Myth or Miracle? Are Keystone XL jobs and energy security claims exaggerated?

To hear some people talk about it, Keystone XL is the answer to many of America’s current woes. It will free America of the scourge of foreign oil dependence, create hundreds of thousands of jobs, weaken the enemies that threaten the union, and bring on the good times once again. While the good times may well roll for a handful of oil companies and their shareholders, independent analysis of some of the lofty claims made by proponents of the pipeline reveal that many such claims are wildly exaggerated if not totally false.

Two weeks ago, we revealed that the changing petroleum products market means that the refiners positioned to process KXL crude will turn a good portion of it into diesel for the export market. This highlights America’s integration and dependence on the global oil market and makes a mockery of energy security claims that suggest that KXL somehow makes America less dependent on oil from outside North America. The US oil industry’s growing reliance on export markets makes it very unlikely that a bit more Canadian oil will result in less Middle Eastern or Venezuelan oil. Refiners will buy oil from anywhere they can get it in a market that is now driven by global demand and not domestic need.

Presenting this analysis on a panel examining the pipeline’s energy security benefits at the Canada Institute of the Woodrow Wilson Center last week, I found that the pipeline proponents on the panel did not want to talk about energy security as much as the big issue of the day; jobs, jobs, jobs.

So it is interesting to see that Cornell Global Labor Institute released a report yesterday (pdf) that not only states that TransCanada’s claims about jobs created by the pipeline are unsubstantiated but that the pipeline may destroy as many jobs as it creates.

Jobs creation claims made by TransCanada are based on a report it commissioned by a Texan ‘economic and financial analysis firm’ called The Perryman Group. It turns out Perryman’s optimistic job creation estimates for Keystone XL are exaggerated by the fact that they include sections of the pipeline that have already been built as part of Keystone1 and extrapolations based on project expenditures that will be made in Canada not the U.S.

While this is bad enough it seems to only be the tip of the iceberg. But getting right to the heart of how the Perryman Group arrives at its figures seems to be hampered by the fact that “the lack of adequate data and detail render the report so opaque as to make meaningful review impossible.”

Using Cornell’s methodology, which IS revealed in its report, the analysts estimate that job creation is more likely around a third of the claims made by the Perryman Group and TransCanada.

But that isn’t all. It seems that even Perryman Group’s dubious estimates have been inflated beyond all proportion by pipeline proponents who seem to play fast and loose with the facts in order to big up the numbers. Rep. Fred Upton (R-MI), among others, has been throwing around a figure of 100,000 jobs in his various attempts to get the pipeline approved through legislative action. But even Perryman Group’s report does not go this far. The 100,000 figure in the Perryman report is for person-years of employment not actual jobs. The actual jobs claim was 20,000. So Upton’s mix up makes the company’s already exaggerated claims sound 5 times bigger than they are.  Almost makes you think he’s being paid to give out the wrong information.

The Cornell study suggests jobs created by the pipeline are more likely in the 2,500-4,650 range. This is not insignificant in hard economic times such as these. But there are a couple of things to bear in mind before deciding that these jobs are worth the environmental risks of allowing the pipeline to go through.

Cornell points out that the pipeline could easily destroy jobs by raising gas prices in the Midwest (a result of providing Canadian oil access to international markets through the Gulf coast), destroying farmland and water resources in the event of a spill and by raising health care costs through increased emissions of pollutants. Then there is also the issue that this is not the only jobs creation show in town. Construction workers could be put to work in this country building mass transit infrastructure for example. An activity that would not only create more jobs but also help build the sustainable economy that we need not to mention genuinely enhancing our energy security by reducing oil consumption.

In coming months and years we will need to be much more aware of jobs and other economic claims being made to support oil projects that we don’t need. Jobs and growth claims were recently made in a House Natural Resources Committee hearing for opening up the Arctic National Wildlife Refuge (ANWR) in Alaska and they are bound to be used again and again as industry seeks to open every possible resource under the Drill Baby Drill doctrine. The following statement from the Cornell report reminds us that we cannot allow advocacy to be passed off as research.

What is being offered by the proponents is advocacy to build support for KXL, rather than serious research aimed to inform public debate and responsible decision making. By repeating inflated numbers, the supporters of KXL approval are doing an injustice to the American public in that expectations are raised for jobs that simply cannot be met. These numbers—hundreds of thousands of jobs!—then get packaged as if KXL were a major jobs program capable of registering some kind of significant impact on unemployment levels and the overall economy. This is plainly untrue.