With Republicans now in control of the Senate, Congress looks poised to pass a bill that would force President Obama to approve the ever-controversial Keystone XL pipeline. The White House, still determined to avoid a decision on the subject, is of course threatening a veto. "There is already a well-established process in place to consider whether or not infrastructure projects like this are in the best interest of the country," press secretary Josh Earnest told reporters. After all these years of politically expedient procrastinating, Obama isn't about to let Capitol Hill force his hand.
Given how long Keystone XL has spent in limbo, you may be wondering if it matters much whether the thing ever gets built. After all, the energy landscape has changed a tad over the past few years. When the pipeline, which would transport crude from Canada's tar sands toward U.S. refineries on the Gulf Coast, became a national flashpoint in 2011, oil was selling for around $100 per barrel. Today, its price has been cut in half thanks to the incredible oversupply brought on by America's fracking boom. Meanwhile, many drilling companies in both the U.S. and Canada have already lost patience waiting for the administration to act and found alternatives to Keystone—shipping their crude by rail, or finding alternative pipelines.
TransCanada, the company behind the project, insists that it still has plenty of customers signed up to transport their oil through Keystone XL once it's operational. But others are skeptical about its usefulness. “It’s not relevant at all in my opinion," Harold Hamm, a Republican oil executive and former adviser to Mitt Romney, told Politico when asked about the pipeline. The industry, Hamm argues, has moved on, and so should Congress (he would prefer Republicans spend their time trying to legalize oil exports).
Environmentalists have a different take. In their thinking, low crude prices mean it's more important than ever to kill the pipeline. The reason why is that Canada's tar sands contain some of the most expensive-to-produce oil in the world. In order to extract it, companies need to either strip-mine vast tracts of land or blast steam, heated with natural gas, down deep underground wells in order to melt a hard substance called bitumen. For new projects to make a reasonable amount of money, the Canadian Energy Research Institute estimates that U.S. benchmark prices need to be in the range of $85 to $110 per barrel.
When crude was expensive, the availability of cheap transportation like a pipeline meant the difference between profitable oil and very profitable oil. Now, green groups think it will make or break new development in Alberta altogether. “It is now impossible to credibly argue that Keystone XL won’t enable significant expansion of the tar sands and associated climate emissions,” Natural Resources Defense Council attorney Anthony Swift has said.
So, who's right? Neither, really. Keystone is neither irrelevant, nor especially critical to the future of Canadian oil.
Hamm's blasé attitude aside, Keystone would probably be a small boon to the American fossil-fuel industry, even at this late date. Remember, the pipeline would send crude to refiners on the Gulf Coast. And what do refiners do? They buy oil, then transform it into gasoline, diesel, and other products to sell. The less expensive the oil, the easier it is for them to turn a profit, and the heavy crude found in the tar sands—which gulf refiners are specially equipped to process—is especially cheap, even compared to similar low grades from Mexico and Venezuela. This week, for instance, Western Canadian Select has traded at around just $33 a barrel. The refinery owners of Houston would surely love to get their hands on more it, but in a world of generally low oil prices, doing so isn't exactly a matter of life and death for them.
What about Canada's wants and needs? Building Keystone would certainly make it cheaper to ship tar sands oil. But nixing the project won't spell doom for the tar sands. According to the State Department, it should cost about $10 to move a barrel of oil from Hardisty in Alberta to Houston. It estimates that the main alternative, shipping via tanker cars, costs about $15 per barrel—though some have recently pegged the figure as high as $22. Today, with oil trading at $50, that $5 to $12 gap may sound like a big difference. But short-term trends aren't going to determine Canada's long-term future as a fossil-fuel producer. If companies think that expensive crude will one day return and stick around, they'll invest further in the tar sands. If not, they won't. But given how incredibly imprecise projections about the future of the oil market tend to be, $10 here or there won't make the difference.
For environmentalists, Keystone XL has been a potent symbolic issue. But ultimately, whether the pipeline lives or dies won't mean much for the fate of the planet. It'll just mean slightly fatter or slightly thinner margins for a few companies in the oil business.