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Analysis says pipeline construction will add $1 billion to Iowa economy

A crude oil pipeline proposed to stretch from North Dakota’s Bakken and Three Forks shales to a hub in Patoka, Ill., could generate close to $1.1 billion of economic output for Iowa over a two-year construction period, according to a 78-page analysis released Wednesday by the West Des Moines-based Strategic Economics Group.

Doing business as Dakota Access LLC for the project, Dallas-based Energy Transfer is pursuing a hazardous liquid pipeline permit through the Iowa Utilities Board. The permit would allow the company to bury the pipeline across 343 miles of Iowa land covering 18 counties, including 14.4 miles through Story County south of Ames and under the Heart of Iowa Nature Trail between Huxley and Cambridge.

In a Wednesday meeting with the Ames Tribune’s editorial board, an Energy Transfer executive, joined by two employees with the partnering Des Moines public affairs firm LS2 Group, touted the job- and tax-generating potential of the project, the role it could play in improving the country’s domestic energy security and the steps they said the company would take to minimize the potential harm to Iowa’s waterways and farmland under which the pipeline would be buried.

“It really is a benefit to the entire country in terms of energy security, and it allows us to have jobs in the production of that crude oil,” said Chuck Frey, vice president of engineering at Energy Transfer. “It’s a ripple effect through the entire economy, not just in the utilization of the resources that are found but also in the exploration for and development of those resources.”

The pipeline would be buried far underneath waterways it passes through, Frey said, with an emergency response plan in place in the event of any leaks. Although permanent structures could not be built on land above the pipeline, he said, farmers could still farm that land.

Energy Transfer plans to compensate Iowa farmers for all crop losses caused as a result of the pipeline’s construction during the first year and partially compensate them for the two following years.

In related news, $1.1B economic impact seen in Iowa oil pipeline.

Frey suggested that the pipeline could end up helping farmers by freeing up railways the oil might otherwise be transported on to ship grain through the region with fewer delays.

The company delayed public informational meetings required by the IUB in each of the 18 Iowa counties the pipeline would pass through until December to avoid interfering with the harvest season. (In Story County, a meeting is set for Monday, Dec. 15, at 1 p.m. inside Nevada’s Gates Memorial Auditorium.)

According to SEG’s analysis, the pipeline’s construction in Iowa is expected to cost $1.04 billion, or $2.91 million for each of the 343 miles plus the cost of a pumping station. SEG estimates that $628.4 million of that money would remain in the state’s economy. SEG also estimates the pipeline’s construction in Iowa over two years would create more than 7,600 “job-years” of employment, an estimate of the seasonal work equivalent to the amount of work that would be done by one worker over the course of a year.

Across the four states it would pass through, the pipeline would stretch more than 1,100 miles, cost an estimated $3.8 billion to build and initially transport more than 450,000 barrels of oil each day. SEG estimates that during construction, the pipeline would increase regional production and sales by almost $5 billion.

Dave Swenson, an ISU economist who expressed skepticism about economic projections released by Energy Transfer in September, remained unconvinced about the project’s potential benefits after reviewing the SEG report on Wednesday.

“I just don’t see evidence that the Iowa economy has the capacity to produce the construction jobs claimed by the report,” he said.

Swenson pointed to Iowa Workforce Development statistics showing oil and natural gas pipeline jobs in the state peaking at a little over 400 in 2008. He added that he believed framing employment in terms of job-years was “used to distort rather than inform” and predicted that “much more spending leaks out of Iowa and the region than the authors claim” because of construction materials that would have to be produced outside of the state.

(In September, Energy Transfer estimated that construction in Iowa would create 2,000 to 4,000 jobs, with about 15 permanent jobs remaining after the project’s completion by the end of 2016. Frey said the company was committed to hiring at least 50 percent of Iowa’s construction workers from inside the state and through unions.)

Harvey Siegelman, a former state economist who now serves as SEG’s president, defended the economic analysis, including the use of job-years as a common economic indicator. He added that it has been a decade and a half since a pipeline of this magnitude was last built in Iowa.

“This is a project that fits in the category alongside the Microsoft data center, the Google data center in Council Bluffs, the Facebook data center, the Orascom fertilizer facility,” Siegelman said. “Each of these are billion-dollar-plus investments.”

But he said there were two key differences: Energy Transfer’s project is not focused in a single community and is not asking for local or state tax incentives.

SEG is an independent company whose analysis was commissioned by Energy Transfer. The company has also recently conducted studies on subjects including housing feasibility, for the Iowa Economic Development Authority, and the socioeconomic impacts of gambling, for the state’s Racing and Gaming Commission.

Its full economic analysis of the Dakota Access project is available online at EconomicsGroup.com/impact.html.