Who won the Keystone XL fight?
Environmentalists have been locked with conservatives in bitter battle for years over Keystone XL. Keystone XL would be an extension and upgrade to the Keystone pipeline, which imports Canadian tar sand oil to US refineries. Environmentalists hate Keystone XL because tar sands oil is phenomenally dirty to extract, and conservatives love Keystone XL primarily because environmentalists hate it. The substantive consequences are tiny: the oil will get drilled, refined, and burnt anyway, and the pipeline is unlikely to substantially affect carbon emissions, job growth, or energy prices. But it has somehow assumed enormous symbolic significance.
On this first day of the new Congress, the conservatives think they have won. For some reason, passing authorization of the new pipeline is one of the new Congress’s top priorities and they are likely to pass authorization within 24 hours. Obama may or may not veto it; he probably will. But eventually authorization will sneak its way into some must-pass bill.
However, the pipeline may not even get built. The price of oil has crashed precipitously in the last few months, and Keystone XL is no longer economical. Neither, for that matter, are most of the tar sands operations that would have been supplying it. Both the pipeline and tar sands operations require WTI (a benchmark oil) prices of ~$75/barrel, while today it hit $48. The pipeline would have both lower per-unit prices and lower volume, a total deal-breaker. It is a long-term project, and current market conditions are not permanent; but the Saudis are driving oil prices lower specifically to kill off these North American producers. Investors and TransCanada should be worried that the reasons for today’s low prices might not go away tomorrow or next decade. The environmentalists can claim victory: while they might not have won in the Congress, they dragged the fight out long enough that changing economic conditions make pipeline construction far from certain. While the issue isn’t conclusively settled yet, the fighting part seems to be over.
As this saga finally dies with a whimper rather than a bang, a few thoughts. Obama should certainly agree to sign whatever bill passes through the Congress, but insist on some meaningful concessions in exchange for not vetoing it. This deal would be nearly costless even if the pipeline was getting built for sure. Before the environmental movement celebrates, it should carefully think about just what it has achieved. And I think the answer to that is basically nothing. I have heard Keystone is a good recruiting tool – but was it the best recruiting tool? Perhaps funds and staff should have been dedicated to recruiting instead of fighting this fight. The opportunity costs of years devoted to this stupid fight are horrifying.
The Keystone XL fight is over, and nobody won.