Project as adding to greenhouse gas emissions
On Monday the Keystone XL pipeline project crossed another hurdle when legislation approving construction of the proposed line to connect Canadian oil sands crude with Gulf Coast refineries was passed by the United States Senate.
The bill sailed through 63 votes to 32 in the Senate, which is now in the hands of the Republicans following November mid-term elections, along with the House of Representatives, which passed the same Keystone legislation last week.
With the bill well on its way to becoming law, it will up to President Obama to decide on whether or not to veto it, a decision he has held off for six years. Obama has criticized the project as adding to greenhouse gas emissions, despite an environmental assessment to the contrary by the State Department released a year ago, and because he argues it would help Canadian producers to deliver crude for export, against the claims of the proponent, TransCanada Corp, which maintains the oil will be processed in US refineries and consumed domestically.
While the political machinations of Keystone, with all the horse trading it inevitably entails, certainly make for some excellent headlines, an equally pressing question is whether the project is even viable with today's oil prices, which dropped further on Monday to below $46 a barrel in North America.
The rationale for Keystone was a way to bring together booming US oil production, and to a lesser extent, production from the oil sands in Northern Alberta, to Gulf Coast refineries that were facing declining imports from Mexico and Venezuela. The project was first proposed in 2008 and was supposed to begin carrying 830,000 barrels a day in 2012.
But the market didn't wait for the pipeline to be built, and landlocked Canadian crude has found its way to Texas and Louisiana refineries by rail instead. Canadian oil exports by rail tripled to a record 182,000 barrels a day in the third quarter, according to Canada's National Energy Board. The United States has also been importing Canadian oil like gangbusters, showing that the trade will happen with or without the pipeline extension (Keystone XL is an addition to the existing pipeline). Data from the US Energy Department showed US imports of Canadian crude reached a record 3.1 million barrels a day in September.