NCPA - National Center for Policy Analysis

The Keystone XL Energy Project Is Much More Than a Pipe Dream

October 27, 2011

Though a recent study from researchers at Cornell University raised questions regarding the economic impact of Keystone XL, the benefits of the project seem clear and concrete.  Undoubtedly, the megaproject, a mammoth pipeline that will stretch 1,661 miles from Alberta, Canada, to Texas' Gulf Coast region, carries a substantial price tag that will require significant start-up investment to bring it to fruition.  However, these costs will be more than recouped, says Robert L. Bradley, Jr., founder and CEO of the Institute for Energy Research.

  • The project in total is budgeted to cost $7 billion.
  • Immediately upon completion, the pipeline will have the capacity to carry 700,000 barrels per day (bpd) and ultimately the ability to transport 900,000 bpd.
  • The greater supply of Canadian oil could save Gulf Coast refiners almost $500 million annually in transport costs, which would presumably translate into consumer savings at the pump.
  • By 2019, employment related directly to the Keystone XL project could reach as much as 179,000 jobs, conferring $6.5 billion in aggregate personal income gains.
  • The United States currently consumes 25 percent of the world's energy, but produces less than 5 percent.

The primary arguments in favor of the pipeline are based on two primary points mentioned above.

  • The project produces dispersed benefits to American consumers by allowing for lower energy costs.
  • Furthermore, it confers concentrated benefits on newly employed workers, both in its initial construction and maintenance.
  • A final point that greatly reinforces these conclusions is that trends in America's energy consumption are unlikely to change in the near future, meaning that the United States' reliance on foreign oil is a problem that will not go away with time.

As Central and South American countries such as Venezuela and Mexico gradually slow their oil production, the ability of the United States to cover this difference through imports from Canada becomes paramount.  All of these factors seen aggregately make a compelling argument in favor of the Keystone project.

Source: Robert L. Bradley, Jr., "The Keystone XL Energy Project Is Much More Than a Pipe Dream," Forbes, October 19, 2011.

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