The Keystone XL Pipeline has already run into a million problems, and the latest one might be plummeting oil prices.
The six-year political battle over construction of the pipeline — intended to move oil extracted from tar sands in Alberta, Canada to refineries in the US states of Texas and Illinois — is nearing an end.
Republican lawmakers taking over Congress in 2015 have pledged to green-light the last stage of the project when they take office, but crude oil prices, which have plunged to five-year lows, could potentially make the pipeline less profitable than previously advertised.
"It's too early to pronounce Keystone XL DOA [dead on arrival]," Richard Martin, a spokesman for Colorado-based energy consultancy Navigant Research told VICE News. "The Republican-controlled Congress will certainly raise the issue again after January 1, but [with oil] at $60 a barrel or less, the economic arguments for the pipeline rapidly slow to a trickle."
The US currently imports about half of the 19 million barrels of oil it consumes daily, and the Keystone would bring 830,000 extra barrels a day from neighboring Canada. America enjoys a common market and restriction-free movement of products like oil and gas with its northern neighbor, and pipeline proponents say Canada is closer and more reliable than suppliers in the Middle East and Africa.
Pipeline opponents argue that the project poses significant climate change risks, including the potential to increase carbon gas emissions and create oil spills, while prolonging America's dependence on fossil fuels. President Barack Obama has repeatedly delayed making a decision on the pipeline, putting its fate in the hands of the State Department, which has jurisdiction over the international project and is currently conducting an assessment.
"It's become a political football," Bud Weinstein, associate director at the Maguire Energy Institute in Dallas, Texas, told VICE News.
That football has seemingly become far too big, too expensive, and too symbolic an issue to be dropped by for its owner, TransCanada Corp., or its congressional backers. But some energy pundits say investors ought to take a second to reconsider.
Robert Bryce, a senior fellow at the Manhattan Institute, a free market think tank, told the Los Angeles Times this week that, regardless of the politics, from an economic perspective, "the project is clearly very challenged right now."
Meanwhile, Jane Kleeb, founder of the anti-Keystone group Bold Nebraska told Politico that current low oil prices give Obama "a landing place to reject the pipeline because Canada needs cheap and big infrastructure."
"When oil prices are high, producing the expensive and high-carbon tar sands makes sense," Kleeb said. "But now that oil is low, the only way tar sands will continue to expand is if Canada gets big pipelines."
Experts say the Keystone isn't the only oil project that's at risk. Goldman Sachs this week warned that $1 trillion in spending on future oil projects could be affected, according to a Financial Times report. With oversupply shoving prices down, up to 400 big energy projects — previously planned on the bet that oil prices would remain at a certain level — are facing delays as their economic viabilities are questioned, the report said.
Goldman's analysis also indicated that companies might need to trim project spending by up to 30 percent to be profitable at current crude prices.
At least for now, TransCanada is confident that its investors will ride out the price rollercoaster. The company told VICE News they are "less sensitive to short-term oil fluctuations."
"Our shippers are in for the long haul," TransCanada spokesman Mark Cooper told VICE News. "They have remained along that what has been a six-year ride during which time oil has fluctuated from between $40 to $100 a barrel. None of our customers have ended their contracts, which are each expected to operate between 20 to 40 years."
Weinstein agreed with this assessment, saying that, although TransCanada would need oil to stay at least "$60 to $65 a barrel to make it commercially viable," the mercurial market will have little impact on large long-term investment projects like the Keystone.
"Short-term there will be a drop in production in Alberta, but long-term the global demand is going to rebound," Weinstein said. "If somebody were to tell TransCanada that oil would stay at $40 a barrel for the next 100 years, then they probably wouldn't build the pipeline. But the projects that are more likely to be hit [by falling oil prices] are ones like deep water drilling in the Gulf of Mexico."
TransCanada maintains it simply "makes good sense that this project moves forward," to kick start job creation — it estimates that pipeline construction would create 42,000 direct and indirect jobs — and provide local economies with millions in annual tax revenues.
David Bellman, founder Ohio-based All Energy Consulting, told VICE News that he expects major projects that might be delayed as a result of falling oil prices to be completed when the market picks up again.
"We swing from one pendulum from another," Bellman said. "If I'm an oil producer, I'm probably going to feel quite a bit of pain for the next six months, but that pain has a rebound. That's just how it works."
Yet some industry experts remain wary of predictions of an imminent oil market upswing.
"It appears Saudi Arabia is prepared to effectively wage a price war in order to force high-cost producers — a category that includes the oil sands of western Canada, the source of oil for Keystone XL — out of the market," Martin said, referencing the decision last month by the Kingdom and other OPEC members not to cut production rates. Together with the recent US shale oil boom, the overabundance of Saudi oil is seen as one of the primary drivers of the current crude crisis.
"That doesn't mean that oil sands development will cease," Martin said. "But it certainly calls into question the higher cost projects and the future of Keystone XL."
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