ISU economist doubts study touting economic benefits of pipeline

CEDAR RAPIDS - An Iowa State University economist said he is 'very skeptical” of an industry study released on Wednesday touting more than $1 billion in economic benefits and thousands of jobs for Iowa from a crude oil pipeline proposed to slice through part of the state.

Dave Swenson, a scientist in the ISU economics department, questioned the study's projections for jobs, financial output and indirect benefits for supporting industries, such as durable good suppliers.

'My argument, just like my research has shown most notably in the renewable energy industry, is these types of estimates are typically much higher than careful analysis or reality can confirm,” Swenson said.

The economic and fiscal impact study was prepared by Strategic Economics Group for Dakota Access LLC. Dakota is owned by Dallas-based Energy Transfer Partners, which is proposing the 1,100-mile-long pipeline from the Bakken supply area in North Dakota to Pakota, Ill., including 343 miles cutting diagonally across 17 Iowa counties.

The study projected $628.4 million circulating through the Iowa economy, $386.8 million in additional indirect growth in production and sales, 7,623 jobs during the two-year construction period, $33.1 million during the construction period for the state government, plus $2.2 million for local governments in additional taxes, and an additional $14.6 million in individual income taxes.

'It's not worthless, but it's an industry-sponsored promotion piece designed to get the public to support it,” Swenson said. 'Policymaker beware.”

The project still must go through public hearings in the effected counties and gain approval from the Iowa Utilities Board.

Swenson said the study uses a deceptive calculation for jobs, called job years. If one job existed for two years, it would be counted as two job years, he said. He said for the $1 billion economic output, a similar duplication by years is used, and he disputed using gross transactions as a measure of economic output.

'We measure our economic output in terms of Gross National Product, of which labor income is a component,” Swenson said. 'The point is that they used gross transactions instead of returns to labor and investment as their measure of economic additions.”

He said the study 'significantly overestimates” durable goods purchases, such as pipes, pumps, and valves, and, therefore, the total jobs supported by those purchases. Swenson said the supplies will likely come from outside the region, such Ohio, Alabama, Texas, Oklahoma and Louisiana.

He also said Iowa lacks the firms and specialized construction employees to fill the construction jobs, and many will go to out of state firms and workers, who then travel from site-to-site and will spend most of the income back home.

'There are more technical gripes, but this is, I believe a much too rosy characterization,” he said.