The U.S. State Department recently released a study showing that building Keystone XL would have little impact on climate change. The proposed Keystone XL pipeline would connect the oil sands in Alberta, Canada, to the U.S. refiners on the Gulf Coast.

Critics of Keystone XL have long argued that building the pipeline would aggravate global warming because crude made from the Canadian oil sands releases about 17% more carbon dioxide than the average crude refined in the U.S. The critics also worry that Keystone XL could contaminate water supplies because it passes through the Ogallala Aquifer, which irrigates a large part of the central United States.

On the opposite side, Keystone XL supporters say that the pipeline is figuratively the best house on a bad block. The world needs oil. The oil sands in Alberta have oil and will be developed whether the Keystone XL pipeline is built or not.

The supporters also argue that Alberta's oil sands won't contribute to climate change. With current technology, currently 170 billion barrels of the total 1.8 trillion barrels in Alberta's oil sands are economically retrievable. Scientists estimate burning those 170 billion barrels would only increase the global temperature by about 0.03 degrees Celsius.

The supporters also argue that transporting oil through pipelines is safer and less likely to cause oil spills than transporting oil through railroads.

The Canadian full-court press
Because of the inadequate infrastructure to transport oil away from the oil sands, Canada is leaving a fortune on the table. At one point last year, Canadian heavy oil traded at a $41 per barrel discount to West Texas Intermediate.

Given the large sums of money involved, Canada has put full-court press on the Obama administration. The foreign affairs minister, John Baird, has demanded that the U.S. make the pipeline decision soon.

Sources report that Prime Minister Stephen Harper will personally ask President Obama to approve Keystone XL on Feb. 19 at the North American Leaders' Summit.

The shale revolution
According to the EIA, U.S. oil production increased to a 25-year high last year, while imports fell to a 25-year low. The EIA predicts that crude oil output will continue to grow annually by 800,000 b/d until 2016 when it tops out.

When domestic oil production is increasing, people care less about energy security. When it tops out, people care more. Energy security is still important, and is a major reason why we still use 10% ethanol for gasoline. Canada is more stable than many current trading partners and orders of magnitude friendlier, which means that using Canadian oil is safer than using foreign oil from other sources. 

Winners and losers
If Keystone XL is approved, Canadian oil sands producers such as Suncor Energy (SU 0.45%) will benefit along with pipeline operator TransCanada (TRP 0.71%). The Canadian oil sands producers will get more for its oil, while TransCanada will collect more fees from the oil that passes through the pipeline. Unlike shale plays that run out fairly quickly, given the 170 billion barrel oil-sands reserves, the 730,000 b/d pipeline is likely to generate profits for TransCanada for a long time to come. 

Railroads such as Canadian Pacific Railway (CP 0.69%) that otherwise would have transported the oil should also see lower revenue as a result. 

The bottom line
Keystone XL is a potent and contentious symbol. Politicians don't like potent and contentious issues, especially if those issues could tarnish their legacy.

Given that the president has postponed the decision for almost six years and mid-term elections are coming up, I believe it's unlikely that Keystone XL will be approved while he is in office. If this is the case, it will undoubtedly be a major election issue for his prospective successors.