Controversies in Keystone Pipeline Project - Case Study Example

 Controversies in Keystone Pipeline Project Introduction Keystone Pipeline Project is one of the leading collaborative efforts between Canada and US wherein both the countries are involved in the establishment of an oil pipeline between the two countries. It is meant for transporting crude oil and other oil related products to the refineries in US. Once completed, this pipeline will be more than 2000 miles long and will be covering the areas such as Alberta and different State of US. What is important to note that it is a phased project and interconnected with other projects also making it a keystone pipeline project supporting other smaller projects also. Three phases of the project are already complete with fourth phase is in construction stage. Considering the overall length of the pipeline and its design, there have been different issues, which have been highlighted. One of the key criticisms and serious issues to be dealt with is the environmental impact of this pipeline on various areas. Apart from this, there are also economic and political issues involved in the construction of this pipeline project. This project however, will focus upon identifying and exploring economic issue of whether this project will actually result into stimulation for the economy besides creating jobs for both the countries. There has been a criticism on whether the project has been actually able to generate the same level of economic stimulus and job creation in both the economies or not. It was considered as an important project to provide $7 Billion stimulus besides creating approximately 200,000 jobs in the country. However, there have been conflicting estimations regarding the consequence of the project on economy. Greenpeace, one of the leading campaigning organizations also appealed to the SEC to scrutinize the claim of project creating 200,000 jobs during its entire construction period. President Obama was also quoted as being saying that the overall jobs created by the project will be around 2000. There have also been issues regarding the capacity utilization of the pipelines as it has been suggested that pipeline may create serious capacity issues considering the overall construction cost involved in the production of this pipeline. It has also been suggested that this pipeline may not yield benefits to the local oil supply as it has been constructed to actually export the Canadian oil to China. This argument therefore suggests that such heavy expenditure on the construction of the pipeline may not result into same level of economic benefits being transferred to the local economy specially the States which are offering tax exemptions to this project (Flynn, 2012). Introduction Definition of Problem The problem here in is a case with the Keystone pipeline project, which was mainly constructed to create economic stimulus of more than $ 7 million, and more than 200, 000 jobs to the youths. The project upon completion has elicited a series of conflicting opinions from many people across the two regions. Most of these raise questions on both the credibility and viability of the project. Contrary to the Canadians and the US expectations, the company is totally on the other side likely to cause more loss than the benefits anticipated. There are also allegations that the pipeline would actually not export oil to the US, but to China, one of the issues that greatly raise the credibility as well as the viability of the report throughout the implementation season. Stating historical facts The keystone pipeline project was collaboratively rolled out to export crude oil to refineries in the US. This project was aimed at boosting economic stimulus of the country by $7 billion, and was equally meant to create over 200,000 jobs for citizens of both countries. The project was also tailored to provide support for other projects in the region hence making them survive. The cost of setting up the project significantly provided conviction that it would be viable and of great benefit to the two countries. The progress of the project has however not indicated any sign of the anticipated benefits. Contradictions have surrounded the project with many raising alarm over its viability and the ability to fulfill its intended mandate satisfactorily. The project leaves more questions than answers as the truth regarding its progress finally uncovers. The billion-dollar project cost the two countries a great deal, and letting things it die, would result into such a big loss to both the countries. The idea of the Keystone pipeline transporting oil to china is also alarming since that was not part of the original plan. Progress on the project The project is currently complete up to the third phase, and the fourth phase is under way. The fourth phase is however facing a number of controversies over its routing which passes through to Nebraska. Most of these are related to the environmental hazards attached to this project. Relatively, part of the pipeline route that should go through the sea brings further controversies over the fourth stage of construction. Overall purpose of this paper In lieu of the above allegations and conflicts over the Keystone pipeline project, this research is aimed at making in depth research into the conflicts and problems surrounding the project, and then coming up with possible recommendations to help find an ultimate solution. The research will take into consideration, the environmental, political and the economical impacts of the project vis a vis the current progress. In addition, the research will take historical perspective of this project into account while attempting to analyze the salient issues revolving around its viability and project life. Literature Review Historical perspective of the issue The Trans Canada Corporation proposed the project on 9th February 2005. However, the communications, energy, and paper workers Union of Canada in 2007 requested the Canadian government to block any regulatory approvals for the project; terming it as a trick to benefit the US citizens with permanent jobs. The commission further indicated that the project was meant to reduce Canada’s energy security as well as jeopardize job creation and investments in the Canadian energy sector. Despite this, the Canadian national energy board went ahead and approved the construction of the Canadian section of the pipeline. The US government, through the Department of state also played their part by issuing a presidential permit, which authorized construction, the maintenance and operation of the pipeline at the United States – Canada border. In 2008, the ConocoPhillips purchased 50% of the project stake. The TransCanada however agreed that they would buy the shares held by the ConocoPhillips and become the sole owner of the project. The process of acquiring all the necessary legal documents pertaining to the transfer of shares took over two years. The construction also took another two years hence the pipeline from Alberta to Patoka, United States started operating in 2010. The keystone project began as a collaborative project that was to strengthen the economic status of the US and Canada. The pipeline was meant to transport crude oil from Canada to the US refineries. The project was seen as capable of boosting trade within the two regions and was to create many job opportunities between the two countries. The governments of both the two countries were optimistic about the project benefits and they fully pledge their support for the same. Concerns have however been raised over the projects feasibility in terms of environmental sustenance amidst other conflicting ideas. Further research digging dipper into the project reveals causes of conflict over the project’s key intention and whether it was sufficiently planned for before the release of the funds. Related issues highlighted in literature The literature reveals a number of issues surrounding the project at hand. Most of these have been raised by the two countries owing to the levels of risks attached to the project development. The most common conflicts involve the environmental issues, the conflicts of interests, geopolitical issues, conflicts of interest, political issues, indigenous issues, safety issues, economic issues, and issues relating to public opinion among others. Environmental factors Despite the various conflicts in opinions regarding who was meant to benefit from the keystone pipeline project, there are various environmental concerns that were equally attached to the same. A number of environmental activists, citizens, and politicians have express concerns over the negative environmental impacts likely to be brought about by the Keystone project. One of the biggest environmental issue lies on the risk of oil spillage along the pipe; experts fear that this could easily lead to sensitive terrain and would further increase the greenhouse gas emissions by nearly 17 percent during the extraction of the oil sands. According to Samuel Avery, a social activist, mining on the Alberta tar sands would increase carbon dioxide in the air by 50 to 60 parts hence raising the total levels to at least 450ppm. This is the least threshold for critical climate feedback and it is the point where global warming begins to take effect. Another environment concern is that oil spillage on the pipeline would cause air and water pollution hence interfering with water supplies as well as causing harm to birds and water creatures. The pipeline’s original route plan went through the sand hills, the Nebraska wetland ecosystem and then to the Ogallala Aquifer which is among the world’s largest fresh water reserves. The Ogallala aquifer covers eight states in the US, and the same time providing nearly two million US citizens with drinking water. The Aquifer is also said to be supporting agricultural projects worth $20 billion. After the opposition from activists, the pipeline route was changed skipping the Sand hills. A research hydrologists based I Nebraska such as James Goeke believe that’s pillage on the oil pipe lines would leak into the Aquifer and contaminate the water hence ruining not only the water life but also the Nebraska state water supply. Despite the above arguments in regards to the environmental health concern of the aquifer, other individuals like the pipeline representative had a differing opinion of the same. He views that many pipelines crossing the Ogallala aquifer with liquid hydrocarbons and crude oil, and none has ever affected the aquifer. He assures the Nebraska citizens of safety since the pipe would be well fitted. The project has also received equal opposition from other organizations such as Natural Resource Defense Council (NRDC) because it will be transporting oil from oil sands. NRDC has further claimed that the move by Canadian government to construct the pipeline largely undermines the United States effort to establish a clean energy environment. Political Issue There are many political issues surrounding the Canadian political scene as well as the United States political scene. Both the governments have shown interest in the development of the pipeline and have extensively made a contract to have the pipeline laid across their borders. Both the countries anticipate benefiting from the pipeline. For this reason, each of the countries had a role to play, and the roles depended on their benefits. The role of Canadian government The Canadian government and oil companies have pledged to ensure the project’s success purporting that it would create jobs and then ease the transfer of crude oil to the US. The Canadian government is optimistic about this project since most refineries in the United States such as the gulf coast refineries have expressed their interests in the Canadian crude oil. This is likely to enhance trade between the two countries. Relatively most companies in the US have already upgraded their refinery facilities to enable them handle the processing of crude oil. A number of politicians also support the keystone pipeline process and are on the opinion that the United States refineries will provide them with good source of their market products. Pew Research Center’s findings show that 66 percent of the Americans support the project while 23 percent oppose it. US government The US government is particularly adamant on the project, despite having made a few steps towards its development. The Keystone project is likely to cause much in the US land and cause more harm than good. The disadvantages of this project to the US citizens especially the Nebraska and other citizens from various parts of the world. The US government has allowed the construction of the oil pipes along the borders through the department of states approval. The US political arena comprises of people with different opinions about the keystone with industry owners supporting the idea of having the pipeline laid for the benefit of the economy. The US government is equally optimistic that the project will lead to job creation hence reducing the rate of unemployment in the economy. The US president Barrack Obama was once quoted saying that the project will create employment opportunities for 2000 youths. Therefore, it is not justified to state that the US is not interested in the project; however, there are individuals with nixed feelings and opinion the ability of the project to fulfill the intended mandate satisfactorily. Moreover, there exist many nonprofit organizations, which have expressed their dissatisfaction regarding the project. Most of these have viewed the project as something meant to benefit Canada and china hence is on the opinion that the US government should not accept to adopt the project. Economic Issues The project was set up to increase trade and create job opportunities in both the US and Canadian economies. The Keystone pipeline was seen to be likely to have positive impacts on the economic growth of the two countries. Job Creation The two countries anticipated that the project would create vast job opportunities across the region, hence the reason for the approval of the project. The US citizens were to benefit through creation of more employment in the industries and refineries, hence boost the country’s GDP. Therefore, this was seen as a good tool for the country’s economic development. The Canadian government also found a good market for its crude oil and the keystone pipeline. Relatively, the project was going to create more job opportunities for the Canadians in the construction sites as well as the pipeline industry. Economic Stimulation The project was echoed to be able to stimulate the US economy and create job opportunities for over 20,000 workers. These figures were got from the analysis made by the Perryman group, a US based firm that analyses viability of such projects. The report by the Perryman group was however disputed by the Cornell ILR Global Labor Institute, which discovered that the Keystone Company would create over 2500 temporary jobs; the impact of this would be lowered through the raising of oil prices in Midwest in the long run reducing the employment rate. The same would then lead to a decline in economic growth of the nation. The Cornell ILR Global Labor Institute also affirms that the project would create about 5000 temporary jobs in the states, within the two years period that the construction would take place. Despite this, there are a myriad of conflicts that have been raised over the manner in which the TransCanada sought US approval of the project. Most organizations state that the TransCanada used false public opinions to win the project. The US government, the media, and the public seemed to have been short changed on this project. The project has therefore come under attack for the creation of the 20,000 jobs with many people citing it as unrealistic. Critics have also expressed concern that the jobs may not be as stated. The Keystone project has drawn a number of radical mixed liberal with many people attacking the Canadian government for not realizing the negative impacts that the keystone project aimed at bringing the entire environmental scene. In the same radical mixed liberal, there are people that fully support the project, and have developed a perception that the project would bring massive benefits to both the states. However, in this group of people, there are those that view the project in the neoclassical manner, that is, they look at it in terms of short term benefits such as two years job contracts. Nonetheless, the other group that is giving the project a contemporary perception, look at the project in terms of both the positive and negative aspects. After which they offer their opinions regarding their judgment. This is probably not the case with the board of directors of the project. The board of directors all seems to have subscribed to the neoclassical school of thought. In this, they look at the project in single dimension not taking in to consideration both sides of the argument. They only look at the positive aspect of the project without making comparison of the same. It is thus imperative to look at the project from both the positive and the negative dimension and then compare the outcome. In this case, the outcome would be satisfactorily as a well as logical and capable of influencing decision making within the paradigms of discussion. Relatively, economists have noted that the Keystone project may bring about unintended economic consequences to the economy (Pipeline & Gas Journal, 2009, August 1). For instance, the increase in the north to south crude oil transport will trigger the sands producers to increase their prices. In the process, high revenues will be realized thus facilitating the development an industry in Alberta. Because of the Petrodollar nature of Canadian currency, the extra revenues produced will help strengthen the Canadian Dollar against the US dollar. Relating this to the history trends, the strong Canadian dolar will lead to reduction in the Canada’s manufacturing sector. The result will be a job loss for over 50,000 individuals. Many of such jobs therefore, especially those in the auto industry will shift to the south and affect the US manufacturing positively. Data Validation Issues In regards to data validation, there are a number of issues that need to be placed under constant consideration. One such is the stand of each of the parties performing the analysis. Validation of data regarding the keystone project is one of the main causes of controversies surrounding the project. The keystone pipeline project spokes person in his speech affirmed that the project would lead to 20,000 new jobs and would boost the economy through an investment of $7 billon dollars. However, this information was disapproved by the Cornell ILR Global Labor Institute, which affirmed through their research that the company had overstated its objectives. The above-mentioned jobs according to the Cornell ILR Global Labor Institute would only be within the range of 5000 – 6000, and they would be valid within a period of two years. Therefore, data provided by the TransCanada Company was over pronounced and more exaggerated. Through this mistranslation of data, the company managed to manipulate the media, the public, and the US government into believing that the project would be valid and achieve the desired goals. Solutions proposed In the face it, the keystone project seems to bring more threats than good to both the Americans and the Canadian citizens. Despite the few economic benefits that would be realized in the project, such as creation of job opportunities and boosting of the economy, the project poses harm the economic statuses and the environment of both nations, especially the United States. The data presented by TransCanada were exaggerated and seemed to be drowned towards having the contract signed rather than serving the mandate of its purpose. The controversies surrounding the project also point out at the level of inconsistency on the procedure followed to reinstate the project. The above analysis shows that the project is not logical and affects the worlds’ environmental safety and health as well as economy. The main solution to this project is for the United States to withdraw from the contract and not allow establishment of pipelines along its land. Similarly, following the environmental impacts that the keystone project is likely to cause, it is prudent for campaigns to be held to halt the project so as ensure that such environmental atrocities are not committed. The establishment of the Keystone project is likely to lead to oil spillage, which will result, into killing of wild life as well as the emission of excess carbon dioxide in the air. This in the end would lead to destruction of the ozone layer. Alternatively, the project can be aborted and people resolve to use energy means that will significantly lead to low emission of greenhouse gases. The use of technological advances such as Plug in electric vehicles (PEV) will be a good option. Demand for crude oil could also be reduced by initiating policies such as increasing fuel efficiency corporate average Fuel economy standards, implementing policies on renewable fuel standards and then increasing the external cost by imposing carbon tax. Methodology This research has been done primarily with help of secondary data. The data had been already prepared and analyzed hence making it simple to study and make conclusions. Most of the secondary data used involved information from various websites, news articles, journals, and books relating to this topic. Research Philosophy The nature of this research requires comprehensive reading as well open and sober mind to understand the data behind the information under study. At the same time, the research encompasses checking of data systematically to ensure that all the information is analyzed and presented in the correct manner. In addition, references were made from a number of books dealing with the Keystone project and presenting all the relevant facts from the same. Data Collection The data collection techniques used here included checking of secondary data and performing an in-depth analysis of the same. The data was majorly collected from communication media such as newspapers and magazines, which relate to the topic under study. Data Analysis The data used in this report was analyzed critically, in regard to arguments presented from various points of view. Despite the information sources offering varying data, the analysis performed offers a critical appraisal of information by comparing facts presented by both the side of arguments, in this case, the argument from the United States point of view as well as the Canadians point of view. At the same time, the data that has been used here are most current and valid hence making the argument relevant. Results It is quite clear from the analysis that the Keystone pipeline project was not viable enough to offer the appropriate solution herein. By looking at the situation from both the environmental, economic, and political perspectives, it is easy to comprehend the level of damages that the project is likely to cause to the States. Critical analysis of the same situation implies that it inclines more on the United States side rather than the Canadian. This is an implication that the project would benefit both countries in terms of economic developments (Pipeline & Gas Journal. 2010, August 1). Conversely, it is clear that the project would result into more environmental harm and the magnitude of such cannot be compared to the benefits accrued from the project. Result evaluation Evaluating the above results, the Keystone project is null and should not be continued. Various elements need further clarification before the project can be approved further. At its onset, the project appeared promising and lucrative but this is not the case since several factors are not clear. It is worth noting that pipeline is one of the safest means of transporting crude oil compared to rail or trucks. Many people lose their lives annually from either derailment or explosion of Lorries and rails carrying crude oil. Pipeline was a viable option to curb this menace. The case of using the Keystone pipeline to transport crude oil from Canada to the US refineries was a safe option for the transportation. However, alleged fears have it that the pipelines could experience leakage that would compromise environmental safety and that of the people within its environs. The pipeline was also meant to pass through regions that supply fresh water hence making it hard to approve the pipeline projects in such regions. Discussion The Keystone pipeline issue has been a problem that has for so long hit the headlines. The project has gone to its third phase and the fourth phase is pending the approval of the US government. Many environmentalists and political activists have expressed their dissatisfaction with the pipeline project citing it as harmful to the environment and the economy. As well, the project was meant to foster economic developments within the region hence increasing the growth of the regions’ GDP. People have had mixed opinion regarding the project with other stating that the project stands a chance of benefiting them while others on the opinion that the project would not benefit them in any way. Politicians from both sides have also indicated their opinions regarding the project, with those from the Canadian side stating that the project would improve trade within the region. The public has also had their opinion regarding this matter and according to polls performed by the Pew centre, 65 percent of the public supported the idea f having the project in the US while 30 percent did not support the project. Nearly 50 percent of democrats supported the project while 82 percent of republicans supported the same. Environmental analysts however warn against the approval of the project since it would cause massive environmental threats. Most nonprofit organizations have expressed their fears that if the project should be approved, then the Ogallala Aquifer, which is among the world’s largest fresh water reserves, faces danger of contamination in case of pipe leaks. As well, the aquifer serves large region of people with water and contaminating it would lead to a great turmoil. At the same time, contamination of the water reserve would interfere with the water life in the region. This implies that the sea plants and animals would die and the ecosystem would lack balance. Relatively, the environment would be polluted through the excretion of excess carbon monoxide in the air; this would lead to depletion of the ozone layer. The impact of losing the beautiful environment cannot be compared to gaining a two years contract job. The project is not worth the damage it is likely to cause hence the US should not approve of it. Conclusion The onset of the keystone project revealed massive success; however, it is quite evident that the project would not yield as much as anticipated. There are equally massive irregularities attached to the project, with a number of sources confirming that the Chinese government was also part of the deal. However, the US government is not satisfied with the fact that the project would only offer temporary employment for two years after which the persons pull out (Roth, 2013, December 1). The credibility of TransCanada has equally been questioned and many questions are raised over their intention to push for the project. The ultimate solution in this case is for both the countries to pull out of the project to prevent the treats it posses to the environment and the economy of both the countries. Alternatively, the pipeline can be diverted to a path that is far from vulnerable environmental factors. Reference Salmon, S. S. (2013, April 1). House Expected to Vote on Keystone XL Pipeline Bill Prior to Memorial Day: The Pipeline Project Will Not Have a Negative Impact on the Environment, According to Report. Modern Casting, 5, 7. Flynn, G. B. (2012). The Keystone XL pipeline project: proposals and considerations. Hauppauge, N.Y.: Nova Science Publishers, Inc.. Pipeline & Gas Journal. (2009, August 1). TransCanada becomes sole owner of Keystone Pipeline System.(Projects)(ConocoPhillips). Pipeline & Gas Journal, 8, 5. Pipeline & Gas Journal. (2010, April 1). Keystone XL Pipeline wins South Dakota PUC approval.(Projects)(South Dakota Public Utilities Commission)(TransCanada Corp.)(Brief article). Pipeline & Gas Journal, 3, 5. Roth, D. G. (2013, December 1). Pipelines Prove Safer Than Road or Rail. Pipeline & Gas Journal, 7, 5. Read More