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Keystone XL Pipeline Expansion Delayed

Approval of an oil pipeline expansion project running from Canada to the U.S. was put into limbo this month causing some experts and U.S. companies frustration and further debate about its benefits.

President Barack Obama made a statement November 10 supporting the U.S. State Department's decision to ask TransCanada, the company behind the crude oil pipeline, to reroute the pipeline and find ways to make it more environmentally friendly.

The pipeline expansion called Keystone XL - planned to run from Hardisty, Alberta, Canada, through Montana and the Dakotas to Steele City, NE - was a $7 billion project thought by some companies to be a boost to the economy and an opportunity for job growth.

John Monaghan, legislative specialist with the free market think tank the Heartland Institute, said the benefits for citizens and local economies "are real and significant."

"I think it was an uncomfortable political decision ... Obama was put in a difficult situation on purpose," Monaghan said. "This is the definition of a shovel-ready project, and he's not ready to stand up and support it. It's frustrating to watch."

Gross crude oil export revenues for Canada were estimated at $50 billion in 2010 compared with $40 billion in 2009, according to the Canadian National Energy Board; that increase can be partly attributed to the Keystone Pipeline sections built and in operation since 2010. According to Tiffany Armitage, president of Canadian-based ARMCO, a manufacturer of hose assemblies, "The injection of that kind of cash flow into our economy has contributed greatly to keep us relatively stable."

She said she can only see the current pipeline and expansion project as affecting NAHAD members who are associated with the energy industry in a profitable way. "This project impacts Canada and the U.S. as a whole in a positive way," Armitage said.

"Nationally we will all benefit. ARMCO may not supply directly to the Keystone project, but we supply not only in the extraction and transfer process but also in the remediation. A large part of what we do and our capital investment involves testing and recertification, assuring we create and distribute safe and reliable products. I believe ARMCO would see incremental growth through this project."

Other NAHAD members, like general manager Chad Hasert of Pace Manufacturing in Brandon, SD, were still uncertain about the benefits of the project that he said is a "big subject in this area." Opinions about the pipeline expansion in the state seem to be is split, he said. He said he's still learning about the pipeline and its impacts and was not ready to comment directly on it.

To help meet the demand for oil and increase Canadian exports to the U.S., TransCanada first proposed the Keystone project in 2005. The U.S. Department of State gave a nod of approval for construction in 2008, and the pipelines became operational in 2010. The pipelines in place begin in Hardisty, Alberta, and transport crude oil to Wood River and Patoka, IL, and Cushing, OK, through nearly 2,500 miles of 30- and 36-inch pipeline, according to TransCanada.

After these projects, considered phase one and phase two, the Keystone XL or phase three was proposed. This 1,700-mile pipeline would take crude oil on a different route to Steele City, NE, and another phase taking oil from Cushing, OK, to Houston, TX.

The future of the project and its impacts may be delayed or even ended, according to Glenn Hurowitz, senior fellow at the Center for International Policy and director of the Tropical Forest and Climate Coalition.

Although he agrees with Monaghan that President Obama's decision was a result of political pressure, Hurowitz takes a firm stance against the Keystone project overall, saying construction of the pipeline would be a detriment to the environment and contribute no real significant amount of jobs, he said.

"I also believe that we shouldn't be exporting North American oil until we're in a desperate" or compromising national security position, Hurowitz said.

TransCanada recently said the number of permanent jobs it would create as a result of the expansion is in the hundreds. However, the company has said that more than 20,000 mostly temporary construction jobs would result from the project, including pipe fitters, welders, mechanics, electricians, heavy equipment operators and so on. It also claims 118,000 spin-off jobs may result, due to “increased business for local restaurants, hotels and suppliers.” Critics of the project say these numbers are inflated.

"These individuals are fearful that once the project is complete, unemployment will skyrocket, but we need to remember growth in industry creates industry growth," Armitage said. "On the other hand, some statistics say that upon completion of the pipeline, industry employment could increase those numbers by more than 5 times."

Pipelines are viewed as a more environmentally safe option to transport oil, although Hurowitz said that claim is deceptive. Transporting by vehicle, although the rate of accidents are higher, poses less threat because of the small quantity of oil per vehicle while a pipeline has the potential to cause more damage with only one accident, he said.

"There are immense environmental concerns, and there should be," Armitage said. "However, we must remember that we are not using the same technology as we did when we were building pipelines in the 1950s."

While the future of the Keystone XL Pipeline is uncertain and highly debated, in the end, if it goes through, the project would benefit NAHAD members, even if indirectly, and strengthen relations with Canada. "There is no question that we are one another’s best allies," Armitage said. "It doesn't make sense to be importing from unreliable or unfriendly nations when it's available from your most trustworthy and supportive neighbor."

Learn more about the Keystone XL Pipeline.