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Wednesday, May 23, 2012

Keystone XL Round Two

TransCanada Corporation reapplied to the Obama administration on May 4 for its Keystone XL pipeline project.

Russ Girling, TransCanada’s president and chief executive officer, said, “The multi-billion dollar Keystone XL pipeline project will reduce the United States' dependence on foreign oil and support job growth by putting thousands of Americans to work. Keystone XL will transport U.S. crude oil from the very large Bakken supply basin in Montana and North Dakota, along with Canadian oil, to U.S. refineries. Our application for a Presidential Permit builds on more than three years of environmental review already conducted for Keystone XL.”

Recall that President Obama rejected the project in January. In order to avoid angering a key constituency, the President wanted to avoid making a decision until after the November 2012 election. Congress, however, passed legislation requiring an earlier decision, and Mr. Obama wound up siding with extreme environmental groups that effectively oppose any production of carbon-based energy.

At the same time, so as to not alienate labor union backers, the President invited TransCanada to reapply. The company has worked with lawmakers and regulators in Nebraska to shift the pipeline around the state’s Sandhills, which was the often-emphasized environmental issue pushed by the opposition.

As the firm reports: “The application includes the already reviewed route in Montana and South Dakota. In April, legislation was passed in Nebraska and signed into law by Governor Heineman that enabled TransCanada to re-engage with Nebraska's Department of Environmental Quality (DEQ), allowing the company to continue to work collaboratively in determining an alternative route for Keystone XL that avoids the Sandhills. Alternative routing corridors and a preferred corridor were submitted to the DEQ April 18. The DEQ will now help determine a specific route and oversee the public comment and review process. Once a route is finalized, it will be submitted as part of the Presidential Permit application.”

In terms of the firm’s desired schedule, The Wall Street Journal noted, “TransCanada expects to begin construction of Keystone XL in the first quarter of next year, with completion slated for as early as late 2014, if approved. TransCanada has said it will move ahead with a shorter segment of the line—from Cushing, Okla., to the U.S. Gulf Coast—which doesn't need Washington approval. That segment should start pumping by late next year, the company said.”

Now, it once again is up to the Obama administration. Will the President choose to delay after years of reviews, and despite the substantial economic benefits from this project?

As noted in previous SBE Council Energy & Entrepreneurs analyses, the Canadian Energy Research Institute has estimated that the Keystone pipeline would boost U.S. employment from the 80,000 jobs supported by existing oil sands projects in 2010 to 179,000 jobs in 2035. If the full oil sands projects were to move ahead in Canada, then new U.S.-related jobs would rise to 600,000 by 2035.

Also, based on the latest Census Bureau data (2009), 98.7% of employer firms involved in supporting oil and gas operations have fewer than 500 workers, and 83.3% less than 20 employees. As for firms in the oil and gas pipeline construction industry, 94.9% have less than 500 employees, and 61.1% fewer than 20 workers.

Indeed, the Keystone project is good for the economy, good for small business in the energy industry and as energy consumers, and good for jobs. Let’s hope the President gets it right this time around, and without any further delay.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.

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