Tuesday, March 20, 2012

Fuzzy Math & The Keystone XL Pipeline

Robert Sterling, Konformist.com

Whenever you hear right-wing poiticians and mouthpieces demanding support for a project with the supposed reasoning of "jobs" it should rightfully be met with absolute skepticism. These cretins could care less for the working man, so when they feign support for workers, it is invariably a cynical exploitation on behalf of a big business gift.

To sell the public on the Keystone XL Pipeline, the right has put out numerous claims of job creation. The least controversial number is 20,000, and that one is even dubious at best. To begin with, the term "job" is defined by TransCanada (the company behind the XL Pipeline and the supplier of the 20K number) as "job years" which means that if the project takes the estimated two years, it will create actually half of the 13,000 "job year" number of jobs in construcion. Meanwhile, as for the 7,000 other "job years" created in manufacturing, it is likely most of this work will be done outside the US. So what is the more likely number of jobs created by the XL Pipeline, 20,000 or 6,500? According the the US State Department's own study, the actual total number on permanent jobs (not temporary during the construction) created by the Pipeline will be twenty.

Of course, whether it be 20 or 6,500 or even 20,000, that's a pretty small number of jobs for such a large project, so TransCanada had to juice the numbers. One study, supplied by TransCanada consultant Ray Perryman, proclaimed that "effects over the life of the project were found to include $20.931 billion in total spending, $9.605 billion in output, and 118,935 person-years of employment." (Note again that the number is in "job years" again.) In the same study, Perryman declares: "Under 'normal' oil price assumptions equivalent to the average for all of 2007, The Perryman Group found the gains in US business activity stemming from a permanent increase in stable oil supplies to include $100.144 billion in total spending, $29.048 billion in output, and 250,348 permanent jobs." This has lead the US Chamber of Commerce to support the project, citing the 250K figure.

(Oddly, the Chamber of Commerce doesn't cite the highest number of jobs estimated by Perryman to be created by the XL Pipeline, that of 553,235 jobs. The reason for this is that number is based on "the high-price case in which costs per barrel reach the peak levels observed in the summer of 2008." Which means the more outrageous oil prices get, the more supposedly beneficial the XL Pipeline is.)

Again, whether the number is 118,935, or 250,348, or even 553,235, the numbers should be met with doubt, as they are supplied by a consultant for a company trying to sell public and politicians on a project. The Global Labor Institute looked at the numbers cited by Perryman, and concluded they are bogus To begin with, of the $7 billion tied to the project, $3 to $4 billion has already been spent: thus there is no multiplier gain for this money if the XL Pipeline is approved. Further, the number assumes a rather generous 18 "job years" created per million dollars spent: the GLI goes with the more reasonable number of 11 "job years" per million. The end result of this simple math equation is a creation of 33,000 to 44,000 "job years" by the pipeline and not 118,000, which would create a maximum of 22K temporary jobs at best over the two years of the project, and 11K at worst if the project takes an extra year to complete.

As for the 250K to 550K numbers that TransCanada pushes, the GLI notes in response that it may very well be a long-term job killer. The big four problems with the project:

* Higher Fuel Prices: "KXL will increase the price of heavy crude oil in the Midwest by almost $2 to $4 billion annually, and escalating for several years. It will do this by diverting major volumes of Tar Sands oil now supplying the Midwest refineries, so it can be sold at higher prices to the Gulf Coast and export markets. As a result, consumers in the Midwest could be paying 10 to 20 cents more per gallon for gasoline and diesel fuel, adding up to $5 billion to the annual US fuel bill."

* Economic Costs Related to Air Pollution and Carbon Emissions: "It is a well known fact that if emissions rise, air quality deteriorates, and health problems increase. Respiratory and other illnesses reduce both labor productivity and labor market
participation, as well as the educational performance of those exposed to airborne particulates."

* Impact on the Green Economy and Green Jobs: "It is also important to consider the jobs that may not be created as a result of KXL. Many believe its approval will likely have a chilling effect on those in the private sector and in public policy who have positioned themselves on the cutting edge of the green economy. Small business organizations such as the Green Chamber of Commerce and the Green Business Network (representing more than 5,000 enterprises) agree that KXL will impede progress toward green and sustainable economic renewal."

* Environmental Damage: "The industry has ignored or dismissed fears that the KXL pipeline will have a serious impact on our environment through inland spills or spills into fresh water supplies (principally the Ogallala Aquifer) or through increases in greenhouse gas emissions (GHGs) and other forms of pollution. In so doing, it has no need to acknowledge that environmental damage is invariably a job killer. Cleaning up spills and other environmental damage may create some jobs, but only at the expense of jobs in other parts of the economy."

Of these four job killers, environmental damage would on the surface appear to be the greatest X-factor, but in reality, it's not. The reason is because environmental damage from the XL Pipeline shouldn't be viewed as a potential risk, but a certainty. As PoliticusUSA.com noted, TransCanada "predicted that one of their existing pipelines would produce one spill every seven years, but it has produced 12 spills in less than one year. Even with one spill, over 1,000 rivers will be adversely impacted as well as the Ogallala Aquifer that supplies drinking water to 2 million Americans and is the primary source of groundwater for 20% of America’s agriculture production." Talk about a job killer.

If there is any X-factor here, it's the elephant in the room that strangely isn't being mentioned: terrorism. Allegedly, according to our national security establishment and its mouthpieces, the threat of al Qaeda and other terror orgs is so great, we need fingers stuck up our ass in airports in order to feel safe. Yet somehow, the possibility of an attack on a pipeline project ranging from our Canadian border to Texas is just crazy talk.

Sadly, being a betting man, I suspect the Keystone XL Pipeline will be built. This is because the GOP is using its usual strategy of frothing like mad dogs, which will likely soon be met by a predictable spineless cave by Obama. The only thing that will stop this project is if opponents stop relying on Obama's nonexistent backbone and start putting pressure on him and other politicians to fight the money behind this con. It could happen (certainly the Occupy Movement is evolving into something more than Democratic Party apologists that represent too much of progressive leadership) but would require a radical change in our current political paradigm. Let's hope that on this bet I am wrong.


The Impact of Developing the Keystone XL Pipeline Project on Business Activity in the US. The Perryman Group June 2010 <http://www.perrymangroup.com/reports/TransCanada.pdf>.

Kesslerat, Glenn. "Keystone Pipeline Jobs Claims: A Bipartisan Fumble." Washington Post 14 December 2011 <http://www.washingtonpost.com/blogs/fact-checker/post/keystone-pipeline-jobs-claims-a-bipartisan-fumble/2011/12/13/gIQAwxFisO_blog.html>.

Pipe dreams? Jobs Gained, Jobs Lost by the Construction of Keystone XL. Global Labor Institute September 2011 <http://www.ilr.cornell.edu/globallaborinstitute/research/upload/GLI_KeystoneXL_Reportpdf.pdf>.

Rmuse. "The SEC Mulls An Investigation Calls Grow For John Boehner To Resign." PoliticusUSA 28 January 2012 <http://www.politicususa.com/en/john-boehner-resign>.

Tullis, Paul. "The Questionable Economics of the Keystone XL Pipeline." Businessweek 17 February 2012 <http://www.businessweek.com/top-news/the-questionable-economics-of-the-keystone-xl-pipeline-02172012.html>.

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