The Keystone Export Limited (XL) Pipeline

keystone pipeline

By: T. Jeffersonian

On January 20, 2021, President Joe Biden signed an executive order to revoke the permit enabling the Keystone XL Pipeline to be built.  This order will add to lost jobs along with his other plans.

The Keystone Pipeline System is an oil pipeline system in Canada and the United States.  It was commissioned in 2010 and is owned by TC Energy and as of March 31, 2020 by the Alberta Provincial Government.  It runs from the Western Canadian Sedimentary Basin in Alberta to refineries in Illinois and Texas, and also to oil tank farms and an oil pipeline distribution center in Cushing, Oklahoma.  The Keystone XL is a pipeline extension connecting the original pipeline terminals in Hardisty, Alberta, and Steele City, Nebraska, by a shorter route and a larger-diameter pipe.  Keystone XL would run through Baker, Montana, where American-produced light crude oil from the Williston Basin in Montana and North Dakota would be added to the Keystone’s throughput from Canada.  Also, Keystone XL would enable the transport of up to 830,000 barrels per day of crude oil from the Western Canada, Montana, and North Dakota, primarily to refineries on the U.S. Gulf Coast.  In essence, a bigger pipeline, different route, adds American oil to Canadian oil, pumps it all to American strategic oil reserves in Oklahoma or to refineries on the U.S. Gulf Coast.

According to a February 10, 2011 Reuters article, Koch Industries—then owned by Charles G. Koch and David H. Koch, commonly referred to as the Koch brothers or Koch family—were in a position to increase their profits substantially if the Keystone XL Pipeline were approved.  By 2011, Koch Industries refined 25 per cent of all crude oil imported into the United States.  The Koch family funding apparatus has been funding conservative and libertarian groups through think tanks for over forty years. The Cato Institute, which Charles Koch helped create in 1974, is consistently ranked as among the top 25 U.S. think tanks overall in terms of influence on public policy in the United States. The Koch family have however supported more than just what are generally considered conservative causes. They opposed George W. Bush on many issues, are pro-choice, support same sex marriage, and worked closely with the Obama White House for the Obama administration’s criminal justice reform initiatives that aligned with their own. In 2015, the Kochs worked with the American Civil Liberties Union on criminal justice reform. The Kochs have also worked to push legislation aiming to adjust federal sentencing guidelines and reduce prison populations.  According to a report by American University’s Investigative Reporting Workshop, the Koch family have built “what may be the best funded, multifaceted, public policy, political and educational presence in the nation today”. Opposition to the government spending any money on climate change is also among the Koch family’s activities. The primary recipients of Koch contributions, including Americans for Prosperity, The Heritage Foundation, and the Manhattan Institute, which actively oppose clean energy and carbon legislation and are skeptical of climate science. In fact, the Koch family were involved in the first known gathering of climate change skeptics in 1991. Organized by the Cato Institute, this meeting shifted the position of the Republican Party on climate change.  The Koch family indicated that they intended to raise almost $880 million in support of candidates in the 2016 elections, and have given more than $100 million to conservative and libertarian policy and advocacy groups in the United States.  In early 2018, political advocacy groups linked to the Koch family pledged to spend $400 million on the 2018 midterm elections. 

In 2015, one year before the 2016 elections and the same year that the Paris Climate Accord was negotiated, President Obama rejected the Keystone XL Pipeline.  President Obama stated that approval of the project would undercut the United States global leadership on climate change.  Based on its timing however, President Obama’s decision appears to be primarily politically motivated.  Obama’s goal was to preserve his climate change legacy at the end of his Administration, to draw a distinct difference between Republican and Democrats on climate change, and to deprive the Kock family of the opportunity to make money which would be used to support conservative candidates in the 2016 elections.  Politicians have their financial backers.  The Koch family is not a consistent President Obama’s backers despite the occasional team up to pursue common interests.  It is highly probable that the Kochs are not President Joe Biden’s financial backers either, since he served as Vice President under Obama and all of the states through which Keystone XL would run, primarily vote Republican. 

President Biden’s revocation has significant financial ramifications.  1,000 jobs have already been lost this week.  Canadian Prime Minister Justin Trudeau, himself a Liberal and a Climate Change proponent, held his first official phone call with President Biden this week after the revocation.  Prime Trudeau raised Canada’s disappointment with the United States’ decision on the Keystone XL pipeline.  Trudeau underscored the important economic and energy security benefits of bilateral Canadian – American energy relationship as well as Canadian support for energy workers.  In 2017, Trudeau touted the Keystone XL pipeline, saying: “No country would find 173 billion barrels of oil in the ground and just leave them there. The resource will be developed. Our job is to ensure that this is done responsibly, safely and sustainably.”  So again, at 1,000 jobs lost already, but what are the other short and long term financial and climate ramifications?

Immediately after Biden’s revocation, Wyoming’s Republican U.S. Representative Liz Cheney warned that the decision “will eliminate jobs, increase the cost of energy, and embolden our adversaries.”   In 2011, TC Energy estimated that the construction work force would consist of approximately 5,000 to 6,000 workers, including Keystone employees, contractor employees, and construction and environmental inspection staff.  These workers would generate from $401 – $482 million in total taxable wages. An estimated $7.65 billion would be spent on materials and supplies, easements, engineering, permitting, and other taxable costs.  TC Energy claimed that the pipeline would generate $6 billion in property tax revenue over its lifetime.  A quick 2011 calculation (adjusted for 2021 inflation) indicated that moving 830.000 barrels a day that would generate $6.9 billion in annual taxable revenue.  The pipeline would have generated at least $3 billion in tax revenue.  With Biden’s revocation, the Keystone XL associated tax revenue is now gone.  People are now unemployed because jobs are gone.  Gas prices are going up because speculators are using Biden’s focus on climate change as an excuse to drive up gas prices.  With America producing less oil, foreign entities are positioning to drive up their own oil prices because they know we will turn to them to make up the difference.

Revoking the Keystone XL Pipeline was a purely political decision that has already cost jobs and will lose $3 billion in taxable income that the United States needs not only to recover from the Coronavirus, but to also fund our own climate change initiatives.  Hawaii is $1.4 billion short in operating revenue.  Next year we will be $2.4 billion short.  The United States could have used the $3 billion in tax revenue collected from Keystone XL for our states.

Educate yourself!