BUFFALO, S.D. - Rick Balcom doubts he’ll see many construction workers at the bar of his No. 3 saloon in this remote town in the northwest corner of South Dakota if TransCanada Corp. wins permission to build the Keystone XL oil pipeline.
Balcom, 44, knows most of the workers building the Canada to Nebraska pipeline will stay at a catered “mancamp” seven miles away and won’t be hoisting brews under the stuffed mountain lion that adorns his bar. On their days off, workers will probably travel to places such as Deadwood and Spearfish an hour-and-a-half drive south that offer gambling and other attractions, he said.
“I can’t think of anybody who would be hugely disappointed if it didn’t go through,” Balcom said. “It’s kind of a deal right now where we could take it or leave it.”
His views reflect the hard to-measure economic impact of a $5.3 billion project that would create a surge of hundreds of short-term construction jobs, which would be followed by a skeletal staff to tend the buried pipe and associated pumps.
It would be among the country’s largest building projects, though one centered in states that already have low unemployment and where competition is fierce for skilled workers.
Supplies and materials will have to be bought, though many big-ticket items - such as the steel - will be sourced from overseas. TransCanada is based in Calgary and about two-thirds of the company’s shareholders live in Canada.
Tax revenues would rise substantially in the counties along the route, though the gains would represent only a sliver of the general funds of Montana, South Dakota and Nebraska, the three states Keystone would cross. Trans-Canada has already donated about $85,000 to communities in the path, for such things as emergency equipment, park improvements and swimming pools.
Some locals say they’re concerned, though, about the truck traffic and the potential for crime and oil leaks if the pipeline is built.
A journey through the small towns where the pipeline would travel revealed different attitudes that contrast with the vehemence of the arguments over Keystone in Washington, where the project has spawned a multimillion dollar lobbying fight over climate change, energy security and job creation.
“I think we’ll get some of the business,” said Ronnie Coyle, 56, owner of the Super-Valu grocery store in Philip - population 770 - about90 minutes east of Rapid City.
Others are more ambivalent, saying they aren’t sure the benefits outweigh the risks.
“It really doesn’t affect me much,” said Tim Olson, whose construction company in Buffalo is about half a mile down U.S. 85 from Balcom’s No. 3 saloon. He says he already has as much work as he can handle. “We’re busy.”
At Steele City, Neb., Keystone XL would link to an existing pipe to Cushing, Okla., and then to a southern leg already under construction, carrying bitumen, a type of heavy crude, from the oil sands of Alberta to refiners on the Gulf Coast.
Much of the area it would cut across is pasture land, where the people are as sparse as the trees. It also means little of the skilled labor needed to construct the 875-mile line will be found locally, though keeping the work camps up and running may employ as many as 60 people, according to Trans-Canada.
About 90 percent of the workers who will dig the ditches and lay the pipeline will come from outside Montana, South Dakota and Nebraska, according to a draft environmental impact statement prepared for the U.S. State Department.
The department is reviewing TransCanada’s application for a permit to build the pipeline because it would cross an international border. A final decision could come late this year or early next.
The State Department’s draft analysis, released in March, said the pipeline would generate the equivalent of 3,900 full-time jobs in each of the two years of construction. After that, Keystone would create 35 permanent jobs, according to the State Department review.
President Barack Obama has cited those sparse job estimates to question the pipeline’s economic impact.
“Republicans have said that this would be a big jobs generator,” he said in a July interview with The New York Times. “There is no evidence that that’s true.”
TransCanada says 7,000 jobs were created to make the equipment needed to build Keystone XL and the southern leg to the Gulf Coast. About 9,000 workers will be hired to construct the Canada-Nebraska portion, the company says.
The project represents about 0.5 percent of all nonresidential, U.S. construction spending, says Ken Simonson, chief economist for the Associated General Contractors of America, an Arlington, Va.-based group that represents general contractors. It would be about 3.5 percent of construction spending in the power and energy sector - “a meaningful bump,” Simonson said.
Construction workers will operate from self-contained camps that will function essentially as temporary towns that are often bigger than the permanent settlements nearby.
Grady Semmens, a spokesman for TransCanada, said between 700 and 900 construction workers will stay at the camps, plus another 100 managers, inspectors and camp staff. About 1,250 people live in Harding County, according to the 2010 census. Of those, about 330 reside in Buffalo, the county seat.
Of the 32 counties the pipeline would cross or pass near, 23 had unemployment rates lower than the state average in 2010, according to the State Department’s analysis.
Keystone means more money for local hotels, auto repair shops, restaurants, hardware stores and other businesses that make up small-town economies, said Ernie Goss, an economic consultant based in Omaha who wrote an industry-funded economic analysis focusing on Nebraska.
Goss, an economics professor at Omaha’s Creighton University, said Keystone would generate about $817.4 million in economic activity in Nebraska during the two year construction period.
The project has another impact - taxes.
In total, Keystone would generate about $34.5 million in property tax receipts in its first year. That’s about 7.8 percent of the total the counties collected in 2010, according to the State Department review.
Sales tax on the materials, equipment and services would provide income for cash-strapped communities along the route. The revenue could equal about $45.6 million for South Dakota over the two-year construction period, just about 0.6 percent of the state’s total general revenue, according to the State Department draft report.
Montana doesn’t collect a general sales tax. But Clayton Hornung, mayor of Baker in the east-central part of the state, says Keystone is already paying dividends.
TransCanada paid for a water tower and a water line out to the proposed man camp west of town in anticipation of its needs. Hornung said the company plans to invest $2.5 million to upgrade the city’s water and wastewater systems.
“We certainly appreciate that because some of these things wouldn’t have got done,” Hornung said.
Even so, he says he doesn’t expect the pipeline to have a long-term impact. More development is likely to come to the town of about 2,500 residents from the expanding oil and gas industry in the area as development from North Dakota’s Bakken fields spreads further west and south, he said.
Terry Dittmer, who owns Crete Lumber & Farm Supply Co. southwest of Lincoln, Neb., is one potential beneficiary. He sold about $900,000 worth of two-by-fours, nails, plastic sheets and other supplies when TransCanada built the original Keystone pipeline in 2010, which cuts down from Saskatchewan through the eastern half of North Dakota, South Dakota and Nebraska.
That represented about a 20 percent increase in revenue, he said.
And, pipeline work is reaching beyond the borders of the states it will cross.
TransCanada has already spent about $1.9 billion of the $5.3 billion it will cost to build the line, Semmens, TransCanada’s spokesman, said.
Siemens, based in Munich, is manufacturing high powered pumps to be used on Keystone at its Norwood, Ohio, factory.
And, suppliers such as Welspun Corp. Ltd., which has a plant in Little Rock, is also providing pipe.
Much of the material to build the pipeline came from overseas, however. The steel came mainly from companies in Canada, Europe and China.
Half of the 400,000 tons of pipeline in the U.S. portion of the line was manufactured by Welspun USA in Little Rock, a subsidiary of Welspun Corp. Ltd. in Gujarat, India, according to Semmens.
About 650 workers were employed at the U.S. unit when it fulfilled the Keystone order, said Dave Delie, president of the subsidiary. Now the company has 800 workers. Delie said the Keystone helped the company’s reputation. “It’s a big deal,” he said.
The company would also have to hire at least 30 workers to load the 400 miles of Keystone pipe that now sits in its yard, Delie said.
Business, Pages 69 on 09/01/2013