[Updated 2/5]
They’re small. Really small. From the Congressional Research Service (Jan. 5, 2015):
Because job projections, in particular, involve numerous assumptions and estimates, the State Department’s job estimates for Keystone XL have been a source of disagreement. One challenge to State’s analysis is that different definitions (e.g., for temporary jobs) and interpretations can lead to different numerical estimates and “fundamental confusion” about the Final EIS numbers. Consequently, it may be difficult to determine what overall economic and employment impacts may ultimately be attributable to the Keystone XL pipeline or to the various alternative transport scenarios if the pipeline is not constructed.
The CRS report quotes this portion of the State Department EIS:
During construction, proposed Project spending would support approximately 42,100 jobs (direct, indirect, and induced), and approximately $2 billion in earnings throughout the United States…. Construction of the proposed Project would contribute approximately $3.4 billion (or 0.02 percent) to the U.S. gross domestic product (GDP). The proposed Project would generate approximately 50 jobs during operations. Property tax revenue during operations would be substantial for many counties, with an increase of 10 percent or more in 17 of the 27 counties with proposed Project facilities. …
Additional clarification on what proportion of those jobs would be American, vs. foreign, sourced is from this Cornell report:
Based on jobs information provided by TransCanada for the FEIS, KXL US on-site construction and inspection creates only 5,060-9,250 person-years of employment (1 person-year = 1 person working full time for 1 year). This is equivalent to 2,500-4,650 jobs per year over two years. (page 7)
What about the materials used in the construction of the pipeline?
TransCanada claims that “the $7 billion (KXL) pipeline project is expected to directly create more than 20,000 high-wage manufacturing jobs and construction jobs in 2011-2012 across the Us, stimulating significant additional economic activity.”20 This claim is misleading and erroneous on a number of levels.
First, as discussed above, the budget for KXL US that relates to incremental US employment is $3 to $4 billion and not the $7 billion claimed by the proponents. Second, TransCanada and other KXL proponents are giving the impression that KXL will create a high number of manufacturing jobs. This is simply not true. The main manufacturing activity related to pipeline construction is the manufacture of the steel pipe. The 36-inch steel pipe is the largest single materials input for KXL. This is literally the pipe in the pipeline. In general, pipeline construction is not a manufacturing-intensive activity even if the steel itself is also being manufactured onshore.
This section will present strong evidence that:
(a) almost half (and perhaps more) of the primary material input for KXL—steel pipe—will not even be produced in the United States;
(b) based on the experience of Phases 1 and 2, the final processing work for KXL will probably be performed in the US with most of the steel and pipe sourced from oustide of the US (notably India and South Korea).21 (page 11)
Now, no doubt there will be some spillover effects (Note: If you didn’t believe in spillover/multiplier effects arising from the American Recovery and Reinvestment Act (ARRA), you won’t believe in any multiplier effects from Keystone XL construction.). Let’s assume there is such a thing as a spending multiplier; then using plausible estimates for incremental building, and accounting for imported inputs, the Cornell researchers conclude:
…the incremental US spending associated with KXL project construction is only about $3 to $4 billion. Given a multiplier of 11 person-years per $1 million, this translates into total employment impacts of 33,000 to 44,000 person-years.59 So a reasonable estimate of the
total incremental US jobs from KXL construction is about one-third of the figure estimated in the Perryman study and used by industry to advocate for the construction of KXL.
Moreover, any job impacts associated with KXL construction would be spread over 2 and more likely 3 years.60 So the annual impacts are at most about 22,000 person-years of employment per year, for two years.61 But the annual impacts could also be as low as 11,000 person-years per year, for three years.62 (page 24)
For context, the US economy added 252,000 to nonfarm payroll employment in December alone.
Update, 2/5, 1:45PM Pacific: Reader Bruce Hall quotes from an impartial source (!!!), TransCanada:
Fact: TransCanada is 100 per cent responsible for responding, cleaning and restoring the site in the unlikely event of a pipeline leak.
It’s our responsibility – as a good company and under law. If anything happens on the Keystone XL Pipeline, rapid response is key. That’s why our Emergency Response plans are approved by state and federal agencies, and why we practice them regularly. We conduct regular emergency exercises, and aerial surveys every two weeks. We’re ready to respond with a highly-trained response team standing by. At TransCanada, we continually look at ways to improve our system. Since 2011, TransCanada has invested an average of about $900 million per year in its pipeline integrity and maintenance programs.
Here’s another quote from an impartial source; guess where it comes from:
Site Safety Planning is an essential element of emergency preparedness and response. [xxx] is
dedicated to ensuring the safety of company personnel and the public. In the event of an oil spill,
or other emergency, [xxx] will manage a coordinated response to minimize impacts to the
environment while keeping safety issues in the forefront. The Site Safety Plan (with the ICS
Forms at the end of this section) is a general plan intended to address initial safety criteria
during the early stages of the response effort.
Why, it’s from the BP Gulf of Mexico Regional Oil Spill Response Plan, filed in 2009!
By the way, on costs and benefits couched in terms of partial equilibrium welfare analysis, see this post. Always useful to think about what assumptions go into aggregating marginal utility across individuals… (i.e., always useful to think beyond econ 1).
In other news, the Keystone global warming effects are also small. Really small.
In other news, the bad health effects of a second morning donut are small. Really small. So go ahead. Go for that third donut.
One thing that hasn’t gotten a lot of attention are the eminent domain issues involved with the Keystone XL pipeline. It’s funny how far right wingnuts who normally wail and gnash their teeth over the federal government’s use of eminent domain to build a national park are somehow eerily quiet when it comes to the Keystone pipeline.
You also don’t hear a lot about the liability issues. Suppose a farmer agrees to let the pipeline traverse his or her property. Suppose there is a leak that is entirely due to the negligence of TransCanada. Is TransCanada liable for the clean-up? No. The landowner is. Is there a known and proven way to clean up the gunk that would “flow” through the pipeline? No. Basically the farmer would lose everything. That’s one reason so many farmers are resisting the pipeline. It’s also why TransCanada isn’t all that interested in buying the properties outright. They would rather stick some poor unsuspecting sucker with all the liability issues.
Finally, this seems like a strange time to worry about a new pipeline. Sounds like there is considerable risk that TransCanada could be building a white elephant. And does anyone really believe that TransCanada will just swallow the losses if oil prices stay depressed? I’m pretty sure we’ll see Sen. McConnell and his gang coming to the rescue, just as they tried to argue that we needed to drill in the arctic in order to keep the Alaska pipeline profitable.
MYTH: “Landowners are responsible and liable in the event of an oil spill.”
Fact: TransCanada is 100 per cent responsible for responding, cleaning and restoring the site in the unlikely event of a pipeline leak.
It’s our responsibility – as a good company and under law. If anything happens on the Keystone XL Pipeline, rapid response is key. That’s why our Emergency Response plans are approved by state and federal agencies, and why we practice them regularly. We conduct regular emergency exercises, and aerial surveys every two weeks. We’re ready to respond with a highly-trained response team standing by. At TransCanada, we continually look at ways to improve our system. Since 2011, TransCanada has invested an average of about $900 million per year in its pipeline integrity and maintenance programs.
– See more at: http://keystone-xl.com/facts/myths-facts/#sthash.B44fcxUU.dpuf
I don’t get it. Suppose you could build it for free, with no labour at all, not even a broken window. Wouldn’t that be even better?
It’s funny how far right wingnuts who normally wail and gnash their teeth over the federal government’s use of eminent domain to build a national park are somehow eerily quiet when it comes to the Keystone pipeline.
More precisely, using eminent domain on behalf of a foreign corporation to seize property from U.S. citizens.
I wonder how many jobs are being lost because of the general encouragement of other anti pipeline efforts (there have been articles on this). For example, the Marcellus not being able to get their gas out of NE PENN and New England not getting cheap gas. And not just the building/operating jobs, but the enabling of drilling and use of the energy.
I would actually expect the XL pipeline to create unemployment.
Right now Tom Steyer has one of the only pipelines existing in the area. The Democrat mega-bundler wants to keep XL out so he does not have to deal with competition. He is an environmental champion as long as it makes him rich.
Also Warren Buffett would probably have to lay off people on his railroads that currently have a monopoly on transporting oil from the north. Buffett is also one of those who loves Democrat market intervention as long as he benefits from the results.
The Democrat Luddites would love to keep our inefficient and more environmentally dangerous system. They always fight creative destruction and would have us all using wood burning stoves if possible, as long as Steyer and Buffett have a monopoly on the wood.
Republican talking points are nasty, focusing on persons and impugning motivation rather than addressing the issues being discussed. If you don’t have something substantive to offer, why not just keep your hatefullness to yourself?
I don’t get the issue of jobs created as a benefit of a project. Labor is a cost. Now it is true that when there is inadequate aggregate demand, the market price of labor and other inputs may be less than their opportunity cost, but that only means that labor costs are lower, not that they are benefits. Apparently the benefits from the pipeline that accrue to project sponsors are great enough to make it worthwhile to them even without taking into account the possible difference between market price and opportunity cost of inputs. The issue of the pipeline concern whether there are costs that the project sponsors are not internalizing. (Certainly liability for spills will be internalized under the laws of the states through which the pipeline will be build.)
Thanks for the update and the credit, Menzie. However, just because you don’t like the source doesn’t mean it is wrong. Insinuation is not refutation.
I would think that you might be more inclined to question 2Slug’s assertion that: “You also don’t hear a lot about the liability issues. Suppose a farmer agrees to let the pipeline traverse his or her property. Suppose there is a leak that is entirely due to the negligence of TransCanada. Is TransCanada liable for the clean-up? No. The landowner is. Is there a known and proven way to clean up the gunk that would “flow” through the pipeline? No. Basically the farmer would lose everything. That’s one reason so many farmers are resisting the pipeline. It’s also why TransCanada isn’t all that interested in buying the properties outright. They would rather stick some poor unsuspecting sucker with all the liability issues.” Especially in the light of TransCanada’s public acknowledgement of liability and funding to address it.
That is not to say that pipelines are perfect transportation vehicles for crude oil, but they seem to offer significant advantages over this: http://www.huffingtonpost.com/news/oil-train-derailment/
Bruce Hall: No, not necessarily wrong. But when the statement is a statement of intent (and ability) by the party writing the press release, with incentives toward putting a positive spin on matters, then only the gullible will take those assertions at face value. Who said “trust but verify”?
Agree with a skeptical approach to things. Any approval of the pipeline should have liability spelled out for oil spills. I’m guessing that like so many other things, the operators of the pipeline have some liability and some insurance and then taxpayers have to chip in for the rest. With nearly 200,000 miles of petroleum pipelines in the U.S., it would seem that history can tell use what is the case. And if pipeline technology hasn’t improved in the last 50 years, I’d say there was a strong case to resist building more… but we would all be greatly surprised if that was true. The issue is whether the new technology is being deployed completely for new pipelines. That same issue applies to trains carrying crude. And highway tankers. And boats.
Certainly, the economics of transporting crude are in favor of pipelines. What seems to be the issue is the potential risks. By their nature, pipelines have far less risk to humans than trains and highway tankers loaded with crude. But also by their nature, pipelines carry massively more amounts of crude than the alternatives, so the environmental risks are higher without adequate leak detection. From what I can gather, the Keystone pipeline is being proposed without the “latest and greatest” detection technology and that alone should be the show-stopper… not implausible arguments about liability.
http://oilprice.com/Energy/Energy-General/No-More-Spills-New-Technology-Could-Transform-the-Pipeline-Sector.html
If Congress is so enthusiastic about Keystone, it should require the most sophisticated monitoring systems. Likewise, if the President is concerned about American lives, he should be encouraging limitations on train transportation of crude.
But if there is a spill, think of all the jobs that would be created cleaning it up!
The employment effects are very small because you chose total US employment as the demoninator. But if you chose, say MT+SD+NE employment you’d get an increase of over 1%/year which I wouldnt call very small. I’m sure it was a just coincidence that the denominator chosen was the one that gave you the result that toed party-line.
Induced effects? Oh brother…..
Otherwise, pipelines are capital intensive. One should hope/expect them to create few jobs.
But they strike me as doing a decent job of building wealth.
Is ‘wealth’ a bad word with US economists these days?