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Is the Keystone XL Pipeline Really Worth It?


A look at the good, the bad, and the ugly about the major oil project.

The Ugly

The Keystone XL Pipeline's strongest opposition comes not from environmental groups directly, but scientists and academics that have conducted comprehensive studies. Some of these studies directly counteract the Perryman Study that was commissioned by TransCanada in support of the pipeline project and presented to regulators tasked with approving the project.

Pipe Dreams Report: Cornell University's Global Labor Institute produced a report, entitled Pipe Dreams, which directly countered a number of claims made by the Keystone project. For instance, the report suggests that TransCanada would spend only $3-4 billion (rather than $7 billion), most of the jobs created would be temporary and non-local, and KXL steel would be manufactured outside of the United States and actually impact unemployment levels slightly.

Oil Prices Set to Rise: The Natural Resources Defense Council produced a report, entitled Keystone XL: A Tar Sands Pipeline to Increase Oil Prices, which argues that the Keystone XL Pipeline would both decrease the amount of gasoline produced in US refineries for domestic markets, and increase the cost of producing it, leading to even higher prices at the pump.

Environmental Impact: A collection of 27 different scientists working for a variety of organizations sent a letter to President Obama noting that tar sands carbon takes a lot of energy to extract and refine, with mining practices that are environmentally destructive. Unlike in the past when these impacts were not known, there's now a chance to stop the pipeline from being built before the dangerous results would be realized.

The Bottom Line

The Keystone XL Pipeline may not be the first pipeline transporting oil from Canada's tar sands to US refiners – Enbridge's (NYSE:ENB) Alberta Clipper and TransCanada's Keystone I pipelines are already transporting oil – but the increasing number of pipelines and the resulting increase in dirty fuel is causing concern among many environmental groups and citizens in affected states.

Politicians are likely to weigh these concerns and decide on the fate of the Keystone XL Pipeline in early 2013, unless regulators introduce additional delays.

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Editor's note: This article by Justin Kuepper was originally published on Commodity HQ.
No positions in stocks mentioned.
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