Keystone's economic benefits for US questioned

Backers of the controversial $5.3 billion Keystone XL pipeline project weighed by the Obama administration could boost US jobs and energy independence, but critics say the uplift will be short-lived.

Opponents of the project to build an 1,980-mile (3,200-kilometer) conduit for oil from Canada's tar sands region to the US Gulf of Mexico coast, also warn that net impacts on US energy supplies and independence will be minimal.

A public hearing is set to be held Thursday in Grand Island, Nebraska -- near the halfway point of the north-south pipeline -- to debate the issue as the US State Department, which oversees the US side of the project, collects public input.

The State Department will weigh the input and make a final recommendation to President Barack Obama in the coming months.

While the environmental impact of the project is in focus for many critics, its advantages for the sluggish US economy, with unemployment still a high 7.6 percent, is also a key issue.

In its March impact statement on the project, the State Department estimated that the project in its construction phase would support 42,100 annual jobs over a period lasting one to two years, including 3,900 positions in direct construction.

But over the longer term, Keystone would add just 35 permanent and 15 temporary jobs, mainly for routine maintenance. Such gains have "negligible socioeconomic impacts," the State Department concluded.

US labor leaders say the huge investment to build the pipeline would give a needed boost not only to the construction industry, but to steel and other suppliers.

But environmentalists counter that those jobs gains are minor compared with the sorts of benefits that are possible with similar investments in wind, solar and other renewable energies.

There is less debate on whether Keystone will lead to lower gasoline prices for American consumers.

The Canadian oil is expected to be refined as much for export as domestic supplies. US refiners on the Gulf Coast are already refining crude into gasoline at increasing amounts for export.

Domestic pump prices would still be influenced by the global market price for oil, analysts say.

"As long as the US has to import crude and pay global prices, then that's what's going to set the gasoline prices," said Jackie Forrest, a senior director at energy consultancy IHS CERA.

"So with or without Keystone XL, it's going to be the same situation."

Where Keystone could have the greatest economic impact is on the US energy mix.

Advocates of the pipeline note that importing the Canadian crude would allow the US to reduce imports from other countries, such as Venezuela, which produces a similar type of heavy oil.

That could jibe with US ambitions to become energy self-sufficient in North America.

For Canada, the gains are clearer. Oil companies plan billions of dollars of new investment in the oil sands. The US rejection of Keystone XL would threaten a key market.

Keystone XL is a "linchpin" for the oil industry's plans in Canada, Natural Resources Defense Council attorney Anthony Swift told a US congressional panel earlier this month.

The oil industry's expansion plans "cannot take place without the approval of the Keystone XL tar sands pipeline as a major avenue to the needed new markets for tar sands crude," Swift said.

Backers of the pipeline argue that the Canadian deposits will be developed regardless of what happens to Keystone XL.

The fuel could be delivered by rail from Canada to the US. And Canada could also build new pipeline capacity to the west coast of Canada, where it could be exported to China.

"The oil sands are the economic engine that will be driving the Canadian economy for the next 50 years," Alexander Pourbaix, president for energy and oil pipelines at Keystone project developer TransCanada, told the congressional hearing.

"The only question is which market will get it."