Why the ‘Keystone Vision’ is an Economic Mirage

Politicians say they want to support the “Keystone Economy.” Here’s why that vision means fewer jobs, no impact on gas prices, and more pollution

by Daniel J. Weiss

Rep. Ann Marie Buerkle (R-NY) told reporters during a recent press conference on the economy on that “Solyndra and Keystone represent what’s at stake this November.  Two very different visions — I think Solyndra and Keystone typify them.”

She is not the first Republican official to make this comment, promoting a vision that means relying on a very flawed pipeline project that benefits foreign oil companies.  It sharply contrasts with President Obama’s clean energy investment vision.

A “Keystone” economy means:

• No additional oil produced for the United States.  The State Department’s final “Keystone XL Assessment” concluded:

“WORLD and ETP studies indicate that building versus not building Keystone XL would not of itself have any significant impact on: U.S. total crude runs, total crude and product import levels or costs.

“This is because changing WCSB [oil sands] crude export routes would not alter either U.S., Canadian or total global crude supply.” (emphasis original)

Additionally, there are indications that a significant portion of the oil sands piped through Keystone to Gulf Coast refineries will be made into products for export rather than kept here.  At a December Congressional hearing, Rep. Ed Markey (D-MA) asked the CEO of pipeline owner TransCanada whether he would agree to keep all refined products from oil sands in the United States.  He declined.

On February 15, Rep. Markey offered an amendment to H.R. 3408 to “ensure that if the Keystone XL pipeline is built, the oil that it transports to the Gulf of Mexico and the fuels made from that oil remain in this country to benefit Americans.”

The amendment failed 173-254.  Rep. Buerkle voted against it, opposing retention of Keystone oil in the United States and instead supporting its export to other nations.

• Same oil prices for the United States. The analysis determined that the pipeline will only have a tiny impact on the price of crude and other products:

“Under the KXL scenario, delivered prices for [oil sands]…into PADD3 Gulf Coast are lower than under the No KXL case and those for PADD2 [Midwest], higher.  The effect is limited, no more than around $0.70/bbl.”

This means that gasoline prices in the Gulf Coast region would at best be only one and three quarter cents lower per gallon.  Meanwhile gasoline prices would increase in the Midwest if Keystone is built because the oil glut there now is keeping prices lower.

Time magazine concurred that Keystone would have almost no impact on gasoline prices:

“Keystone would have little immediate [price] effect, especially since there’s already sufficient pipeline infrastructure in place for the next few years.”

• Relatively few jobs created.  The State Department’s “Executive Summary of the Final Environmental Impact Statement for the Proposed Keystone XL Project” predicts that the construction workforce would only “consist of approximately 5,000 t0 6,000 workers.”

These are far fewer jobs than the claims of the big oil companies promoting Keystone.

In contrast, the Recovery Act investments in clean energy technologies created 733,000 direct jobs through 2010 according to the Economic Policy Institute and the Blue Green Alliance.

Keystone would produce far fewer jobs than the Environmental Protection Agency’s recently approved standards to require power plants to reduce their smog, acid rain, mercury and air toxics pollution.  The University of Massachusetts estimates that these rules will create 325,000 direct jobs over five years.

• Reliance on a project that is not “shovel ready.” The Keystone pipeline isn’t even map ready yet since its route through Nebraska has yet to be decided.  And there has been no assessment of the potential harm to adjacent air, water, and land from its construction and operation once it is sited.

In fact, there is a growing controversy over building the pipeline in places where the route is already mapped.  The Los Angeles Times reported on the conflict between landowners and TransCanada:

“Canadian company that wants to build the 1,660-mile structure [is] going to court to force the cooperation of landowners who don’t want it crossing their land.

“The issue has brought conservative tea party groups out rallying alongside environmentalists opposed to tar sands oil production, united behind [Julia Trigg] Crawford’s attempt to keep the pipeline from crossing her 600-acre farm in the town of Direct, near Paris, where she fears it could contaminate the creek that irrigates her fields.”

This controversy suggests that construction is not “shovel ready” outside of Nebraska either.

Rep. Buerkle and Republican Congressional leadership support approval of the Keystone pipeline as their solution to high gasoline prices, which is a major goal of big oil too.

This contrasts sharply with President Obama and the Democratic Congressional leadership’s energy vision, which includes the following policies in the proposed FY 2013 budget.

• Invest in clean, home grown renewable energy, including wind, solar and geothermal resources.

• Increase funds for R&D for “game changing” advanced energy technologies.

• Help businesses and home owners lower their electricity bills via energy efficiency retrofits of their buildings and homes.

• Cut $40 billion in tax breaks for big oil companies over the next decade.  The five largest companies made $137 billion in profits in 2011 – they don’t need additional subsidies.

In his State of the Union address, President Obama acknowledged that sometimes investments like the loan guarantee for Solyndra fail, but we must not surrender to our economic competitors.

“Our experience with shale gas…shows us that the payoffs on these public investments don’t always come right away.  Some technologies don’t pan out; some companies fail.  But I will not walk away from the promise of clean energy…. I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here.”

Rep. Buerkle and her Republican allies would capitulate to our clean energy competitors while doing Big Oil’s bidding. Their vision is a path to doing nothing about the price of gas, creating fewer jobs, and spewing more pollution.

Daniel J. Weiss is a Senior Fellow with the Center for American Progress Action Fund.