And at most, it's merely a symbolic and short-lived win. To ensure the end of tar sands oil, the government will have to enact measures to make high-carbon fuel unprofitable.
Yesterday, everyone involved in the support and opposition to the Keystone XL pipeline got what they wanted: Obama tossed a squib to
environmentalist supporters whom he's previously disappointed, and Republican boosters of the pipeline got to turn the Obama's refusal (which they accelerated by attaching a February 21 deadline for approval to the payroll tax bill) into a talking point against Obama in the upcoming
election. In a country without a greenhouse gas strategy or an energy policy, this is passing for political action, but it's really... nothing, a draw,
a symbol of symbols.
The Keystone XL is merely on hold, and oil from all sorts of other "dirty" situations continues to flow into our gas tanks. The next time around, environmentalists should resist fighting the symbolic pipeline to concentrate on fighting the larger issue -- reducing emissions and making tar-sands oils prices reflect their environmental toll. We need to stop fighting oil development project by project -- and instead focus on passing a Low Carbon Fuel Standard (which could make the Keystone XL economically unviable), and on reducing oil consumption overall.
First, I have to say I'm a skeptic about the economic viability of the Keystone XL pipeline. Tar sands oils are expensive to extract, so they require a high global oil price -- well over $50 a barrel to be profitable. In the global crude market, these oils do not command the higher prices that light sweet crudes do. So tar-sands crude operates within a pretty narrow margin of profitability. In addition, 15 companies, recently including Chiquita, and the EU are refusing to buy gasoline made with these oils -- which means that the stuff risks becoming an "orphan" crude, where only a few buyers compete for it. (The consulting firm Purvin & Gertz wrote a report suggesting that the Low Carbon Fuel Standard, which sets the tax on different fuels according to their total life-cycle emissions, would seriously impact the profitability of tar sands.)
When you put an oil with so many costs and qualifications into a $13 billion pipeline, you may magnify these price risks even further. Take the example of another TransCanada pipeline, the mainline gas pipeline running from Alberta to New England, which is now in a "death spiral" of rising costs and falling shipping volume. When less product is shipped in a pipeline, the cost per unit of product increases, making the product even more expensive. This, in turn, drives other suppliers out of the pipeline, making the product even more expensive. It's not hard to imagine this happening with the Keystone XL. It would join the dust heap of "must have" energy projects including LNG terminals, pipelines, and extra refineries that were sideswiped by market forces.