The battle rages across the US over the Keystone Pipeline from Alberta in Canada to the ports of Texas in the US. In November 2011, President Barack Obama announced "the decision on the pipeline permit would be delayed until at least 2013, pending further environmental review".
The Keystone system is huge and complex. Two stretches totalling almost 4,000km of 30-inch and 36-inch pipelines have been in operation since June 2010 and February 2011.
The system delivers about 600,000 barrels per day (bpd) of synthetic crude from Alberta tar sand oil fields to US inland refineries and to the oil hub of Cushing in Oklahoma. But environmentalists are fighting a tough battle to stop the final phase, which is a parallel system of about 2,800km of 36-inch line connecting Hardesty in Alberta with Port Arthur and Houston in Texas.
The part between Cushing and Texas will make available surplus crude to Texas refiners and may be built separately anyway. The Keystone system is not only important for Canadian exports but also for shale oil development in the US along the route of the pipeline and, therefore, it will eventually deliver about 1 million bpd, of which 70 per cent will be from Canada.
This phase has generated controversy because of its routing over the top of the Ogallala aquifer, a fresh water source for drinking and agriculture in Nebraska and other states. Even a change in route and enhanced safety systems couldn't appease environmentalists, who want the US to stay committed to clean energy. Tar sands oil is considered "dirty fuel at high costs".
But the Americans, sooner or later, may be forced to use this sort of crude as other sources get exhausted. The refiners in the US have already made investment in order to be able to refine this heavy crude. Canadian and US conventional oil is on the decline while non-conventional oil from Canada, especially, and the US is on the rise. Forecasters suggest that non-conventional oil from the two countries may increase from 1.7 million bpd in 2010 to as high as 6.6 million bpd in 2035 and the Canadian share may be close to 5 million bpd.
The US snub brought immediate reaction in seeking markets elsewhere. TransCanada, the owner of the pipeline system, said that development of oil sands will continue.
Prime Minister Stephen Harper headed to China to entice the Chinese. There is already an 1,177km pipeline proposed from Alberta to the Pacific coast and it may help diversify its export market. The Chinese may also be welcoming as they seek supplies from wherever they can get them.
But many observers believe that the Keystone pipeline expansion will eventually be approved after the presidential election and Obama call to delay a decision is prompted by his "obsession to get re-elected".
Robert Samuelson, the famous economic commentator, described Obama's decision as "an act of national insanity".
The recent move by the House of Representatives to force approval of the pipeline is unlikely to succeed though "the bill, approved 237-187, would strip President Barack Obama's authority to decide on TransCanada's $7 billion [Dh25.69 billion] project and give the Federal Energy Regulatory Commission 30 days to approve the pipeline after it's deemed safe."
The president is expected to veto it even if the Senate adopts similar measures. Other oil producers and exporters are watching the development and the delay is to their advantage. It will support prices and may be reduce the enmity in the US towards oil-producing and exporting countries in Opec and elsewhere. At the same time environmentalists may have to come down from their ivory tower and face the reality that tar sands may be unwelcome but they are not worse than coal.
The writer is former head of the Energy Studies Department at Opec Secretariat in Vienna.