Debates and discussions over the economic impacts of energy project development often seem confusing, conflicting and dominated by spin. In many cases, these discussions equate “economic impacts” with something called “job creation.” While employment is certainly high on everyone’s mind (and many large energy development projects happen in rural areas that have tended to have high unemployment), it is certainly not the only economic impact that energy projects can have.
Some economic impacts are certainly positive, such as lower energy costs. Others are certainly negative, including impacts on existing infrastructure (like roads, bridges and public utilities), crime and housing costs. But none of these have gotten the attention (or analysis) as has the issue of employment.
It is easy to see how confusion can arise from competing “jobs” numbers. As a case in point, read this article from the Washington Post (Will Keystone XL pipeline creatre 42,000 'new' jobs?) about the proposed Keystone XL pipeline project that would have transported oil from Canada to refineries along the U.S. Gulf Coast. One U.S. Senator supportive of the project cited a study claiming that Keystone XL would have created more than 40,000 new jobs. Another Senator opposed to the project, however, claimed that Keystone XL would have created ten times fewer jobs. The two numbers seem irreconcilable.
What is going on here? Companies in the U.S. have built hundreds of thousands of miles of pipelines – don’t we know by now how many people it takes to build a pipeline? The reason for the confusion comes down to just a few key facts about measuring (and reporting) the workforce implications for energy project development.
- The total size of the workforce needed to sustain a given level of energy development extends far beyond the people that actually drill wells, lay pipeline or erect wind farms. Part of the disagreement over the Keystone XL and other big energy projects comes down to using different definitions of what constitutes the ‘workforce’ and which jobs in which industries are counted.
- The number of people required to build a large energy project like a gas well or a pipeline is very different than the number of people required to run the project once it is complete. There thus may be very different short term versus long term workforce implications. Some jobs may be temporary contract employment while others are more like permanent positions.
- Creating a job is not the same thing as reducing unemployment, since workers may shift from one job to another. While we often talk casually about the number of jobs that a given energy project will create, it is more correct to refer to the size of the workforce needed to develop and sustain a given energy project.
The Washington Post article contains a nice summary of why it is so difficult to pin down the exact economic or workforce impacts, and would be relevant for any large energy or infrastructure project, not just the Keystone XL pipeline. In the material that follows we’ll go into some more depth as to where the numbers for economic impacts come from, and understanding the advantages and shortcomings of the methods used to generate these numbers.