America's Largest Union Endorses Keystone Pipeline

Brian Hicks

Written By Brian Hicks

Posted March 5, 2013

The pressure on President Obama surrounding the hotly contested Keystone XL Pipeline has just increased; the nation’s largest union federation has seemingly endorsed the project, even though it did not mention the Keystone XL by name.

The AFL-CIO issued an optimistic call for rapid expansion of U.S. pipelines, reports the New York Times. Although it doesn’t amount to a vociferous endorsement of Keystone XL, this still means President Obama will now be under increased pressure as he continues to deliberate over the issue.

The pipeline is, of course, projected to carry in excess of 700,000 barrels of Canadian crude per day over to refineries located along the Gulf of Mexico. At a cost of nearly $12 billion, the Keystone XL pipeline would run all the way to the Gulf of Mexico, some 2,000 miles in all.

For environmental groups and other forces lobbying against the Keystone project this is, needless to say, not good news. Their opposition is built primarily around the platform that the tar sands, which form the bedrock of the Canadian crude, are highly polluting, as they are “dirtier” and release much more carbon dioxide.

The AFL-CIO issued its endorsement of pipeline expansions in general during its yearly winter meeting, this year held in Florida.

From the New York Times:

Richard Trumka, the A.F.L.-C.I.O.’s president, acknowledged that the federation statement “can be interpreted in different ways.” Yet he voiced support for building the Keystone pipeline, saying that “there’s nothing environmentally unsound about the pipeline” and that what environmentalists opposed was opening up Canada’s tar sands.

It seems clear that AFL-CIO has the hundreds of jobs the Keystone project is bound to generate foremost in mind. Moreover, the Canadian government is unlikely to view a negative decision on the pipeline favorably. And finally, the project would certainly go far in reducing U.S. dependence on OPEC-provided crude.

What is clear is that, at least for the construction companies that are planning it and that will eventually build it if it is approved, the economic realities are foremost.

The Tulsa World quotes John Steward, assistant construction manager with TransCanada Corp. (TSX: TRP), which owns the Keystone project:

“People say it’s supposed to keep thousands of people working. Well, it does.”

“We have kept people working through the winter, when usually it’s kind of slow. Some guys have been working with me for four years now. Their families depend on this work.”

The southern part of the Keystone project received Federal approval last summer, Tulsa World reports. Some 850 people are employed across each of three phases. It’s an enormously complex project which, when completed, would be the longest oil pipeline outside Russia and China.

Considering that the general age of domestic pipeline infrastructure is between 60-70 years, something like the Keystone XL is long overdue, especially given the current pressures of oil and gas production. The existing pipeline simply does not have the capacity for handling all the oil being churned out due to the shale revolution, and the Keystone could go far in alleviating some of that pressure.

The pipeline will largely carry Canadian crude, but will also make space for some oil from the Bakken shale.

One of the benefits of the Keystone project would be a reduction in some of the price disparity between domestic and Brent crude. Because the three phases are not being built simultaneously or in lockstep, construction proceeds in sporadic fashion.

Once the southern leg is completed (expected later this year), that’s just the second phase. The middle leg became operational in 2011—it runs from Nebraska to Cushing—but TransCanada is still awaiting President Obama’s verdict on the section that will connect Canada with Steele City, as Tulsa World reports.

The Keystone controversy all began when President Obama rejected TransCanada’s original proposal, based largely on Nebraska governor Dave Heineman’s concerns regarding the pipeline running through the Sand Hills and over the Ogallala Aquifer, sensitive environmental areas.

TransCanada subsequently submitted a new route, which Heineman approved. This is the route that is awaiting President Obama’s final decision.

The State Department has already indicated that such a pipeline route is more than likely the safest option for moving all the crude. It is expected that the Keystone project will come online some time this year, provided all permissions are granted.

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