Obama is right: Keystone XL not a jobs plan

In an opinion written for The Fort Worth Star-Telegram, Bernard Weinstein, an economist and associate director of SMU's Maguire Energy Institute, writes about President Barack Obama and the Keystone XL pipeline.

By Bernard L. Weinstein

In recent weeks, President Barack Obama has been debunking the Keystone XL pipeline as a “jobs plan,” claiming it would only support 50 permanent jobs.

Though he didn’t reference a source for this number, most likely it was provided by one of the mainstream environmental organizations that view Keystone as a litmus test for the president’s commitment to fighting global warming.

No reasonable economic analysis would come up with such a ridiculously small number. For example, it takes about 800 full-time workers and 1,000 contract employees to maintain the Trans-Alaska pipeline, which is much shorter that the proposed Keystone XL.

But in a sense, the president’s assertion was correct. Although it would support thousands of high-wage jobs during its construction phase, Keystone shouldn’t be viewed as a jobs plan but as a crucial part of North America’s energy infrastructure that would transport crude oil from the Canadian province of Alberta and the Bakken shale play in North Dakota to refineries and ports along the Gulf Coast.

The link will be especially important when America inevitably gets into the business of exporting oil. But this will require action by Congress, which effectively imposed a ban on exports following the 1973-74 Arab oil embargo.

Currently, there is a mismatch between new production and our refinery capacity. Shale oil from Texas and North Dakota is primarily “light,” while most Gulf Coast refineries are geared to process “heavy” crude. To process more light crude, refinery equipment would have to be revamped at a significant cost.

The oil from Alberta that would move through the Keystone XL is a heavy crude, ideally suited for processing by Gulf Coast refineries. Today, these refineries rely primarily on imports from Mexico and Venezuela, and both of those countries, for different reasons, are seeing declines in production.

By contrast, Alberta boasts the world’s third-largest oil reserves and would be a reliable, and friendly, supplier for many decades. It then makes sense to start exporting some of our light crude oil.

Although opponents of the Keystone XL pipeline say their concern is with a possible spill that could contaminate ground water, their ultimate goal is to stymie production in the Canadian oil sands as well as the Bakken.

But their logic is flawed. Decades of use have proved that pipelines overall are overwhelmingly safe and reliable. And when a spill occurs, repair and cleanup are relatively easy.

By comparison, when a freight train hauling crude oil in tank cars jumps the rails, the damage can be devastating — as was the case with the tragic accident in Quebec last month.

The volume of crude oil being moved by rail tank cars has jumped 25-fold since 2008. If Keystone is killed, even more Canadian and Bakken crude will be transported by rail.

Canadian companies are already talking about building new pipelines from the Alberta oil sands to New Brunswick on the Atlantic seaboard and to British Columbia on their west coast.

Obama seems to have forgotten we have a “common market” in energy with our northern neighbor, meaning no policies should be implemented that affect the flow of energy resources between the two countries. The brouhaha over Keystone has been a diplomatic slap in the face to Canada, America’s number one trading partner.

If the president decides to veto the pipeline, further damage will be done to U.S.-Canadian relations. In a worst-case scenario, Canada could even place restrictions on future American investment in their energy sector.

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