Oklahoma and Texas increased their economies by a combined total of $5.7 billion due to the southern leg of the Keystone pipeline (the “Gulf Coast Pipeline”) during the 17 months it was under construction. According to the Consumer Energy Alliance, the pipeline also brought in local tax revenues and aided 24 counties that are in low-income, rural areas. TransCanada invested $2.3 billion to build the 485-mile pipeline connecting the crude oil storage hub in Cushing with refineries along the Gulf Coast. In the process, the construction of the pipeline involved hiring almost 5,000 workers.[i]
The Gulf Coast Pipeline brought $2.1 billion to the Oklahoma economy and $72 million to its local tax coffers, and $3.6 billion to the Texas economy. Building the northern leg of the Keystone XL pipeline can do the same for the northern states if only the President would approve the permit which he has delayed for almost 6 years for political reasons.
Small Towns Need Keystone
Many small towns on the northern route are praying for Keystone to revive their dying economies. For example, the pipeline would cross six counties in Montana and everyone on the route has endorsed the project. According to TransCanada, it has signed easements with every landowner on the pipeline’s proposed path through Montana and South Dakota.[ii] According to Dan Bucks, director of the Montana Department of Revenue, TransCanada will pay about $80.3 million in total Montana property taxes in its first year of operation, of which $16.3 million will go to the school equalization fund and $1 million will go to the university system. The rest (about $63 million) will be divided among the counties and school districts within the counties, and other tax districts such as fire, cemetery and soil conservation districts. In McCone County, Montana, TransCanada would be paying an expected $10,403 in revenue for each of McCone County’s 1,734 residents![iii]
According to the State Department, Keystone would create about 2,000 short-term construction jobs over two years (or 3,900 if construction took only a year), and 50 long-term positions. It also would support 40,000 “indirect” or “induced” jobs across the country during construction, ranging from canteen cars serving food along the pipeline route to factories manufacturing construction equipment for the project.[iv] These indirect jobs would help revive the economies of the small towns along the northern route.
In the meantime, Canadian oil sands are being moved by rail to the United States and railroad companies are making profits from those movements. Further, pipelines are being built in the United States. For example, there are 3 proposed pipelines to move oil from the Bakken.
Oil Pipelines to Move Bakken Oil
While President Obama is stalling the Keystone XL pipeline, other pipelines in the northern Midwestern states are being built. Three different pipelines with a combined capacity of 885,000 barrels per day are expected to be constructed by 2016 to move oil from North Dakota’s Bakken oil fields[v]:
- Enbridge Energy Partners has been approved by North Dakota regulators to construct the 600-mile Sandpiper pipeline with construction beginning as early as July 1, 2014. The $2.6-billion project is scheduled to move oil from North Dakota to Clearbrook, Minnesota starting in 2016. It will have a capacity of 225,000 barrels of oil a day. A larger pipeline with a capacity of 375,000 barrels a day will move oil from the Clearbrook oil terminal to another oil hub in Superior, Wisconsin.
- Energy Transfer Partners plans to build a 1,100-mile crude pipeline between North Dakota oil fields and the oil hub in Patoka, Illinois. From there, it could move 320,000 barrels a day to refineries in the Midwest, to East Coast plants by rail, or to the Gulf Coast by another pipeline. Energy Transfer has secured long-term commitments from oil producers, and expects the line to be in service by the end of 2016.
- Enterprise Product Partners intends to build a 340,000-barrel-a-day line from Stanley, North Dakota to the crude oil-storage hub at Cushing, Oklahoma and is awaiting a final decision by the company’s board. A third pipeline, the 600-mile Sandpiper pipeline, to be constructed by Enbridge Energy Partners has been approved by North Dakota regulators and construction can begin July 1. Enterprise’s proposed pipeline could start shipments in late 2016 pending enough producers signing on to the project.
The majority of Bakken oil is moved by rail today. According to the North Dakota Pipeline Authority, Bakken rail outflow capacity totaled 965,000 barrels per day at the end of 2013 while pipeline capacity totaled 515,000 barrels per day. Rail capacity was nearly double,[vi] but, more rail infrastructure is expected. For example, BNSF will open a new 10-mile stretch of track that will parallel existing track in its Bakken Shale region, and will build another 10 miles of track after that. The track segments are $25 million to $40 million projects, part of the $1 billion in capital spending BNSF plans this year to expand service along its Northern Corridor that cuts through North Dakota and Montana and borders the Bakken Shale oil region.[vii]
Technology is making sources of oil economic that were unavailable just a few decades ago. Those sources in Canada and in the Bakken in North Dakota are creating investments in rail and in pipelines. The northern leg of the Keystone XL pipeline would be providing tax revenues to South Dakota, Nebraska, and Montana if it were allowed to be built. Those tax revenues are sorely needed by small towns in the north to revive their economies. But, President Obama stands in their way to recovery, because he will not decide whether it is in the national interest to build a pipeline to help move more North American oil cheaply and safely through the United States.
The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.
[i] The Oklahoman, Pipeline injected $2.1 billion in Oklahoma economy, June 25, 2014, http://newsok.com/report-pipeline-injected-2.1b-into-oklahoma-economy/article/4958818
[ii] NBC News, Main Street, Montana: Small Towns Pray for Keystone XL Pipeline, http://www.nbcnews.com/feature/seeking-main-street/main-street-montana-small-towns-pray-keystone-xl-pipeline-n139976
[iii] Billings Gazette, Keystone would bring millions in taxes, February 5, 2012, http://billingsgazette.com/news/state-and-regional/montana/keystone-would-bring-millions-in-taxes/article_e15aeb0a-af81-576d-8809-68d554cf4f8.html
[iv] Washington Post, Keystone XL Pipeline environmental impact statement, January 2014, http://apps.washingtonpost.com/g/page/politics/keystone-xl-pipeline-environmental-impact-statement/789/ and US News, Keystone XL May Create Fewer Jobs Than Most Expect, March 11, 2014, http://www.usnews.com/news/articles/2014/03/10/experts-keystone-xl-pipeline-may-create-fewer-jobs-than-most-expect
[v] Wall Street Journal, North Dakota’s Bakken Oil Fields to Get New Pipelines, June 26, 2014, http://online.wsj.com/articles/north-dakotas-bakken-oil-fields-to-get-new-pipelines-1403810341
[vi] Energy Information Administration, Crude-by-rail transportation provides Bakken Shale production access to major markets, June 10, 2014, http://www.eia.gov/todayinenergy/detail.cfm?id=16631&src=email
[vii] Wall Street Journal, BNSF to Continue Investments Related to U.S. Oil Boom, June 10, 2014, http://online.wsj.com/articles/bnsf-to-continue-investments-related-to-u-s-oil-boom-1402430342