A Negative Cost-Benefit Analysis For the Keystone XL Pipeline

After the president vetoed legislation designed to force him to approve the Keystone XL Pipeline, the issue kind of dropped out of sight. But as sustainability consultant Sanjay Kapoor notes today at Ten Miles Square, the State Department is presumably beavering away on a review of the project, including its benefits and costs. But it’s not clear it will really reflect the costs:

Last month, Secretary of State, John Kerry gave a speech at The Atlantic Council. In his remarks, he said:

“It is time, my friends, for people to do real cost accounting. The bottom line is that we can’t only factor in the price of immediate energy needs. We have to include the long-term cost of carbon pollution.”

Good point! Curiously, such analysis is barely present in the State Department’s own assessment – Final Supplementary Environmental Impact Statement (SEIS).

Kapoor conducts his own analysis, and deduces:

[T]he pipeline yields a one-time benefit of $3.4 billion during construction and recurring annual benefit of $60 million after that.

The costs are trickier, but Kapoor comes up with a conservative estimate of $2 billion per year in environmental costs to the United States alone (and another $4 billion for other countries, which the State Department should care about). So any positive economic benefit would be gone very fast and the project would go into the “red” rapidly and permanently.

So it’s not just a matter of balancing economic benefits with environmental costs; the latter are just as real. As Kapoor concludes:

To aggressively pursue a low-carbon economy, the Keystone XL pipeline is not just as good a place to start as any, but better. It is an infrastructure project – yesterday’s infrastructure.

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Ed Kilgore

Ed Kilgore is a political columnist for New York and managing editor at the Democratic Strategist website. He was a contributing writer at the Washington Monthly from January 2012 until November 2015, and was the principal contributor to the Political Animal blog.