Biden Pledge to Dump Keystone Pipeline Would Kill Thousands of Jobs, Analysis Says

Joe Biden
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May 19, 2020

Joe Biden will kill the Keystone XL pipeline project if elected, his campaign said Monday, a move that would likely cost thousands of jobs and millions in local tax revenue.

That termination would cost tens of thousands of jobs, which would result in billions of dollars in lost wages, according to estimates published last year by the State Department. Those reductions would in turn cost state and local governments millions in tax revenue, up to 10 percent of annual property tax revenues in 17 counties across three states.

Biden's announcement is just his latest move to shore up credibility among the Democratic party's environmentalist base, which has vocally opposed the pipeline since the project was first started in 2010. Doing so, however, will likely further alienate the top Democrat from voters in oil-rich swing states like Pennsylvania—while, one expert told the Washington Free Beacon, likely having little actual impact on fossil fuel consumption.

"Biden promising to revoke Keystone’s approval is a pander," Josiah Neeley, a senior fellow in energy policy at the R Street Institute, told the Washington Free Beacon, "but unless oil prices recover it’s a meaningless pander, as the tar sands won’t be profitable anyway."

Neeley estimated that production of a barrel of oil from the Alberta, Canada tar sands where the Keystone XL originates costs roughly $60 a barrel. With the global demand collapse due to the coronavirus pandemic, however, crude oil is currently trading around $30 to $35 a barrel, meaning there's little economic incentive to actually dredge crude out of the ground to send down the pipeline.

While closing down the Keystone XL is unlikely to have a major impact on fossil fuels, it will cut off the money needed to fund the pipeline's construction—and with it, thousands of jobs. The State Department estimated that two years of constructing the pipeline would produce 42,100 jobs, including 16,100 directly working on the pipeline, and another 26,000 created through indirect spending driven by the project.

Some of the pipeline has already been constructed, Neeley noted, so those figures represent an upper bound on remaining employment. But the wage effects of both past and future employment facilitated by the Keystone XL are substantial: $2.05 billion in employee earnings, according to the State Department, 80 percent of which would spread throughout the country in indirect spending.

The crackdown on the project would come as the economy struggles to recover from the coronavirus-induced recession. Over 20 million people went unemployed in April, and Federal Reserve chairman Jerome Powell indicated in a Sunday interview that unemployment could reach 25 percent—rates not seen since the Great Depression. Even with some recovery, joblessness is still likely to be elevated by next year—the nonpartisan Congressional Budget Office projects 10 percent unemployment through 2021.

Lost economic activity has tax implications, too. The State Department estimated that the project would generate $55.6 million in tax revenue across 3 states and 27 counties. Seventeen of those counties would see a more-than-10 percent bump in their annual revenues, a substantial boon.

Biden's campaign told Politico that the presumptive Democratic nominee would "proudly" rescind Keystone XL's permit, effectively terminating construction of the 1,200-mile pipeline.

Biden's opposition to the pipeline, his campaign noted, follows from his agitation against it while serving in the Obama White House. The Obama administration denied construction of the pipeline—which required federal approval because it crosses the Canadian-American border—in 2015, after five years of regulatory dispute. Just four days after taking office, President Donald Trump invited the project's owners to reapply, approving the project three months later.

Biden's promise is just the latest instance demonstrating the candidate's hostility to fossil fuels. In a March primary debate, Biden said he would end fracking in the United States as well as all drilling, "period." His campaign later clarified that he intended to ban drilling on public lands and at sea and backed off a total ban on fracking.

Such policies would likely have a substantial economic impact, notably in swing states. The energy industry employs 106,000 people in must-win Pennsylvania alone, most provided by the state's rich oil shale reserves. Fracking is also widely credited with facilitating America's transition to becoming a net petroleum exporter, which substantially reduces U.S. dependence on oil-rich foreign states like Iran and Russia.