Keystone Oil Pipeline Decision Key to Obama's Energy Policy

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One of the major policy decisions facing U.S. President Barack Obama is whether or not to approve the Keystone oil pipeline across the Canadian border into the United States.

If approved, the pipeline - to be built by TransCanada (NYSE: TRP) - would transport about 1.3 million barrels of oil a day from Canada's oil sands to refineries along the Gulf coast.

The Keystone oil pipeline, if approved, would benefit U.S. energy security. Not to mention TransCanada and players in the Canadian oil sands industry such as Suncor Energy (NYSE: SU).

This decision is one investors in the energy sector need to pay attention to as it will set the tone for energy policy in President Obama's second term.

Keystone Oil Pipeline Protest

The president will certainly be under heavy pressure from a key constituent of his political base - environmentalists - to reject the project again. This weekend several thousand environmental activists will gather in Washington, D.C. for a demonstration outside the White House to urge the president not to once again say no to the project.

The activists will be putting forward several arguments. The first is that the extracting oil from the Canadian oil sands releases higher levels of greenhouse gases than do other methods of extracting oil. The second concern is over possible leaks into the Ogalala Aquifer, the underground aquifer that lies beneath the Great Plains.

These same concerns led President Obama to reject the original proposal, citing the environmentally sensitive Sand Hills region of Nebraska. This rejection forced TransCanada to submit a revised plan, rerouting the pipeline around that region. The southern portion of the Keystone oil pipeline - from Oklahoma to the Gulf of Mexico - has already been approved by the Obama administration. It received final permits from the Army Corp of Engineers this past summer.

The U.S. State Department, which is ruling on the project, is currently conducting another environmental assessment on the Keystone oil pipeline project. This assessment will be concluded by the summer of 2013.

Keystone Oil Pipeline Optimism

Many observers believe the political rhetoric and think the approval for the pipeline is a sure thing.

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