Back when the idea for the Keystone XL pipeline first came out, I wrote numerous pieces suggesting that while I worried about the environmental impact of extracting and refining oil from tar sands–a particularly dirtier process–I figured that it was likely coming out of the ground, regardless of whether it ultimately went south through the US or west through Canada.
Now I’m not so sure. The sharp decline in oil prices changes the calculus, as noted in this Marketwatch analysis:
…the Canadian Energy Research Institute estimates that oil-sands projects need a price of $85 a barrel to be profitable in the current cheapest…method and new standalone mines will require $105 a barrel to make a reasonable return.
Crude is trading at $75/barrel as we speak, and the EIA just cut its year-ahead forecast by $18 to $85/barrel.
Of course, they could be wrong and oil could climb to a high-enough perch to make tar sand extraction profitable. Meanwhile, the timing of the politics could easily push Congress to offer bipartisan support for Keystone this week, as Louisiana Sen. Mary Landrieu wants this behind her in her upcoming runoff election.
But for now, the economics may be doing the environment a favor by pricing oil at a level that could keep the tar sands underground.