The Keystone XL pipeline has been a cursed project, designed to move the wrong kind of oil at the wrong point in history. But President Biden’s first-day executive order killing the project will still vaporize some good jobs and raise questions about whether he cares at all about threatened oil and gas workers as he pushes for a rapid shift to non-carbon energy.
Canadian firm TC Energy proposed the XL pipeline in 2008 as a faster way to move oil from drilling fields in Alberta to Steele City, Nebraska, where it would then move through different pipelines to Gulf Coast refineries. The Alberta oil is thicker, dirtier and more corrosive than typical crude, making it more of a pollution and leaking concern. Oil is also less economic than it used to be, with prices less than half what they were in 2008. And new urgency to address climate change and cut greenhouse gas emissions has weakened public support for oil and gas projects.
President Obama stalled the XL pipeline, then in 2015 said he wouldn’t issue the required permit. President Trump reversed that position, however, giving the go-ahead. TC Energy started construction last year.
With Biden killing the project, the company now says it will lay off about 1,000 workers. It hasn’t said how many are American and how many are Canadian, and the company didn’t answer Yahoo Finance’s questions on the matter. But construction projects were due to start this winter on elements of the pipeline in Montana, South Dakota and Nebraska. At peak construction, the project would have employed several thousand U.S. workers, jobs that will no longer materialize.
The executive order revoking the XL permit didn’t say anything about the lost jobs. A White House spokesperson told Yahoo Finance, “the President recognizes the need to build infrastructure that creates good-paying union jobs, boosts the U.S. economy, is in our national interest, and advances our climate and clean energy goals. He knows how to do that. It's with the plan he ran on.”
New classes of winners and losers
The tricky part is the gap between jobs that disappear today because of political decisions, and jobs promised in the future. Political programs that create new classes of winners and losers tend to be problematic from the outset—especially if somebody has to lose before anybody wins. Killing real jobs today for the sake of assumed jobs tomorrow creates exactly the kind of cynicism toward politicians and government that fueled Trump’s surprise win in 2016: The government tells you what’s best while curtailing your paycheck or your opportunities.
XL probably would have died under any Democratic administration, since it’s uniquely loathed by environmentalists who are a key constituency of the Democratic Party. It doesn’t help that it’s a Canadian company rather than an American one. Biden’s determination to shift aggressively toward green energy is appropriate given the scale of the problem, and the XL decision to some extent is a symbolic one cementing Biden’s policy priorities.
But more decisions like this are coming, with Biden possibly revoking more pipeline permits and putting new limits on drilling. Biden must be conscientious of existing energy jobs if he wants buy-in for his climate plans beyond the stalwarts in his own party. If he doesn’t get that buy-in, he won’t accomplish much.
The oil and gas industries employ nearly 1.5 million Americans, with another 185,000 coal jobs. Those jobs pay better than average and are the best source of employment in depressed regions like Appalachia and parts of the south. Some of those jobs are in politically important swing states such as Ohio and Pennsylvania that will determine future presidential elections.
Biden contends that shifting from carbon to green energy could create more good-paying jobs than we’d have otherwise, and third-party research supports that. But how we get from a carbon economy to a greener one is enormously important. If Biden policies effectively kill one sector of the economy while building another, it will produce deep opposition in parts of the country, and in Congress, while fueling retrograde political opponents eager to blast green energy as socialist tomfoolery.
The United States has done a historically poor job of dealing with declining industries and jobs lost to cheaper overseas production or new technologies that simply replace them. That has contributed to the hollowing out of the middle class and the kind of frustration Trump supporters often voiced. As the carbon sector declines, one idea is to locate new jobs in wind, solar, smart grids and maybe nuclear power in the same areas where oil and gas jobs are disappearing. That would be shrewd, but in some cases it won’t be possible, since, as one example, wind turbines and solar panels don’t work everywhere.
Biden has much bigger plans in store, and it’s possible he can get some Republican support in Congress if he can convince those legislators his green-energy policies would benefit their own constituents. The first thing they’ll want to know about is jobs, and Biden is going to need better ways to sell his ideas than pointing to the Keystone XL cancellation.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: email@example.com. Click here to get Rick’s stories by email.