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Public Comments on Keystone Project Reveal Economic Woes of Small Towns

Cash-strapped communities say they need Keystone tax revenue for health care and roads, while opponents argue the money will quickly disappear.

Jul 17, 2013

Tucked into letters the State Department has received from people seeking to influence its review of the northern segment of the Keystone XL pipeline are pleas from local officials, largely from Montana, who see the project as a lifeline for their strapped budgets.

Several mention offers by TransCanada, the pipeline operator, to help rebuild local bridges or other infrastructure projects. Others want the tax revenue or jobs the project would bring, even if those benefits might be temporary.

The letters are among more than a million comments, most of them form letters, that the State Department received about its draft environmental impact statement during a 45-day public comment period that ended on April 22. The department is reviewing the comments while completing revisions to the impact statement.

Environmentalists have long opposed the Keystone, citing the risk of spills, damage to fragile ecological systems during construction and the impact of oil sands on climate change. The pipeline's supporters argue that by bringing heavy crude from Canada's oil sands region to U.S. refineries the pipeline will provide a steady supply of fuel from a stable and friendly neighbor and boost the economy by providing jobs.

The letters of support from county officials stand out, however, because they reflect the economic hardships that towns and rural areas are facing.

One of the pipeline's most appealing benefits is the tax revenue it would bring. TransCanada has carved out different agreements with each of the six states it will pass through—Montana, South Dakota, Nebraska, Kansas, Oklahoma and Texas. States with stronger regulations have been able to negotiate tougher safety checks and higher taxes. Kansas will receive no tax money, because lawmakers there granted TransCanada a 10-year tax exemption.

Commissioners in McCone County, Mont. wrote that they've been struggling to fund their annual budgets since 1996 and that the pipeline revenue would double their tax base. 

"There is no extra money to assist in updating and improving our 70-plus-year-old buildings," they said. "These additional taxes will help us to rehabilitate our library, ... remodel and secure our law enforcement facility, add full time employees to law enforcement and the road department, expand our medical facilities and health care services, and improve our fairgrounds." 

Deb Ranum, chairwoman of the Fallon County Commission in Montana, said the county expects to receive more than $9 million in tax revenue, which would be "a God-send for [their] county of about 2700 people."

Ranum said TransCanada has already donated about $1.5 million toward water and sewer projects. Should the project be approved, TransCanada has proposed to pay for the reconstruction of five bridges at the cost of $275,000 to $375,000 per bridge, she said. The company will use the bridges to carry heavy equipment during the project's construction phase.

"They've also rented the area where they're going to set up the man camps," Ranum added.

McCone County's Health Center sent a separate letter to explain how its budget woes could be relieved by tax revenue from the pipeline.

"McCone County is considered a "poor county" as resources are limited," said Nancy Rosaaen, the health center's CEO. She said the health center currently has one medical provider who is responsible for treating 20 patients every day and caring for long-term patients as well. Since the health center is owned by the county and depends on it for money, they've been unable to hire a second medical provider.

"We can't afford to wait for these jobs and tax revenue any longer," she wrote. 

Letters submitted by the Keystone's opponents are wary about the tax revenue benefits.

The taxes that many counties are counting on will be paid in full for only the first year. TransCanada will pay property tax for the land that it uses to construct the pipeline. But because the valuation of a property depreciates over time, TransCanada's tax bill will decline accordingly.

In a recent comment, Nebraska environmental groups opposing the pipeline explained that after seven years their state won't receive any compensation at all, even though the pipeline is expected to be in operation for at least 50 years.

The seven counties where TransCanada plans to locate crew camps expect to see a general uptick in economic activity. Officials in McCone County reported that a new bank, restaurant, gas station and truck store had already opened in anticipation of the incoming workers.  There are also plans to open a new hotel, they wrote.

The State Department has predicted that the construction phase of the pipeline's northern segment will indirectly create about 42,000 jobs among business that supply goods and services to the workers. But the pipeline itself will supply only about 3,900 summer construction jobs in the two years it will take to build it. Once the pipeline is operational, only 35 permanent and 15 temporary jobs are expected to be available. 

Christopher Knittle, a professor of energy economics at MIT, testified to the U.S. House Committee on Small Business that the "more difficult, and probably more relevant, calculation is how many jobs the pipeline will create in the long term."

But Knittle also said that when unemployment rates are high, short-term capital-intensive projects like the Keystone XL pipeline can have a lasting impact. "This is the argument for why economic stimulus should be used by governments in times of recession," he said.

But unemployment rates in the counties the pipeline would cross are among the lowest in the country, with the majority well below the current national unemployment rate of 7.6 percent.

TransCanada has already shelled out money for some of the labor camps and infrastructure projects and has promised to do more. The company has paid $80,000 to lease land for a camp that will house the summer work crew in Fallon County.  

The transient nature of the jobs means that the businesses in the area will see increased activity mainly during the summer. The mayor of Baker, Mont., Clayton Hornung, admitted in his letter that some of that activity won't necessarily be positive. Although Hornung urged the State Department to approve the project, he wrote that his town "expected negative impacts during construction on [its] ability to provide services, mostly for law enforcement, the court system, and traffic."

Naveena Sadasivam is an InsideClimate News intern.

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