Keystone’s Thousands of Jobs Fall to 20 When Pipeline Opens

TransCanada Corp. (TRP)’s Keystone XL oil pipeline, heralded by supporters as a major job creator, will add few permanent positions once the $7 billion project is built.

The number of people needed to operate and maintain the 1,661-mile (2,673-kilometer) pipeline may be as few as 20, according to the U.S. State Department, or as many as a few hundred, according to TransCanada.

“I don’t see a big jobs impact,” Stephen Fuller, director of the Center for Regional Analysis at George Mason University in Arlington, Virginia, said in an interview. “It gets the oil into refineries that already exist. It’s like replacing a bridge on the highway.”

The debate in Washington has focused on short-term construction and manufacturing jobs, rather than on permanent ones. Estimates for construction and manufacturing employment range from 2,500 to 20,000, depending on assumptions of how much of the project’s budget will be spent in the U.S. The company says some of the steel will be made in Canada and India.

TransCanada Vice President Robert Jones said permanent jobs would be “in the hundreds, certainly not in the thousands,” in a Nov. 11 interview on CNN.

Calgary-based TransCanada says construction will create 20,000 “new, real U.S. jobs.”

Supporters of the Keystone XL oil pipeline rally in Washington, D.C., on Friday, Oct. 7, 2011. Photo: Andrew Harrer/Bloomberg Close

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Supporters of the Keystone XL oil pipeline rally in Washington, D.C., on Friday, Oct. 7, 2011. Photo: Andrew Harrer/Bloomberg

Temporary Jobs

Those positions represent temporary jobs that will “vary in length,” TransCanada spokesman Shawn Howard said. The job forecast for the $7 billion project includes 13,000 in construction and 7,000 in manufacturing.

“At the end of the day, it’s 20,000 people who are going to be getting checks from a contractor we hired,” Howard said.

TransCanada plans to use an average of six or seven construction workers for every mile of Keystone XL, higher than the four to five workers needed for each mile of pipeline on earlier phases of the project already completed, according to a Dec. 19 report by Bloomberg Government.

“This suggests that TransCanada either intends to hire more workers for shorter periods of time and speed up the project, or that the company’s pipeline jobs estimate is overstated,” according to the report.

Ray Perryman, a consultant hired by TransCanada to assess the economic impact of the project, said 20,000 temporary jobs equates to 10,000 full-time jobs.

State Department Estimate

“The average number of full-time equivalent jobs per year will depend on the construction time (10,000 if two years, 8,000 if 2.5 years, etc.),” Perryman said in an e-mail. “The most important concept is that construction jobs are temporary.”

The State Department, which has jurisdiction over the project because it crosses an international border, estimates the construction workforce will be between 5,000 and 6,000. A study from the Cornell Global Labor Institute School of Industrial and Labor Relations in New York says construction jobs may be in the 2,500 to 4,650 range.

Job forecasts are based on the number of positions created for every dollar spent, according to Lara Skinner, associate director of research at Cornell and author of the Keystone jobs report. TransCanada is overstating construction jobs by assuming the entire project budget will be spent in the U.S. when about half will be spent on the Canadian segment and on design and permitting in the U.S. and Canada, Skinner said.

The pipeline will support 127 permanent jobs, she said.

Pump Stations

Skinner’s analysis doesn’t take into account the fact that the project has already created jobs, TransCanada’s Howard said.

“Pump stations are being manufactured,” he said. “Those are jobs that weren’t there. You don’t build a project like this with ghosts.”

Even higher projections come from assumptions about how the project would affect the broad economy. The boost will come when businesses hire “hundreds of thousands” of new workers assuming the pipeline lowers oil prices, according to backers such as U.S. Senator Richard Lugar, an Indiana Republican. Representative Edward Markey, a Massachusetts Democrat, called those numbers “grossly inflated.”

Lugar’s “hundreds of thousands” estimate is based in part on Perryman’s 2010 study for TransCanada, according to the senator’s spokesman, Andy Fisher.

Perryman, president of the Waco, Texas-based Perryman Group, a financial analysis firm, said that new supply from Canada will lower U.S. oil prices by about 1 percent.

Permanent Jobs

The savings to U.S. companies would lead to 250,348 and 553,235 permanent jobs over the life of the pipeline, an estimate that reflects “the long-term effects of having a more stable source of that level of oil supply,” Perryman said in an e-mail.

Because the pipeline would replace “dwindling and/or less reliable” supplies from Venezuela and Mexico, Canadian oil “is unlikely” to change the level of U.S. oil imports or “cause an increase in employment or other economic activity,” the State Department said in a Jan. 18 report to Congress.

TransCanada, which has not cited indirect job gains, stands by Perryman’s findings, Howard said.

“Common sense tells you that when you have more and more supply coming into a market it does have competitive pressure on prices,” Howard said in an interview.

TransCanada applied for a permit in 2008. The State Department announced in November it would delay a decision until 2013 to evaluate a new route that would avoid the Sandhills region of the Ogallala aquifer in Nebraska, which serves 1.5 million people.

Indian Steel

That pushed until after the 2012 presidential election a decision on a project that’s supported by some labor organizations and opposed by environmental groups. Congressional Republicans sought to accelerate a decision, prompting Obama to reject the pipeline in January. Legislation that would transfer power over the project from Obama to the Federal Energy Regulatory Commission advanced last week in the house.

The Natural Resources Defense Council, 350.org, and Sierra Club announced today a campaign to have their members e-mail and call their senators to say Keystone XL is dangerous. They plan to take boxes of signed protest letters to the offices of Harry Reid, the Senate majority leader and a Democrat from Nevada, and the chamber’s Republican leader Mitch McConnell of Kentucky tomorrow, groups leaders said.

Steel Pipe

The same groups previously organized sit-downs and human chains around the White House, encouraging Obama to reject the investment.

The 7,000 manufacturing jobs projected by TransCanada will come from making “hundreds of millions of dollars” of steel pipe, fittings, valves and other equipment, according to TransCanada. The company has contracts with more than 50 suppliers in the U.S.

The pipeline will require more than 800,000 tons of 36-inch carbon steel pipe, about half of which will be produced outside of the U.S., Skinner said. TransCanada has contracted with Mumbai, India-based Welspun Corp Ltd (WLCO), India’s second-biggest producer of pipes, and Moscow-based Evraz Plc, a Russian steelmaker, for steel pipe.

Evraz will make pipe for Keystone XL at its mills in Canada, according to the Cornell report. Welspun will probably make pipe in India for final processing at its plant in Arkansas, an arrangement that allows TransCanada to state that about 75 percent of the pipe for the U.S. portion of the project will be purchased from North American plants, according to the Cornell report.

Waxman Letter

Last week, Congressional Democrats led by Representative Henry Waxman, of California, asked TransCanada Chief Executive Officer Russ Girling to disclose where steel for the project will be manufactured.

“TransCanada is entitled to decide where to purchase its materials,” Waxman’s Feb. 10 letter said. “However, providing misleading information to Congress in order to obtain a legislative earmark for the approval of its pipeline would be clearly improper.”

TransCanada plans to buy as much steel as possible in North America and to build about half the pipe in the U.S., Howard said.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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