Inside Story Americas
US oil pipeline: Storm in a barrel?
As the US shelves the TransCanada project, we ask if the real reason is environmental concerns or a political ploy.
Last Modified: 20 Jan 2012 09:37

The controversial Keystone XL pipeline project which would have carried oil from Canada to US refineries on the Gulf coast has been rejected for now.

But the decision by Barack Obama, the US president, is causing a political storm.

"The real issue here was profits for TransCanada. And comparing that to the health and environmental issues raised by the millions of people during public hearings, now that was a question of national policy. It is also no surprise that the job numbers put forward by TransCanada are extraordinarily inflated. And, this is very much about the future of Tar Sands oil."

- Damon Moglen, Friends of the Earth

The proposed $7bn Keystone XL pipeline extension would have carried more than 700,000 barrels of crude oil per day from Canada to Texas.

TransCanada – the company behind the project – first made the application in 2008.

Obama decided to hold off making a decision until after the 2012 election, but Republicans forced him to make quicker decision.

On Wednesday, the US State Department rejected the application on the grounds that it could not be adequately reviewed within the 60-day deadline set by the US Congress.

TransCanada says it will apply for a new permit to build along a similar route.

The proposed pipeline would cover more than 2,700 kilometres from Canada to the US state of Texas. It starts from Hardisty in Canada's Alberta province, where the tar sands are located.

"The correct comparative alternative is not [in] not doing this. Canada is going to do this. That's where the environmental argument should be made about whether or not this is smart. The reality is, otherwise, this oil is likely to wind up in China, and what are the environmental, political and security implications of that."

- Jeremy Carl, research fellow, Stanford University

The pipeline enters the US in the state of Montana and goes further down to Nebraska, where many have raised fears it will contaminate their main water source – the Ogallala aquifer.

The pipeline then snakes further south, ending in Port Arthur and Houston in Texas.

Meanwhile, opponents have objected on environmental grounds, saying it would further the US' dependence on dirty fuels, and that would contribute to global warming and threaten ecological disaster.

But supporters say it will create thousands of jobs, most of which would be temporary construction work.

They also say that it will be good for energy security in that it will help wean the US off oil imports from the Middle East.

So is the rejection of the Keystone XL pipeline plan a blow to energy security and job creation in the US? And are environmental concerns really behind the decision by Obama, or is it just a political ploy?

To discuss this, presenter Anand Naidoo is joined by  Damon Moglen, the Climate and Energy Director at Friends of the Earth; Jeremy Carl from the Hoover Institution, a think tank based at Stanford University; and William Yeatman, an energy policy analyst at the Competitive Enterprise Institute, a public policy organisation dedicated to advancing the principles of limited government, free enterprise and individual liberty.

"It's certainly politics. It wasn't an unequivocal rejection. Obama was in a bit of a pickle, had he made a decision one way or the other. Had he approved the pipeline he would've alienated environmentalists. Had he outright declined or disapproved it, he would've alienated the unions. This way, it's the best possible political solution for the president."

- William Yeatman, Competitive Enterprise Institute

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