Industry Market Trends

As Keystone Pipeline Debate Continues, a New Study Warns of Potential Economic Damage

Mar 22, 2012

The Keystone XL Pipeline project was probably always going to be controversial. All of the combustible elements for a back-and-forth, knock-down, drag-out battle are there.

You've got the subject of drilling for oil, which has been a hot spot in political arenas for the past few decades. (See: "Drill, baby, drill!" chanting in 2008.)

Then you've got the subject of U.S. and Canada relations, with some in the debate seeing things from the Canadian perspective (Is this a good deal for our country, and how will it help our people?) and others in the States arguing that gas prices will rapidly drop if we start drilling and exploring.

Listen to this statement from Canada Prime Minister Stephen Harper, in January after U.S. President Barack Obama put the kibosh on TransCanada's plans to begin building the pipeline: "I don't object to foreigners expressing their opinion," Harper told the CBC. "But I don't want them to be able to hijack the process so that we don't make a decision that's timely or in the interests of Canadians."

He also intimated that, to a certain degree, "Canada is held hostage" to U.S. decisions.

Then, to those two elements, mix in the fact that 2012 is an election year, when politicians posturing reaches its apex. Each side, the Democrats and the Republicans, are desperately trying both to placate the extreme partisans in their base and the moderates who usually decide elections.

And oh yeah, one more thing involved here: Jobs. What both sides in the debate over building the Keystone Pipeline agree on is that at least some jobs would be created in the short-term.

So with those four factors involved, it's fairly easy to see why the Keystone Pipeline has generated such heated debate. Throwing another log onto the fire is the Cornell University Global Labor Institute, which recently released a report that said, among other things, the possible economic damage from a spill from the pipeline could far outweigh the benefits of the project.

A quick word on the Global Labor Institute: According to its website:

The Cornell Global Labor Institute was established in 2005 to work with trade unions in the U.S. and internationally in developing solutions to some of the major social, economic and environmental challenges of our time. One of the main goals of the Institute is to help union officers, staff and activists gain a deeper understanding of the policies and institutions that shape today's world, and assist in bringing unionists based in different countries into contact with each other for meaningful discussions on strategy and policy.

So, from that description, it would seem the GLI is a major proponent of labor unions, which have historically supported liberals and Democrats in politics. Just so you know where they might be coming from.

OK, now on to the report. Here's the key findings coming from it: Because of the risks of a spill thanks to the use of tar sands oil (more on that in a minute), more than a million people who work in agricultural or tourism jobs in the six states along Keystone XL's route (Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas) could be economically affected.

Sean Sweeney, a co-author of the study and the director of the GLI, recently told the New York Times that "given where the pipeline is scheduled to go, it's not inconceivable that a spill like the Enbridge pipeline spill could occur," he said. "And if it contaminated a major waterway in a remote area, it could take a long time to deal with."

What is the Enbridge pipeline? Ah, that brings us back to tar sands oil. In July 2010, the Enbridge Energy pipeline suffered a major spill near Kalamazoo, Mich., that dumped 843,000 gallons of oil sands crude into nearby Talmadge Creek, and then it flowed into the Kalamazoo effort. The cleanup is ongoing, as is an investigation into Enbridge and the spill's cause, and the cost of the cleanup has been estimated at $700 million.

Lacking expertise in tar sands oil, I contacted Danielle Droitsch, a senior attorney with the National Resource Defense Council. She has been writing about and arguing passionately against oil drilling, and especially the kind of drilling proposed in the Keystone Pipeline project.

"Tar sands oil is nothing like conventional oil," Droitsch began. "It's more corrosive, and it's more acidic. It has totally different chemical and physical properties. You can hold tar sands in your hands, for example."

Droitsch also said that tar sands spills are much harder to clean up than regular oil spills.

"When you have a tar sands spill, it sinks to the bottom of the water. You can't use the tools you'd use to clean it up after regular oil," she explained.

Droitsch said tar sands, specifically Canadian tar sands, have become a much more useful and valuable property as alternative oil drilling continues to be explored. The Cornell report specifically points to the use of tar sands oil and explains further why it can be spill-prone

The report states:

Tar sands oil is transported through pipelines as diluted bitumen, a mixture of bitumen (raw tar sands) and light natural gas liquids or other volatile petroleum products. Spills from pipelines transporting diluted bitumen, conventional oil, and other hazardous liquids happen frequently. Between 2002 and 2011, there were more than 3,700 pipeline spills in the U.S.

"Over the past decade," the Cornell study continues, "the amount of diluted bitumen passing through U.S. pipelines has rapidly increased."

In 1999, the U.S. on average imported 165,000 barrels of tar sands oil per day from Canada. By 2010, that number had risen to about 600,000 barrels per day. In 2019, the Alberta Energy Resources Conservation Board expects as many as 1.5 million barrels of diluted bitumen oil will be imported by the U.S. every day.

"There is evidence that pipelines transporting diluted bitumen tar sands oil have a higher frequency of spills than pipelines carrying conventional crude. Between 2007 and 2010, pipelines transporting diluted bitumen tar sands oil in the northern Midwest spilled three times more oil per mile than the national average for conventional crude oil."

All right, so now we've learned a little about the risks, environmentally,  of tar sands oil, that it may spill more frequently than regular oil and of why it's become more important.

Another area addressed by the study is job creation, which I said earlier is a major selling point for TransCanada. The company has stated that pipeline construction would create 20,000 direct construction and manufacturing jobs in America.But the Cornell report looked at TransCanada's data submitted to the U.S. State Dept., and estimates that between 2,500 and 4,650 temporary direct jobs would be created over a two-year span.

The other big factor the Cornell study talks about is the economic damage to the U.S. should a spill occur within the Keystone Pipeline. The GLI report "connects" the following dots:

  • The Keystone XL Pipeline crosses 1,748 bodies of water, four major rivers and the Ogallala aquifer in Nebraska and the Carrizo-Wilcox aquifer in Texas.
  • A leak or a spill into a body of water close to the proposed Keystone XL could contaminate drinking water for residents and livestock, and it could also contaminate irrigation water for farmers' crops.
  •  Agriculture is a major employer in the Pipeline states
  • Keystone XL will cross land and bodies of water that sustain the recreational tourism industry.

The report goes on to discuss just how many jobs could be lost due to a spill, and how draining it would be on states' economies.

"We think it's imperative that the American people become aware of what the tar sands are, and how dangerous it could be," Droitsch said.

In the meantime, TransCanada has gotten approval to begin building the southern portion of the Keystone Pipeline.

But the debate over this project is far from over.