The Keystone XL pipeline is a delivery system that is designed to carry over 800,000 barrels of oil sands petroleum per day from Western Canada to oil refineries along the Gulf Coast of the United States. Around half of the pipeline has already been completed, but its construction has always been opposed by various environmentalist groups.
The Keystone Pipeline pros and cons show that this project has the potential to continue generating jobs and revenues for TransCanada and much of North America. Because many pipelines are prone to leaks, there is also the potential risk of groundwater contamination that must be considered. Here are some of the additional key points to look at in this ongoing conversation.
What Are the Pros of the Keystone Pipeline?
1. The Keystone Pipeline can be a major job creation project.
The US State Department has estimated that the construction of the pipeline project could create up to 42,000 jobs over a two-year construction period. Most of these jobs would be considered temporary, but about 38,000 of them would be considered support jobs, such as food service. About 35 permanent jobs would also be created with this project.
2. The Keystone Pipeline can be a major economic contributor.
It is believed that the Keystone XL pipeline has the potential to contribute more than $3 billion annually to the US economy once it become operational. It would also create an estimated $2.4 billion (in US dollars) for Canada, which would be split between the government, shareholders, and company reinvestments. It would also allow Canadian producers to receive up to $2 more per barrel from the tar sands oil.
3. It would re-establish the Alberta oil sands sector for Canada.
The oil price slump from 2014-2016 has taken away more than 35,000 local jobs in Alberta that contribute or support the extraction of petroleum. This has created a revenue deficit of nearly $1 billion, with the required shutdown from the wildfires that destroyed the region. Completing the Keystone XL pipeline would provide more support for this sector and establish sales that could restore many of the local jobs.
4. It creates a reliable product for Gulf Coast refiners to process.
The refiners in the US who would be processing the tar sands oil would also benefit from this project’s completion. Their current products come from suppliers that are considered to be “less than reliable,” according to a report from Reuters. Instead of relying on product from Mexico or Venezuela that may or may not come in, Keystone offers a daily refining option that can support US jobs.
5. It makes the Canadian economy more efficient.
The oil industry in Canada is responsible for 1/6 of the nation’s economy. The issue that Canadians face with their oil is that there are several transportation constraints due to the location of their petroleum reserves. This has led to a consistently high cost of production. With Keystone, Canadian producers can raise prices because the quality of the petroleum will be better while they are able to cut into their overhead costs at the same time.
6. The amount of emissions added to the atmosphere from Keystone XL are negligible.
At full production, the EPA believes that the Keystone pipeline will add about 19 million metric tons of atmosphere annually to the atmosphere. This figure is in comparison to conventional oil production. In 2011, the US was responsible for about 5.5 billion tons of carbon pollution, which was second only to China’s 8.7 billion tons of carbon. This means the increase would amount ot less than 1% of the totals already produced.
7. Pipeline transportation is safer than other methods.
TransCanada has essentially said that they are going to process tar sands oil whether the pipeline extension for Keystone is built or not. This product can be transported by rail and other options, but the pipeline is the safest method of transportation. In a world where the tar sands oil is going to make it to its destination one way or another, it is usually the best option to choose the safest method of transportation. In this instance, its Keystone XL.
8. It isn’t a full pipeline project.
The Keystone pipeline already exists in a completed state. At the moment, it delivers tar sands oil to the Midwest. The goal is to extend the pipeline down to the Gulf Coast to increase potential processing capacities with an asset that already exists. The reputation of the Keystone pipeline is already a proven commodity with a history that can be verified independently.
9. It promotes US oil development in addition to supporting Canadian development.
Part of the oil that will be shipped through Keystone XL will come from the Bakken Shale formation, which is located in Canada. This means US jobs in the oil industry will be supported at the same time the project is supporting Canadian jobs.
What Are the Cons of the Keystone Pipeline?
1. It would transport one of the most damaging forms of fossil fuels available to us.
Tar sands oil is called “bitumen.” The petroleum is combined with clay, sand, and water to create a very thick mixture which must have the oil extracted from it. There are only two proven ways to remove bitumen from the ground. According to the New York Times, one method includes using water and natural gas to pump steam into the tar sands, which creates the potential for a toxic runoff. Strip mining is the other option.
2. The issues from DAPL are often associated with Keystone XL.
The protests from the Dakota Access Pipeline are often associated with the Keystone pipeline. Although the two projects are somewhat similar in what they hope to accomplish, the environmental concerns are slightly different for Keystone. There isn’t the direct access and arguably unapproved access through tribal lands with Keystone as there allegedly is with DAPL.
3. The interests which have been promoting Keystone have been cutting industry jobs.
The oil industry has been cutting jobs since 2005 instead of adding them. Despite record profits of nearly $550 billion between 2005-2010, the top companies of the industry have actually reduced their employee numbers by over 11,000 workers. The top 5 oil companies in 2010 laid off 4,400 employers, despite paying executives bonuses that topped $200 million.
4. Most support jobs for Keystone XL pay minimum wage.
2 out of every 5 workers who work an oil industry job work for the local minimum wage at a fuel station. With less than 4,000 high paying construction jobs being generated by the project, which are temporary as well, the majority of opportunities that this project will create for people and families is going to be minimal.
5. It will still add more emissions to the atmosphere.
Although the overall impact to the environment from Keystone is expected to be limited, it is still an addition at a time when reduction has been a consistent point of emphasis. Millions of pounds of carbon are still an issue, no matter what the final percentages happen to be. Adding to global warming instead of subtracting from it has the potential to reduce GDP in the United States by up to 2% each year the pipeline is active. In practical terms: if Keystone XL goes active, it would be the equivalent of adding 5.6 million cars to US roadways every day.
6. Tar sands oil has the potential to be highly corrosive.
The oil that will be piped through the Keystone XL extension is some of the most corrosive petroleum that is used today. This means the interior of the pipeline will eventually wear down, which increases the opportunities for it to spring a leak somewhere. This corrosiveness has the potential to affect the air quality in the neighborhoods which surround the refineries along the Gulf Coast where the oil will be processed.
7. More jobs could be created with sustainable investments.
The Political Economy Research Institute estimates that more than 160,000 jobs could be created with a short-term renewables or green stimulus package with a $100 billion investment compared to the 40,000 estimated jobs such an investment would create for the oil industry.
8. It locks the United States into a contract that extracts oil from inefficient sources.
Although Keystone XL does promote energy independence for Canada and the United States, it is doing so through a resource that isn’t entirely efficient to obtain. This means there will always be doubt over the contracts from this fossil fuel because the cost of importing oil could, at times, be cheaper than the locked-in costs of what the pipeline offers.
The Keystone pipeline pros and cons show that there is the potential for economic growth to be achieve, especially in Canada. It also shows that there is the potential for harming the environment more than we already are. All options should be considered with this project so the economics of this situation can be maximized and the environmental impacts minimized before it is completed.
Blog Post Author Credentials
Louise Gaille is the author of this post. She received her B.A. in Economics from the University of Washington. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. If you have any suggestions on how to make this post better, then go here to contact our team.