The Keystone Pipeline Small Business Jobs Debate

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Another perspective on the running debate about whether Keystone XL will boost small business

 

Late last week the Senate passed the long-awaited Keystone XL pipeline legislation giving TransCanada and many other oil industry stakeholders hope that the pipeline may actually get built. We are hopeful the House will soon follow suit giving President Obama the opportunity to sign the legislation into law so that Americans can continue to enjoy low retail gasoline prices by bringing more oil supply to the market.

One of the other important elements regarding the pipeline’s future – and which has been the subject of much debate – are the various predictions on the number of jobs the construction of the pipeline will bring. On a recent episode of CBS’s “Face the Nation,” Sen. Charles E. Schumer (D-N.Y.) said it “would create several thousand temporary construction jobs and only 35 permanent jobs.” Sen. John Barrasso (R-Wyo.), appearing on NBC’s “Meet the Press,” Jan. 4, 2015, predicted “42,000 new jobs.” President Obama weighed in on the debate by stating the pipeline’s construction will create “maybe” 2,000 jobs.

Will these be temporary jobs, permanent new jobs, or indirect jobs (referring to the “trickle down” theory of job creation)? Hard to say, but one thing is clear: small business will be the beneficiary of any jobs that will be created.

To begin with, let’s start with the basics. 

The Keystone XL pipeline is a construction project, and so the most direct jobs are related to the construction industry. In this case, these construction jobs include welders who weld sections of pipes together; pipe layers, those firms that will dig trenches and lower the welded pipes into the ground; and finally, those companies, who over the lifetime of the oil pipeline’s operation will conduct numerous inspections to determine if there are any leaks. Welders and pipe layers are the most short-term jobs, lasting on average 19.5 weeks, to assemble the pipeline that would help carry heavy crude oil from Canada’s Alberta province to the Gulf Coast.

Over two construction seasons, the main beneficiaries of the project would be the states of Montana, South Dakota and Nebraska — each would need to hire between 2,700 and 4,000 construction workers — though Kansas would also hire about 200. Actually, some sections of the pipeline’s infrastructure have already been built and are already operating. What often gets lost in the media coverage is that the Keystone XL is not a new pipeline per se but encompasses the final sections of the pipeline.

When Senator Barrasso (R-Wyo.) was quoting 42,000 jobs, how was he calculating this figure?

His math is based on the estimations that the project will involve about $3.3 billion in construction contracts and materials, including about $200 million on construction camps. That money would reverberate through the U.S. economy, especially in the states with the construction.

These jobs involve about 16,000 jobs (including the nearly 4,000 in construction jobs) would stem from direct spending. For instance, workers in Arkansas have already built about half of the high-strength line pipe needed for the project. But the other 26,000 jobs are even more fuzzy — what are termed “indirect and induced spending.” Some of that money will be spent on goods and services purchased by small business contractors, such as food and other living supplies. As demand for these products increase, small business will need additional labor to meet the demand.

No matter how many actual jobs will be created by the pipeline’s completion, its safe to say that small business – the backbone of the American economy – will be the main beneficiary for years to come.

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