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Occasional Common Sense

ExxonMobil’s 6,122% Overstatement of Keystone XL Employment

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ExxonMobil was a sponsor of this year’s Masters golf tournament at Augusta National Golf Club (which famously allows just barely more commercials than it allows female members).  ExxonMobil used this exposure to air its Keystone XL pipeline advocacy ads heavily on Thursday and Friday (but curiously not on the weekend if I recall correctly), which stated as fact a couple of things I had to question.

Artis Brown, Engineer, leads us through images of apple pie and motherhood interspersed with construction images as he tells us all about the great things that would come with Keystone XL approval:

“We always hear about jobs leaving America. Here’s a chance to create jobs in America. Oil sands projects like Kearl and the Keystone pipeline will provide secure and reliable energy to the United States. Over the coming years, projects like these could create more than half a million jobs in the U.S. alone, from the Canadian border through the Midwest to the Gulf Coast, benefiting hundreds of thousands of families throughout the country. This is just what our economy needs right now.”

If you parse the words, Brown’s not talking about just Keystone XL but “projects like Kearl and the Keystone pipeline.”  The Canadian Energy Research Institute (CERI) report that appears to be the basis for much of the oil industry’s talking points about Keystone XL includes many other pipeline projects, with total capacity more than 10 times larger than Keystone XL’s.

Kind of a sneaky way to get people to think that Keystone XL will have a much larger impact than it actually will have.  Here are the claimed impacts:

  1. Bring oil to the U.S. market, and
  2. Create more than 500,000 jobs across America.

Would Keystone XL and other pipelines bring oil to the U.S. market?

The Keystone XL pipeline will bring Canadian oil to Texas refineries; other planned pipelines would bring oil to the U.S. gulf and west coasts. This doesn’t mean that the output will then enter the U.S. market; Valero, one of the key Texas refinery customers, has detailed to investors plans to export a large amount of the diesel fuel refined from the sour Canadian crude.  So the claim that this Canadian oil would directly enter U.S. markets is probably only partially true, especially since diesel is more prevalent in foreign markets than in the U.S.  But since oil is fungible, additional oil on the world market means more oil available to the U.S.

This would work in exactly the same way as Canadian oil entering the world market via a pipeline across Canada to Canadian ports.  Canada has made no secret of seeking alternate options, in case Keystone and additional pipeline projects are not approved.  One option has new pipelines built across the Canadian Rockies and British Columbia, then shipped to China for refining (actually, there are plans in the works to build such pipelines regardless of Keystone XL).  If China is refining and using Canadian oil, it’s not buying other oil from the world market.

In terms of quantity impacts, the U.S. currently consumes about 18-19 million barrels of oil per day (bbl/d). The U.S. Energy Information Administration (EIA) estimates this will rise to 20.1 million bbl/d by 2035.  At 100% utilization, Keystone XL would add 200,000 bbl/d to U.S. refiners, or 1% of what we consume. All of the projects identified in the CERI report would add 2.3 million bbl/d of capacity, or 11.5% of projected U.S. consumption.

The key points here are that oil is fungible and sells in a world market, and that Canadian oil is unlikely to remain untapped, regardless of where pipelines are eventually built.  Whether it’s refined in America or elsewhere, Canadian oil will add to world supplies and have close to identical impacts on U.S. consumption and prices.  The claims of directly benefiting U.S. petroleum consumers are specious.

Would pipelines create 500,000 jobs in America?

The CERI study, which is available on the American Petrolium Institute’s (API) website, estimated total direct and indirect economic activity under several scenarios.  Under its most optimistic scenario, which “assumes that all oil sands projects, regardless of their current status, will proceed [and] that the required pipeline capacity will be constructed in time to prevent transportation bottlenecks,” around 500,000 U.S. jobs would be “created and preserved.”

The analysis includes not just direct jobs, but also indirect and induced jobs (indirect jobs are those supplying the operations of the industry, while induced jobs are those supported by the economic activity of the direct and indirect employees).  CERI claims about 2/3 of total job creation/preservation would be indirect and induced, or that the ratio of direct to indirect and induced jobs is 2:1, for a multiplier of 2.

A Wood Mackenzie study funded by API last year was much more optimistic on the multiplier for refining, placing it at 4.  Let’s assume that the Wood Mackenzie multiplier is correct for both refining and pipeline operation and maintenance; that would mean pipeline projects would have to generate 100,000 direct jobs by 2035 to get to 500,000 total jobs.

First off, pipeline jobs. TransCanada’s Keystone XL permit with the Department of State targets 3,500 to 4,200 as the peak employment during pipeline construction. API claims construction jobs would number 20,000 (may include indirect and induced jobs–I didn’t find support for the number).  But these jobs are temporary; to get 500,000 total jobs in 2035, you have to have 100,000 permanent direct jobs–temporary jobs beget temporary mulitplier effects.

Pipeline operation and maintenance will not create many permanent jobs; a Cornell University study pegged this number as low as 50.  That’s just for the Keystone XL pipeline, but still a very low number, indicating the efficiency of pipelines once in place.

That would leave 99,950 needed in the refining industry to support ExxonMobil’s job creation/preservation claim.

Currently the refining industry employs about 115,000 people, or 92% of the number of jobs ExxonMobil claims will be supported by all the announced and potential pipelines in CERI’s report.  But according to CERI, the total capacity of these pipelines is 2,300,000 bbl/d, or just 15.3% of current refinery crude inputs of about 15,000,000 bbl/d.  And that assumes 100% utilization.

ExxonMobil’s claim would mean at least 7 times as many jobs are needed to refine tar sands oil as are needed to refine current crude supplies.  This is not credible.

So what’s a more likely number?

Let’s stipulate that permanent pipeline operations and maintenance jobs are 1,150, 23 times higher than the Cornell study–reflecting all potential pipelines and a 100% higher assumption of workers needed/capacity.

For refining jobs, assume that the new inputs from Canada can be refined with the same number of workers as current refinery operations — that there’s no change in efficiency.  The CERI report’s announced and potential pipeline capacity of 2.3 million bbl/d is about 15.3% of current refinery inputs; 15.3% of current refinery employment is about 17,633. So we’re looking at 18,783 permanent direct jobs.

Using the optimistic Wood Mackenzie multiplier to calculate the indirect and induced employment impacts yields the total impact on employment of building not just Keystone XL, but all potential pipeline capacity identified by CERI: 93,917.  Quite a lot different from the 500,000 number ExxonMobil claimed in its commercial.

Keystone XL permanent job impact: only 1.6% of what ExxonMobil wants you to think

Using the same sources, assumptions, and math, Keystone XL would generate 100 permanent pipeline jobs, 1,533 permanent refinery jobs, and 6,533 permanent indirect and induced jobs.  Total permanent employment impact of building Keystone XL: 8,167 jobs.

So the proper number of jobs to think of when considering the tradeoff against potential environmental damage from Keystone XL is NOT 500,000, but more like 8,167.  Might matter for those weighing environmental concerns.

For context, if employment grows from 2010-2035 at the same rate it grew from 1985-2010, there will be 42,000,000 more jobs in 2035; 8,167 is 0.019% of projected job growth.

“This is just what our economy needs right now”? In terms of employment, Keystone XL is a fraction of a rounding error.

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Written by David Clayton

April 12, 2012 at 1:25 pm

Posted in Debunkery, Punditry

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