the case that was made for the construction of the Trans-Alaska Pipeline, and how the project played out in reality.
Background
The Trans-Alaskan Pipeline was constructed by the Alyeska Pipeline Service Company, a consortium currently composed of British Petroleum, ConocoPhillips Transportation, ExxonMobil, Koch Alaska Pipeline Company, and Unocal. In the late 1960s the governor of Alaska opened the North Slope area of the state for petroleum development. Once the initial wells were drilled, the North Slope’s remote location and iced over ports made it necessary to construct a pipeline to bring oil from Prudhoe Bay to the ice-free port of Valdez, Alaska. Over the next six years, the Trans-Alaska Pipeline was planned, debated, funded, and ultimately granted the permits necessary to begin construction in 1974.
The Keystone XL Pipeline project is owned by TransCanada, a Canadian corporation which builds, maintains, and owns oil and gas pipelines, power plants, and natural gas storage facilities in North America. TransCanada already owns the Keystone Pipeline which runs in two branches from Alberta to both Nebraska and Illinois. The proposed Keystone XL Pipeline would follow a direct route from Alberta through Montana and South Dakota to Nebraska and then continue through Kansas and Oklahoma to the refineries in Texas along the Gulf Coast. This new pipeline would ideally transport crude petroleum recovered from the Alberta tar sands and from North Dakota shale fields. This petroleum contains more sulfur and requires additional refining which can be completed in Houston refineries.
The chart below compares some of the key facts of these two pipeline projects.
Trans-Alaska Pipeline(actual)
|
Keystone XL Pipeline
(proposal)
| |
| Length |
800 miles
|
1,179 miles
|
| Maximum capacity in barrels per day |
2.1 million BPD
|
830,000 BDP
|
| Pipe diameter |
48 inch
|
36 inch
|
| Estimated cost before construction |
$900 million
|
$5.3 billion
|
| Actual cost |
$8 billion
|
—
|
| Construction time |
3 years 2 months
|
2 years
|
| Starting point |
Prudhoe Bay, Alaska
|
Hardisty, Alberta
|
| Termination |
Valdez, Alaska
|
Houston, Texas
|
Employment Estimates
Estimates for job creation statistics for the Trans-Alaska Pipeline’s construction continued to fluctuate from the time it was first planned until the labor was set. In March of 1973, Alyeska estimated that the pipeline would employ 26,000 people in construction jobs. These numbers were later dropped significantly to 18,000 construction jobs in October 1973. By January of 1974, once union contracts for the labor had been negotiated, Alyeska estimated that “perhaps 13,000” jobs would be created, “at its peak.” During the summer of 1974, when initial work on the pipeline was just getting started, the labor force was estimated to grow to more than 14,000 workers by the following spring, when the pipe-laying would begin. When the company began hiring in earnest in March 1975, they estimated that between 14,000 and 18,000 workers would be required that summer. The chart below shows the fluctuations in job predictions for construction workers preceding hiring.
In reality, Alyeska employed 21,000 workers during peak construction in the summers of 1975 and 1976. Despite the fact that Alyeska kept dropping its estimated job numbers, the company employed more workers then all their prediction except for the first. By numbers hired, the project was a huge success. But, how do these estimates compare to the proposed Keystone XL Pipeline, and what does this teach us?
The table below illustrates the fluctuations in construction worker job predictions for three different sources: Trans-Canada, the U.S. federal government, and a study conducted by a the Global Labor Institute at Cornell University’s College of Industrial and Labor Relations. Trans-Canada’s job predictions follow a generally similar path to Alyeska’s, in which the job estimates tend to decrease as the project approaches its start date.
In January of 2010, Trans-Canada CEO Russell Girling claimed that the project would produce 13,000 construction jobs. In April of 2011 the number grew to 20,000, which the Canadian Ambassador reiterated in August 2011. In January 2012 the number was revised back down to 13,000 and this past April the company revised that number even lower, to 9,000 construction jobs. Meanwhile, both the federal government and the Global Labor Institute at Cornell University’s College of Industrial and Labor Relations examined TransCanada’s application and made their own job creation estimates, at 6,000-6,500 and 2,500-4,500 respectively. A State Department study projects only 35 permanent jobs in pipeline maintenance and inspection. Although it seems likely that the Keystone XL Pipeline’s application will eventually be approved by the Obama Administration, firmer numbers will not be available until the project gets underway.
This historical comparison must also account for many of the numerous variables which effect hiring on both pipelines. Here are just a few issues which effected hiring for the Trans-Alaska Pipeline and a look at how they might impact Keystone XL.
Location
The Trans-Alaska Pipeline was constructed mainly during the summer months due to the extreme cold and frozen land of northern-Alaska. Because of this, construction jobs on the pipeline were considered seasonal. Though jobs peaked at 21,000 during the April-October months, once November came the company cut the labor force down to the 9,000 employees needed to maintain the camps and equipment. In addition, the lack of infrastructure in the Alaskan tundra necessitated the construction of a highway – James W. Dalton Highway or the North Slope Haul Road – which parallels the pipeline. Alaska’s permanent permafrost also necessitated encasing the pipe in a solution to prevent freezing. These conditions may have raised the number of workers needed to construct the pipeline during the two summers of peak construction.
The Keystone XL Pipeline, on the other hand, does not face severe weather conditions so the construction jobs will be year-round, not seasonal. The pipeline traverses the middle of the United States, so no special transportation infrastructure is needed. Neither will TransCanada have to make special accommodations for soil conditions such as permafrost. The construction jobs for Keystone XL may be better jobs while they last, but may result in fewer jobs overall.
Ancillary Jobs
Pipeline construction also employs manufacturers, service workers, engineers, surveyors, occupational health and safety professionals, managers, teamsters, etc. Estimating these jobs is even more problematic than construction workers because the degree to which these jobs are required varies greatly based on the specific needs of the project. For example, Trans-Alaska required building several large camps for construction workers. Each of these camps required teamsters to haul goods over long distances, service workers to live at the camps and provide food and other services to the workers and managers, and other professionals. During the winter months, the camps were largely dormant and these workers were essentially furloughed. Before construction began, Alyeska estimated that the pipeline would provide 8,000 service jobs. However, the final numbers are unavailable to assess the accuracy of this claim.
Because the Keystone XL Pipeline will be constructed through the heart of the United States the number of service and transportation jobs created will be lower. TransCanada currently estimates that Keystone XL will provide 7,000 new steel manufacturing jobs, however this figure is clearly dependent on which companies provide the steel and the eventual length of the pipeline.
Spin-Off Jobs
Spin-off jobs are jobs which emerge after the pipeline is complete and oil begins to flow. These include refining, chemical manufacturing, petroleum transportation, and “petroleum dependent manufacturing.” The last of these includes even factories that make use of petroleum even though these factories would use petroleum from elsewhere if the pipeline did not exist. The presumption is that these jobs will increase because more petroleum is available. On one hand, these jobs are better than the construction jobs for the actual project because they are considered permanent, but on the other hand, they are impossible to estimate because so many variable effect the process.
For example, TransCanada predicts that 118,000 spin-off jobs will be created by the Keystone XL Pipeline. A study by the Perryman Group, a firm commissioned by TransCanada to examine the potential economic impact of the project, predicts that anywhere between 250,348 and 553,235 permanent jobs will be created. This study is the perfect example of why long-term employment predictions from a distinct energy project are unreliable. The estimates are based on the idea that the pipeline will create permanently stable oil prices which will foster overall economic growth. However, there is no indication the pipeline would contribute to oil price stabilization. In fact, other TransCanada studies predict that oil prices in the Midwest will rise because the Keystone XL Pipeline will alleviate an oversupply there. No previous pipeline, such as Trans-Alaska, has ever stabilized global oil prices. All predictions for spinoff jobs rely on factors like the price of oil, energy innovation, politics, and the overall health of the economy. These variables are impossible to forecast and make predictions such as the Perryman Group’s unreliable.
Because of the variables involved, even a historical analysis of permanent jobs from a discrete energy project are bound by speculation and assumptions. There are no historical predictions available for Trans-Alaska spin-off jobs. However, the state of Alaska now claims that the oil industry as a whole has created approximately 60,000 spin-off jobs within Alaska. For example, port facilities at Valdez were expanded to accommodate large super-tankers transporting oil from Trans-Alaska and the numbers of employees at the port increased. This presumably accounts for some of the spin-off jobs. In the case of Keystone XL, it seems as though the intention is to export significant amounts of this petroleum abroad after it’s processed into gasoline, diesel and other products at existing Gulf Coast refineries, so it’s not clear how many additional jobs might be created. The notion of spin-off jobs is so vague and imprecise that it is impossible to predict beforehand or even estimate after the fact.
Fantasy vs. Reality
Alaska expected the Trans-Alaska Pipeline to lead to the growth of chemical manufacturing and refining in the state. The Wall Street Journal concluded in September 1979 that the “capital intensive” oil industry had failed to create a significant number of permanent jobs for Alaska. After the pipeline was completed, unemployment grew, reaching 15% by June 1977. By September 1979 it had dropped to 11%, but private industry failed to expand substantially. 40% of Alaska’s workforce remained on the public payroll. This was a classic boomtown effect, in which the population of Alaska, particularly the interior city of Fairbanks, swelled in anticipation of petroleum construction jobs. Once the project was complete many thousands who had moved to the city were left unemployed. Eventually, by the mid-1980s, the pipeline project spawned additional spinoff pipelines, but they employed only a small fraction of the construction workers who had previously worked for Alyeska. Clearly, Trans-Alaska did not bring nearly as many jobs as promised.
The states through the Keystone XL Pipeline will be constructed should anticipate this boomtown effect and the potential for high unemployment to follow the pipeline’s completion. However, the potential unemployment in the wake of a boomtown may be limited, in this case, by faster construction. The lesson from Trans-Alaska however, is that long-term employment in these areas is unlikely to increase nearly as significantly as some people would like to believe.
Over the long term, however, the existence of the Trans-Alaska pipeline enticed oil companies to further develop Alaskan oil, which led to increased state revenues. TheAlaska Department of Revenue now estimates that since Trans-Alaska’s completion, 85% of Alaska’s unrestricted general fund has come directly from the oil industry. Today, Alaska attributes its lack of personal income taxes and sales taxes to the revenue from the oil industry.
There is no way to accurately predict the number of short-term, ancillary, or spin-off jobs from any energy project. The number of jobs could exceed predictions, as construction jobs on the Trans-Alaska Pipeline exceeded most predictions. Alternatively, the number of jobs created could be far fewer, as was the case with spin-off jobs in Alaska. Regardless, uncertainty about the number of jobs which could be created is not an argument against energy resource development. Projects like the Keystone XL Pipeline will in fact create jobs (an unknown number), facilitate long term economic development, enhance state revenues, and bring the United States closer to energy security.
Ellen R. Wald is a visiting assistant professor of history at the University of Georgia who specializes in the oil industry and the Middle East.
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