Inside the Keystone pipeline: How much would it really help US consumers?

Most analysts agree that more Canadian oil flowing south would help reduce imports from other regions. Less obvious, however, is the fact that the Keystone XL pipeline is not actually needed to bring all that new Canadian oil to the US – a flow now projected to rise to 1.7 million barrels per day by 2030, according to the same DOE study. Often characterized by proponents as validating the need for the pipeline, that study actually found that Canadian oil import growth will go on at “almost identical” levels through 2030 using existing and new pipeline capacity as well as rail shipments – whether or not Keystone XL is built.

Political backlash

Even so, supporters in Congress continue to call Keystone XL “a no-brainer" from a US energy-security standpoint, also arguing it would benefit consumers by lowering gas prices, too. Keystone XL's “supplies from reliable sources leads to lower costs, thereby putting downward pressure on prices,” one study on TransCanada's website says.

According to this premise, Keystone XL would move up to 830,000 barrels of Canadian crude south each day, boosting economic activity by billions of dollars and creating thousands of new jobs – though their precise number is hotly disputed.

Yet in January, Mr. Obama, under pressure by Republicans, reiterated his previous decision to deny permission to build the Keystone XL– at least for now. The pipeline “would not serve the national interest at this time,” Dr. Kerri-Ann Jones, an assistant secretary of State, subsequently told the House subcommittee on Energy and Power, citing “unresolved concerns” including energy security, economic effects and environmental impacts.

TransCanada replied to the denial by saying it would resubmit its construction proposal to address the environmental concerns, and on Tuesday a company executive reportedly said new plans that rerouted the pipeline away from the sensitive Nebraska Sandhills region would be ready in weeks.

But the president's denial unleashed a furor as GOP presidential candidates and oil industry backers lambasted the White House for denying the US economy oil and jobs.

“The president demonstrates a lack of seriousness about bringing down unemployment, restoring economic growth, and achieving energy independence,” GOP presidential hopeful Mitt Romney said in a statement.

Newt Gingrich said the decision “weakens America's national security and kills thousands of well-paying American jobs,” while oil industry advocate Jack Gerard, president and CEO of the American Petroleum Institute, called the project “essential,” and said, “It must be approved and built.”

Higher oil prices in the Midwest?

But others, including environmentalists who oppose the pipeline mainly because extracting oil from tar sands releases more greenhouse gases than other methods of harvesting oil, also argue the pipeline will do little or nothing to boost US energy security and will actually lead to higher oil prices in the Midwest.

“Rather than providing the US with more Canadian oil, Keystone XL will simply shift oil from the Midwest to the Gulf Coast, where much of it can be exported to international buyers – decreasing US energy supply and increasing the cost of oil in the American Midwest,” concludes a new study by the Natural Resources Defense Council, a New York-based environmental advocacy non-profit group, citing numerous TransCanada studies and the transcripts of Canadian federal hearings.

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