The political wrangling over the EPA concerns has delayed the approval of the pipeline which was initially proposed in 2008. The Keystone pipeline will eventually transport oil from Canada all the way to the Gulf of Mexico and refinery row in Port Arthur Texas.
Deutsche Bank said last week they expect the pipeline to miss the targeted 2013 start date because of the delay in approvals from the current administration.
Deutsche Bank said the project would "very likely" get the presidential permit it needs from the Department of State. Nevertheless, it "may run into some delays in the post-approval phase as various federal and state regulators drag their feet in the follow-on processes."
"Additionally, as soon as approval is given, environmentalists will likely sue - hence the massively thorough process - double the length of the typical major pipeline approval and counting."
Deutsche added that the project's leg from Cushing, Oklahoma, to Port Arthur, Texas, still has a chance of meeting the 2013 goal, because it passes through two energy-friendly states and plays a key role in the Brent-WTI price relationship. This would work to raise the price of WTI more in line with Brent.
The Keystone XL extension was proposed in 2008. The application was filed in the beginning of 2009 and the National Energy Board of Canada started hearings in September 2009. It was approved by the National Energy Board on March 11, 2010. The South Dakota Public Utilities Commission granted a permit on February 19, 2010. However, in its March 2010 report, the National Resource Defense Council stated that "the Keystone XL Pipeline undermines the U.S. commitment to a clean energy economy", instead delivering dirty fuel from oil sands and high costs.
On June 23, 2010, 50 Members of Congress spoke out against the Keystone XL pipeline. In their letter to Secretary of State Hillary Clinton, they warned that "building this pipeline has the potential to undermine America's clean energy future and international leadership on climate change." On July 6, 2010, House Energy and Commerce Committee Chairman Henry Waxman urged the State Department to block Keystone XL, saying in a letter to the department that "this pipeline is a multi-billion dollar investment to expand our reliance on the dirtiest source of transportation fuel currently available."
On July 21, 2010, the EPA said the draft environmental impact study for Keystone XL was inadequate and should be revised, indicating that the State Department's original report was "unduly narrow" because it didn't fully look at oil spill response plans, safety issues and greenhouse gas concerns. The final environmental impact report was released on August 26, 2011. It stated that the pipeline would pose "no significant impacts" to most resources if environmental protection measures are followed, but it would present "significant adverse effects to certain cultural resources". The final decision is expected by the end 2011.
The problem with not building the pipeline will be higher gasoline prices when supplies at the coastal refineries begin to shrink in 2012-2014. As global oil prices rise those refiners will be forced to continue buying waterborne crude indexed to Brent. Completing the pipeline will let those refineries buy the cheaper Canadian crude and that will allow for cheaper gasoline prices. The pipeline will also eliminate the bottleneck at Cushing where the oil produced in the center of the country is piling up because of excess supply. That benefits refiners in the center of the country but does not help those on the coasts. The pipeline would equalize costs for everyone and allow for more efficient distribution.
If there was ever another disruption of water borne crude either by war, embargo or just a shortage of crude in general the Keystone XL will be a lifesaver.