Keystone XL's small business pluses would be big, House panel told

May 27, 2013
Completing the Keystone XL crude oil pipeline's construction would significantly benefit many US small businesses and skilled workers, three witnesses told a US House subcommittee.

Completing the Keystone XL crude oil pipeline's construction would significantly benefit many US small businesses and skilled workers, three witnesses told a US House subcommittee.And it would do so without the dire environmental consequences the project's opponents predict, a fourth witness stated.

"Small businesses like mine and my colleagues in the chemical distribution industry would be directly and beneficially affected by its construction, leading to reduced costs for both ourselves and, ultimately, our customers," Mat Brainerd, president of Brainerd Chemical Co. in Tulsa, told the House Small Business Committee's Energy and Trade Subcommittee.

Brainerd, who also is the National Association of Chemical Distributors vice-chairman, explained that companies like his take title to bulk volumes of chemicals; break them down into small units and, in some cases, blend them; and transport them to small businesses as well as large manufacturers.

"It is through the existence and health of our industry that hundreds of thousands of small industrial users and businesses are able to operate," he noted.

Chemical distributors would benefit indirectly from economic growth resulting from Keystone XL's construction; directly from lower costs for aromatic and aliphatic chemicals, and rail and tank cars; and an improved hydraulic fracturing market which many chemical distributors serve, Brainerd testified.

"Similarly, the pipeline should result in decreased diesel costs," he said. "As a small businessman, I spend approximately $60,000/month on diesel to move my products to market. If prices dropped just 5%, that would save $36,000/year, or the equivalent of a full-time employee's salary."

'Moral arbiters'

Brent Booker, secretary-treasurer in the AFL-CIO's Building and Construction Trades Department, said completing Keystone XL would benefit the general economy by giving new jobs to thousands of laid-off construction workers.

"When self-imposed moral arbiters like 350.org or the Sierra Club dismiss out of hand the jobs that would be created…then they are, in effect, dismissing the lives, families, careers, and even the basic existence of millions of Americans who work to construct, repair, and advance this great nation," he told the subcommittee.

Booker said it's also important to note that TransCanada Corp., the project's sponsor, signed a project labor agreement with six major US unions, effectively assuring that the pipeline would be built with the world's safest and most skilled construction workforce. It also won the support of one of the most effective US grassroots movements, he added.

"It also bears noting that the family-sustaining wages and benefits that will be paid on this project through the PLA will have a dramatic effect on the local economies of communities all along the proposed route," Booker said.

"In fact, over 4,000 workers have already performed roughly 1 million hr of work on the southern leg of Keystone from Cushing, Okla., to Port Arthur, Tex.," he noted. "And the economic impact from the wages and benefits being paid through the PLA is noticeable."

More job impacts

Peter Bowe, president of Ellicott Dredge Enterprises LLC in Baltimore, said building the rest of Keystone XL would affect not only jobs that would be created from its construction, but also those related to production from Alberta's oil sands deposits. "At any given time, it wouldn't be unusual for 20% of our 200 employees to be working on oil sands-related projects," he testified.

"When we make a sale for a Canadian oil sands environmental project, we rely on literally hundreds of vendors from across the country to export a product which is almost all American-made," Bowe continued. "Though I am reluctant to admit it, we have a few American competitors also serving the same market which add to the favorable economic impact that oil sands development has on American manufacturing and American exports."

Cross-border pipeline constraints have driven prices for crude produced from oil sands downward, leading Alberta producers to postpone or cancel projects, Bowe said. "In the best cases, they are leaning on suppliers like us for difficult price concessions to offset some of their logistics cost problems," he told the subcommittee.

"One way or the other, Canadians will eventually solve their distribution problems, with or without US government collaboration," Bowe said. "To the extent this process is delayed, the producers will suffer economic cost, and their US suppliers, including Ellicott Dredges, will suffer as well, including diminished employment."

Christopher R. Knittel, an energy economics professor in the Massachusetts Institute of Technology's Sloan School of Management, told the subcommittee that while he is concerned about global climate change, many Keystone XL opponents have been making the wrong greenhouse gas impact comparisons with average US refined products. Crude traveling through the proposed pipeline would replace heavy grades US importers now buy from Venezuela which have comparable GHG emissions levels, he said.

Prices in perspective

"While more supply always puts downward pressure on prices, it's important to put it in perspective," Knittel said. "The crude oil which would run through Keystone XL would represent less than 1% of the total world market."

Oil prices are determined globally, he noted, but pipeline constraints from Canadian and North Dakota producers to US Gulf Coast refineries have created significant discounts for that crude. Refiners, meanwhile, don't face similar discounts because product pipeline capacity is adequate, Knittel said. Building the rest of Keystone XL conceivably would raise their feedstock costs, but they would likely absorb the increase, he added.

"There are trade-offs here," Knittel said. "My goal at this hearing is to interject facts about greenhouse gas emissions and world oil prices. I don't think this project would have a significant impact on either. It would raise the price North Dakota producers get for their oil, which would increase jobs there."

When it comes to jobs, Knittel said that short-term gains would produce long-term economic benefits. "This is an argument for stimulus in an economic recession—only here, it's private industry, and not the government, which would provide the stimulus," he observed.

The subcommittee's chairman, Rep. Scott Tipton (R-Colo.), said the information at the hearing was timely since the House was expected to vote in another week on Rep. Lee Terry's (R-Neb.) bill which would bypass the White House and congressionally approve completion of the Keystone XL pipeline.