Dec 11, 2014 - 9:00am

Keystone XL Dispute Creates a “New Normal” of Pipeline Delays


Senior Editor, Digital Content

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Keystone XL pipeline opponents on the National Mall in Washington, D.C.
Keystone XL pipeline opponents on the National Mall in Washington, D.C. Photo credit: Photographer Pete Marovich/Boomberg.

Anyone who has followed the six-year drama over the Keystone XL pipeline knows about the lost economic opportunities from its delay. Heck, I spent a week hearing from people living along the pipeline’s proposed route who are waiting for its benefits.

James Hoffa, head of the Teamsters, lists some of lost opportunities from the pipeline’s delay in this Detroit News op-ed:

Completing the final segment of the pipeline from Nebraska to the Canadian border would employ upwards of 2,500 Teamsters and would infuse millions of dollars into local economies. That’s not just where the pipeline is being built either — it’s right here in Michigan, where suppliers could see substantial growth.

How’s that possible? Because a project of this magnitude will require thousands of pieces of equipment like American-made vehicles to be purchased, and those vehicles will need to be kept up with new parts. Similar projects have resulted in automotive companies building facilities to service vehicles. There is no reason to think that wouldn’t happen here as well.

For communities closer to the construction of the pipeline, workers living nearby will add handsomely to their local tax bases. Rent, food and the everyday living expenses will pump dollars into the wallets of local residents. Infrastructure improvements will also need to be made as part of the project to shore up roads and improve wetland areas.

As it stands, the southern portion of the pipeline has already been completed and produced millions of hours of work and positive economic benefits for the local communities in which it was constructed. The project is a shot in the arm to many rural towns that need it the most.

In total, the construction of the Keystone XL pipeline would contribute approximately $3.4 billion to the U.S. gross domestic product. It would support a combined total of 42,100 jobs and approximately $2 billion in earnings nationwide.

There’s been an unfortunate side effect from the Keystone XL delay. It’s inspired anti-energy activists to put up roadblocks to other pipeline projects, the Wall Street Journal reports [subscription required]:

 [T]he crude-oil pipeline’s political and regulatory snarls since then have emboldened resistance to at least 10 other pipeline projects across North America. Using Keystone XL as a template, national environmental groups are joining with local activists in a strategy aimed at prolonging government reviews of proposed pipeline routes and their environmental impact.

As a result, six oil and natural-gas pipeline projects in North America costing a proposed $15 billion or more and stretching more than 3,400 miles have been delayed, a tally by The Wall Street Journal shows. At least four other projects with a total investment of $25 billion and more than 5,100 miles in length are facing opposition but haven’t been delayed yet.

The snags could paralyze some projects for years, increase the costs of those that win approval and kill some projects, though that hasn’t happened yet.

It didn’t use to be like this. As recently as 2009, the Obama administration made a great case when approving the Alberta Clipper, an oil pipeline running from Alberta to Wisconsin. Now, an expansion of the very same pipeline is one of the projects under attack by activists.

Ian Anderson, president of Kinder Morgan’s Canadian business segment calls this a “new normal” for pipeline projects. Simply put, it’s much harder to build energy infrastructure projects in America [emphasis mine] now:

Mr. Girling [CEO of TransCanada] said in an interview that TransCanada company will no longer pursue certain planning, engineering and regulatory steps at the same time because of the opposition. It could take eight years from the project’s initial planning to the start of operations, compared with four years for the first Keystone pipeline, he added.

We can’t say we weren’t warned. Karen Harbert, president and CEO of the U.S. Chamber’s Institute for 21st Century Energy told a House Energy and Commerce Committee hearing in 2013 on the pipeline's five-year delay:

Much of our energy infrastructure is increasingly inadequate to meet current and projected demand. Providing energy is a long and capital-intensive undertaking, and new energy infrastructure projects require long lead times and massive amounts—tens of trillions of dollars over the next few decades—of new investment. Some of that investment and the jobs that go with it will never happen or go elsewhere if the regulatory environment under which companies operate is unreliable and inefficient. Regulatory predictability allows business to plan and invest with greater confidence.

Unfortunately, our energy sector suffers from a lengthy, unpredictable, and needlessly complex regulatory maze that delays, and often halts, the construction of new energy infrastructure. Federal and state environmental statutes such as National Environmental Policy Act, state siting and permitting rules, and a “build absolutely nothing anywhere near anything”—BANANA—mentality routinely are used to block the construction and expansion of everything from transmission lines to power plants to pipelines.

The Keystone XL pipeline is a symbol of a dysfunctional federal permitting process that desperately needs to be streamlined. Our energy infrastructure and future economic growth depends on it.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.