Cost Benefit Analysis: Keystone XL Pipeline Project

A cost benefit analysis (CBA) is a tool in use by businesses to essentially determine a projects viability (Investopedia, n.d.). Typically, the CBA tool compares a project’s benefits to its costs, which can be a quantitative or qualitative comparison (Investopedia, n.d.). In addition, CBA will include opportunity costs of the various options in the analysis. Since opportunity costs are the value or benefit that one must sacrifice in order to obtain benefits from another alternative (Business Dictionary, n.d.). To illustrate, a CBA can help when deciding to build a manufacturing plant, by accounting for annual profits, annual expenses, construction expenses, product demand, and other important aspects. Opportunity costs will be evident when considering to build the plant in a busy city or on the edge of a city, as there may be advantages between the two. Such as cheaper shipping costs, versus a cheaper land purchase between the former and the latter. Although CBA’s are a valuable tool, they are more

Thus, in order to determine the viability of their Keystone XL pipeline project, TransCanada put cost benefit analysis to use. Essentially, the Keystone XL pipeline is an addition to the original Keystone pipeline, which currently transports oil to the Gulf Coast refineries (Koenig, 2017). However, the Keystone XL addition intends to carry 830,000 barrels of oil a day from Alberta to a connection on the original Keystone in Nebraska (Koenig, 2017). Therefore, the Keystone XL project involves both the Canadian and American economy, in which both countries expect to reap the benefits. Thus, the importance for a proper cost benefit analysis on the project is evident, in order to gain the appropriate amount of support from all of the