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Beyond the hype, Keystone would yield few permanent jobs

Stacks of pipe are stored at the pipe yard for the Houston Lateral Project, a component of the Keystone pipeline system in Houston, Texas Ma
Stacks of pipe are stored at the pipe yard for the Houston Lateral Project, a component of the Keystone pipeline system in Houston, Texas Ma

By Alistair Bell

STEELE CITY, Nebraska (Reuters) - In the heated debate over whether to build the Keystone XL pipeline, the energy industry and lawmakers have predicted that the project could unleash an economic bonanza in the Midwest, and provide jobs for up to a half-million people.

Kansas pipeline worker Jeremy Rippe knows better.

"Short term, there will be jobs for everyone around here. Then, not many at all," said Rippe, who helps maintain a gas pipeline on the Nebraska-Kansas border.

Rippe saw TransCanada Corp - the company that hopes to build the 1,200-mile (1,900-km) Keystone XL segment as part of a network of pipelines that move oil from Canada to refineries on Texas's Gulf Coast - lay another section of the Keystone line nearby four years ago.

He recalls that there was well-paying union work for scores of local laborers and machine operators for several months. But the jobs dried up as soon as the construction was over. After that, there were just four workers overseeing pumping stations near this Great Plains town of about 60 people.

Rippe's experience reflects what many labor analysts are saying as President Barack Obama's administration weighs whether to approve the Keystone project: that despite predictions by TransCanada, politicians and business groups of a Keystone-inspired boom, the pipeline would result in few permanent jobs in the United States.

The optimistic forecasts by Keystone supporters are rooted largely in one report from 2010 - funded by TransCanada - that predicted hundreds of thousands of jobs would be created mainly because a flood of crude through Keystone XL would help reduce U.S. oil prices, thus boosting the economy.

Pro-Keystone groups also have arrived at big numbers in estimating the project's potential impact on employment by counting not only those who would work on the pipeline, but also jobs that might be created by economic activity related to the project. For example, a hamburger vendor working extra hours to serve truck drivers who transport steel pipes for Keystone could be regarded as adding to the jobs total.

A State Department study in January was the latest report to throw cold water on Keystone XL's potential as a driver of employment, forecasting that it would create just 35 permanent staff jobs for people who would oversee the completed pipeline.

"We are having a national debate about the Keystone XL pipeline and one of the issues being brought up is jobs, but this project is really in scale similar to a local project like extending the (Washington, D.C.) Metro subway system to Dulles Airport, or a major highway project," said energy economist Ian Goodman, who worked on a Cornell University study of Keystone.

Much of the debate over Keystone has cast conservative, pro-business pipeline supporters who stress jobs and energy needs against liberal groups such as the Sierra Club that say the pipeline - and the methods used to harvest crude from Alberta's tar sands oilfields - would damage the environment.

Keystone XL would begin in Alberta and cut across Montana and South Dakota to Steele City, in southern Nebraska. There it would link up with existing Keystone pipelines that run from Steele City to Texas, carrying 830,000 barrels of crude a day.

There is no dispute that building the final leg of the Keystone network would create temporary American jobs. TransCanada, unions and economists agree that the company would need about 9,000 workers in the two-year construction phase.

Complaints that such jobs would be temporary do not make the jobs any less valid, said Alex Pourbaix, executive vice president of TransCanada.

"I often have to shake my head when our opponents make these allegations. The entire construction industry on this continent is comprised of temporary construction jobs," he said.

Keystone XL also would put money in the pockets of thousands of others not directly involved in construction, such as steel workers, Texas refinery workers and even Margo Compton, the owner of a Steele City bar called the Salty Dog Saloon.

At the Salty Dog, stickers from pipeline workers' unions are plastered on a beer refrigerator by the bar.

Compton's business boomed briefly in 2010, thanks to big-spending construction workers who built an earlier segment of the Keystone pipeline nearby. Today, she jokes that the bar's regulars, many of whom work in agriculture, are poor tippers compared with the pipeline workers.

'A DYING VILLAGE'

The arguments for Keystone XL are popular in Steele City.

Jobs of almost any sort are welcome in a town where the only other employers are farms, the Salty Dog Saloon and a post office barely bigger than a hut. One resident makes money selling guns from his home.

"Everyone here agrees that Keystone has been nothing but good for us," said Steele City postmaster Bill Scheele.

TransCanada donated $10,000 to help improve the town hall and build bathrooms in the firehouse as a gesture to the community in 2010.

But Steele City's status as a pipeline hub has not reversed the town's decades-long decline, as residents have left to find work elsewhere. The population fell to 61 in the last U.S. Census in 2010, down from 137 in 1980.

"We have to face it: This is a dying village," Scheele said.

That's why people here don't mind lofty estimates about Keystone jobs, even if the claims by officials such as U.S. House of Representatives Speaker John Boehner seem inflated.

"Let's work together on building the Keystone pipeline and the tens of thousands of jobs that would be created as a result," Boehner said in January, adding that more than 100,000 jobs would "come with" a completed pipeline.

Boehner's estimate appeared to include what economists call "indirect" and "induced" jobs - those that would be created in a ripple effect from the pipeline work.

It's a method that is seen as legitimate in the world of economic forecasting, even though such job gains often are educated guesses of how many people's livelihoods would benefit from a project like Keystone XL.

One State Department study this year, using data from TransCanada, predicted that Keystone would "support" 42,100 jobs, with fewer than half created by the project itself. Such nuances in job estimates often have been lost as lawmakers and energy lobbyists have urged Obama to allow Keystone XL.

"During the construction phase, the project will create 42,000 jobs," Republican Senators John Hoeven of North Dakota and Bob Corker of Tennessee asserted in a statement in January.

'A GAME EVERYBODY PLAYS'

Even as they have accused Republicans and TransCanada of overstating Keystone's job-creating potential, Democrats have used similar accounting tactics in touting measures they have supported, such as Obama's $787 billion economic stimulus package in 2009.

The White House says the package, a mix of tax cuts and spending on public works and social benefits, generated an average of 1.6 million jobs a year for four years. Republicans reject that figure as too high.

"This is a game that everybody in Washington plays - how you model job creation," said David Mallino, a Washington-based lawyer for the Laborers' International Union of North America, which supports Keystone XL.

The strategy of talking up potential job gains is working for backers of Keystone XL, at least in influencing public opinion. A Washington Post-ABC News poll this month found that 85 percent of Americans believe that the project would create a significant number of jobs, while just 10 percent did not.

The 2010 study that is the basis for the most optimistic claims about Keystone XL's potential to create jobs was done by the Perryman Group, a Texas-based financial analysis firm.

Funded by TransCanada, the study said that extending Keystone would create 250,000 to 500,000 jobs. It said most of the new jobs would stem from the benefits of lower U.S. oil prices that would result from the increased flow of Canadian crude to American refineries.

Michael Levi, energy specialist at the Council on Foreign Relations, said the report's assumptions were "dead wrong," partly because Canadian tar sands oil will get to U.S. and world markets via other pipelines, rail or ships regardless of whether Keystone XL is built.

And global prices, not those in the United States, are the best measurements for the price of oil and how it affects the U.S. economy, Levi said.

Ray Perryman, president of the Perryman Group, said, "I strongly disagree" with Levi, adding that Keystone XL could foster a more self-sufficient North American oil market.

Despite questions about the Perryman report, its numbers still shape much of the political debate about Keystone XL.

The 250,000 figure was used by Thomas Donohue, head of the U.S. Chamber of Commerce, in a letter to Congress and Obama in 2011 that urged them to back the pipeline.

If Keystone XL were built, most laborers would earn about $30 an hour, according to union officials. At the top end would be pipeline welders, some of whom can pull in $120,000 a year if they have their own equipment and are willing to travel.

"These are real jobs and they could be created with the swipe of a pen," said union lawyer Mallino. "Whether it's 50 jobs or 50,000 jobs, there's no reason to leave these jobs on the table for partisan political reasons."

But once the pipeline is built, the jobs would melt away, oil economist Phil Verleger said.

"You build a pipeline," he said, "and it's gone."

(Additional reporting by Valerie Volcovici; Editing by David Lindsey and Ken Wills)

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