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A Project of The Annenberg Public Policy Center

Competing Keystone Claims

Two senators on opposite sides of the Keystone XL pipeline debate are selectively spinning the facts to make their case:

  • Democratic Sen. Chris Coons says approval of the Keystone pipeline “means unlocking the Canadian tar sands,” when in fact the oil he refers to is already moving to market in large volume by other means and so can’t be “locked” simply by stopping the pipeline.
  • GOP Sen. John Hoeven says “42,000 jobs are supported by this project,” adding that “construction jobs are good jobs.” But only 3,900 of those jobs would be in construction, and they would last only a couple of years. Once completed, the pipeline would take only 35 employees and a handful of contractors to operate.

‘Unlocking the Canadian Tar Sands’

Congress is now debating legislation that would strip the Obama administration of its power to decide the fate of the Keystone XL pipeline and grant approval of the project. But the president has said he would veto the legislation because it would circumvent the administration’s review and approval process.

The pipeline, which would be built by TransCanada Corp., would run from Hardisty, Alberta, to Steele City, Nebraska, where it would connect with existing pipelines to refineries on the Gulf Coast. The U.S. segment would be 875 miles long and could carry up to 830,000 barrels of oil per day.

We covered many of the partisan talking points about the project last year in an article we called “Pipeline Primer.”

Sens. Coons and Hoeven debated the merits of the project on “Fox News Sunday.” Chris Wallace, the show’s host, asked Coons what Keystone means for jobs and the environment. Coons first answered the question about the environment, referring to the Canadian oil as “tar sands.” (The industry prefers “oil sands.”)

Coons, Jan. 11: Keystone means unlocking the Canadian tar sands, some of the dirtiest sources of energy on the planet and allowing those tar sands to go across our American Midwest and then reach the international economy and our environment.

Coons’ implication is that if Congress blocks the pipeline then the Canadian oil will remain “locked” underground. But the Canadian oil is increasingly already being transported to the U.S. by rail. Canada exported about 182,000 barrels per day (bpd) by rail in the third quarter of 2014, up from nearly 124,000 bpd in the third quarter of 2013 and about 57,000 bpd in the third quarter of 2012,  according to Canada’s National Energy Board.

The 182,000 bpd being transported by rail is equal to about 22 percent of the proposed Keystone XL pipeline capacity.

The State Department noted in the market analysis section of its final report that there have been “significant investments in increasing rail transport capacity for crude oil out of the WCSB [Western Canadian Sedimentary Basin].” In a March 2014 report, the Canadian Association of Petroleum Producers estimated that rail capacity will exceed 1 million barrels per day by the end of 2015 — and perhaps as much as 1.4 million bpd — because of those investments.

In addition, there are three other pipeline projects that do not need U.S. approval and that would bring Western Canadian crude oil to market, as we described in our earlier article on the pipeline in the section labeled “Alternatives.”

For those reasons, the State Department said “approval or denial of any one crude oil transport project, including the proposed [Keystone] Project, remains unlikely to significantly impact the rate of extraction in the oil sands.”

Ian Koski, a spokesman for Coons, said the senator “might have been better served saying ‘further unlocked’ than simply saying ‘unlocked'” — acknowledging that oil is flowing from Western Canada, but arguing that the State Department report is outdated and its projections flawed.

Koski made the point that the market has changed since the State Department issued its report and oil prices have declined so sharply that “Senator Coons believes it is no longer a foregone conclusion that all of this tar is going to come out of the ground” with or without the Keystone pipeline.

Coons made that point during the show when he said the State Department “reached that conclusion assuming $100 a barrel oil. Oil has now dropped back to its average of the last 20 years, $50 a barrel. Different context, different outcome.”

It is true that it costs more to transport oil by rail than pipeline. It is also true that the State Department report said oil production in Western Canada “is expected to be most sensitive to increased transport costs in a range of prices around $65 to $75 per barrel,” and prices have fallen below those levels since late 2014. “Assuming prices fell in this range, higher transportation costs could have a substantial impact on oil sands production levels,” the State report said.

But the price of crude oil is volatile and experts expect it will rise again. The Energy Information Agency issued a short-term energy report on Jan. 14 that projects crude oil prices will average $75 per barrel by 2016.

Coons was correct when he said that oil is now “back to its average of the last 20 years.” Over the last 20 years, from 1995 to 2015, the average annual price of a barrel of oil — as measured by the West Texas Intermediate benchmark price – has been $53.38. However, it has been $81.81 per barrel over the last 10 years and five of those 10 years it has been above $90 per barrel – including in 2014, when it was $96.34 per barrel.

The financial incentive to extract and transport oil from Western Canada to the U.S. will depend on whether the price of crude oil stays at the 20-year average, as Coons says, or returns to the 10-year average. The EIA expects prices will be closer to the 10-year average.

Coons is also correct that the Keystone pipeline would carry “some of the dirtiest sources of energy on the planet.” That’s largely because of the energy required during the extraction process.

The State Department reports says burning a gallon of fuel from the Canadian oil on average results in 17 percent more greenhouse gas emissions than fuels consumed in the U.S. in 2005. That’s the so-called “well to wheel” figure, which measures GHG emissions through the entire process from well extraction to vehicle combustion.

Creating Jobs

Hoeven, in advocating for the project, emphasized the number of jobs that would be created by the proposed Keystone pipeline — a common talking point for supporters of the project. Senate Majority Leader Mitch McConnell refers to the Senate bill that would approve the project over the administration’s objections as a “jobs bill.”

Hoeven, Jan. 13: Well, the environmental impact statement prepared by the Obama administration says 42,000 jobs are supported by this project, $3.4 billion in GDP increase, $8 billion project, and tell the families that would be getting those paychecks that those aren’t good jobs. Construction jobs are good jobs.

The jobs figure is correct, but those jobs are temporary (for one or two years) and most of them are not construction jobs.

As we have written before, the U.S. State Department’s analysis says that during construction there would be approximately 16,100 direct jobs, which would include construction jobs, and 26,000 “indirect and induced jobs,” which would include the purchase of goods and services by the construction contractors and employees.

Of the 16,100 direct jobs, the State Department says “approximately 3,900 (or 1,950 per year if construction took 2 years) would comprise a direct, temporary, construction workforce in the proposed Project area.” The reports says the construction jobs would be in Montana, South Dakota, Nebraska and Kansas. It does not mention Hoeven’s home state of North Dakota, which has the lowest unemployment rate in the country at 2.7 percent.

After construction is completed, the pipeline would require 50 jobs to operate: “35 permanent employees and 15 temporary contractors,” the State report says.

Hoeven is also correct that the State Department estimated that the project would contribute $3.4 billion to the gross domestic product, but to put that in perspective the report also pointed out that it would add 0.02 percent to the GDP.

— Eugene Kiely