This decision, in essence, strands the oil sands indefinitely and shuts it out of the U.S. market for years, if not forever.
It's being billed as a temporary setback, but it's a major and devastating development.
The excuse is that a new route is going to be sought to avoid putting pipelines across the aquifer that straddles mid-America.
The reality is that the environmental movement, not an aquifer, that straddles the United States and cannot be circumvented. The Keystone, and Canada's oil sands, has become the environmental movement's line in the sand in a battle to shut down fossil fuel usage even though there are no alternative fuels for 20 or 30 more years.
These 'Keystone Kops' have scored a victory that likely marks the beginning of a de facto pipeline moratorium south of the border. And this could cripple America's economy and energy industries.
Keystone has received approvals over a number of years from dozens of environmental and other government agencies, been scrutinized more than other projects and yet, in the end, has had its permit postponed on environmental grounds.
This postponement -- a rejection by any other name -- whets the appetite of a movement that not only opposes "dirty" oil from Canada, but also fiercely opposes the exploitation of shale gas, or deep natural gas, deposits. They are attacking shale gas even though it generates dramatically lower emissions equivalent to roughly one-quarter that generated by oil.
Already, a week ago the CEO of a major U.S. power utility issued a warning that the massive amounts of shale gas may remain shut in due to the difficulty of getting permission to build pipelines linking the deposits to power plants or consumers. Now, post-Keystone, his warning represents a more frightening specter because a gas pipeline is even more unacceptable to environmentalists than an oil one.
The Interstate Natural Gas Association of America Foundation estimates companies will need to build 35,600 miles of big, high-pressure natural gas pipelines between 2011 and 2035 to meet market demands at a cost of $178 billion.
Of course, there are those who would argue that this is just a postponement and not a de facto moratorium on all pipelines. They argue that a Republican president will permit the pipeline.
That's questionable. The biggest obstacle at the end was the legal challenge mounted by the Republican Governor of Nebraska who vowed to fight the pipeline to prevent it from transgressing his state.
Others argue that once a route is found around the aquifer that's acceptable the pipeline will be built.
That's also questionable. There's not a governor anywhere that will want this high profile pipeline routed through his or her state or will want to take on the trans-national, non-state players that power the environmental movement.
Frankly, Canada and Alberta have badly handled the public relations when it comes to Keystone and remediation could help the situation because the White House has opted in favor of its environmental wing at the expense of organized labor one. Canada should guarantee that all the jobs that flow from the oil sands, inside and outside Canada, will be offered to Americans first if Canadians are unable to do the work. And last year, 150,000 visas were extended for that reason.
That, and only that, will up the political ante in Washington and should have been done from the outset. This is more important considering that Obama is likely to win another term due to the mediocre Republican field of candidates.
The other priority is to fast-track the proposed pipeline through British Columbia to the west coast to ship oil to Asian markets. The aboriginal claims must be settled financially and generously as quickly as possible before the trans-national non-state players in the environmental movement organize them and stop the pipeline.
That claims are still lingering represents another failure on the part of governments in Canada.
At the same time, the oil sands production must be refined in Canada in order to back out the importation of crude oil in Eastern Canada. This involves resurrection of the flow rates to Montreal and beyond in order to get bitumen or partially refined oil sands production across the country.
Clearly, shipping oil to the US from out west and importing in the east was an efficient, market-driven energy policy, but the greens and the President of the United States have made that unacceptable for Canada.
- Financial Post