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President Trump has already started acting to benefit North American oil production. On Tuesday, he signed an executive order to advance the construction of the Keystone XL Pipeline, a project, which has been on the shelf for more than four years due to federal government deliberations and eventual rejection. The proposed pipeline is designed to carry oil from Canada to U.S. refineries along the Gulf of Mexico.
The executive order invites
The arguments in favor of the pipeline, many of which President Trump has touted, include increased energy security, government revenue and jobs. However, it is almost impossible to predict job growth from a particular pipeline project . Four years ago, I wrote a lengthy analysis of the potential job creation from the Keystone XL Pipeline for this site by comparing it to a similar large-scale pipeline project built in the 1970s, called the Trans-Alaska Pipeline.
Here are some key points for today:
- Estimates for construction jobs are ultimately misleading because historically they are rarely accurate and the jobs are short-term.
For example, the job estimates for building the Trans-Alaska Pipeline fluctuated between 26,000 and 13,000. Ultimately, the project employed 21,000, but only during peak construction times. This peak construction time lasted only two summers. For the Keystone XL Pipeline, construction job estimates have ranged from 2,500 to 9,000. TransCanada, the S. Federal Government and the Global Labor Institute at Cornell University all produced interesting studies on this issue. Nearly all construction jobs for this project would be temporary.
- Analysts also look at “spin-off” jobs, which are jobs that are created in related industries as a result of the new pipeline. These include sectors like refining, manufacturing, petroleum transportation and petroleum-dependent manufacturing. These jobs rely on too many variables to accurately predict and even measure after the fact. In 2010, TransCanada, the company behind Keystone XL, commissioned the Perryman Group to examine the long-term economic impact of the pipeline. Their study predicted that anywhere from 250,348 to 553,235 spin-off jobs would be created. The study was largely predicated on the assertion that the pipeline would stabilize oil prices. However, there is no evidence, historical or otherwise, that pipelines serve to stabilize the price of oil, a global commodity.
- Evidence indicates that the pipeline would encourage long-term growth in the energy industry for the geographic regions it transverses .
In the case of the Trans-Alaska Pipeline, the completed project enticed more oil companies to invest in Alaska’s energy industry. Alaska eventually achieved high levels of economic growth from this robust energy industry. The Keystone XL Pipeline would likewise make it easier to bring oil produced in Alberta, Canada and North Dakota to the global market. In addition, there are multiple opportunities for other pipelines servicing shale fields in, for example, Ohio and Pennsylvania to link to Keystone XL. This may entice further investment in those regions.
Though it is impossible to accurately predict job numbers resulting from the Keystone XL Pipeline, we can assume a few results. Construction of the pipeline would require thousands of short-term construction and related service jobs. These jobs would most likely number fewer than 10,000 and would only last a short time, and an even shorter duration in any single location. The long-term operation and maintenance of the pipeline would not create a meaningful number of jobs, because pipelines are simple to maintain once built.
However, the pipeline would send more products to be handled and refined in the Gulf region, increasing employment there to some extent, and it may increase investment in oil producing regions in the U.S. and Canada. The pipeline would also undoubtedly enhance state revenues and facilitate long-term economic development in the Gulf Coast region. The short-term economic growth from traveling construction crews would benefit local businesses, and would be look too quick to create a boomtown negative. Building the pipeline could be the first step in improving energy security for North America. The pipeline would demonstrate cooperation and goodwill to Canada as the Trump Administration also reconsiders NAFTA.
