Source: reuters // Reuters — Robert Campbell is a Reuters market analyst. The views expressed are his own. — By Robert Campbell NEW YORK, Jan 18 (Reuters) – So it appears the Obama administration will reject the Keystone XL pipeline. This will be a big deal in the political realm but (quietly now) the decision will have little immediate impact on the oil market. What’s that? No devastating impact on energy security in the United States? No game-changing victory for the environmental lobby? Nope. For all the gnashing of teeth over the last few months over this pipeline, this decision is likely to have very little long term impact. Keystone will be a political football and a symbol for U.S. politicians longer than it will a market issue. Let’s start with energy security. First and foremost this decision will not prompt Canada to immediately ship more oil to Asia in a pique. After all the approval process for pipelines in Canada is far more torturous than in the United States and regardless about what the Canadian government says, there is considerable opposition to pipelines to the Pacific in that country. Keystone XL backer TransCanada would probably have an easier time reworking its current proposal that starting from scratch with a Pacific pipeline. For instance, Enbridge which is the most advanced in getting a Pacific pipeline proposal to regulators, does not expect its Northern Gateway project to enter service until 2017 at the very least. And that assumes it gets through what will be a tough regulatory process in time to start construction in 2014. So anyone starting today should not expect to start pumping until 2020. So let’s cross that off the list. Ditto for supply concerns. Canadian oil producers may be disappointed by the decision but there are a number of competing alternatives that are moving forward that will easily substitute for Keystone XL. If anything, North America’s oil pipeline industry has become remarkably entrepreneurial in the few years between the first Keystone XL proposal and today. Witness all the competing pipelines to move Eagle Ford crude oil and how quickly they are coming to market. For Canadian crude, the near term issue is not getting into the United States — there’s already plenty of capacity into the country — it is moving south into new markets. Enter Enbridge’s proposed Flanagan South pipeline, that would move oil from the Chicago area to Cushing where it would link up with the soon-to-be reversed and expanded Seaway Pipeline. If backed by shippers in February, the line will start up in 2014, around the same time the expansion of Seaway is due to be completed. ENVIRONMENTAL WIN? A DRAW, MAYBE Of course it is easy to accept the arguments above but point to the rejection as a more worrisome development arising from public fears, pseudo-science and America’s woefully confused and contradictory energy policy. That may be but the facts would seem to point more to a calculated political decision than a hidden environmental agenda now setting policy. For the most part, the Obama administration has avoided most of the environmental arguments advanced by Keystone XL opponents when justifying its decisions. For instance opposition to Keystone XL has centered around a bid to thwart the development of Canada’s oil sands, which are more greenhouse gas-intensive than conventional crude oil due to the need to burn a lot of fossil fuels of heat to extract and process oil sands. But even by blocking Keystone XL, the Obama administration has done nothing to prevent a huge increase in oil sands crude entering the U.S. over the next five years. Indeed, that oil will come on pipelines that are already built and permitted as noted above. In a sense the Obama administration has tacitly accepted oil sands crude as a fact of life in the United States and has acquiesced to its gaining an increased market share. For environmentalists celebrating the demise of Keystone XL, but there’s an excellent chance they’ll go home from the party in a vehicle fueled by oil sands crude. So what is the real lesson here? Well, there are remarkable parallels with the current debate over hydraulic fracturing. As with the fracking issue, the Keystone XL issue showed the oil industry once again demonstrating its unparalleled, almost obtuse inability to gauge public sentiment get out in front of an issue. Just like fracking, pipelines have been in use for decades, have a long and distinguished safety record, etc and so on. And just like fracking, when faced with opposition, informed or not, the industry tried to bulldoze its way through when a more nuanced approach would likely have eased passage. By opting for its usual tactics of confrontation, bullying and bluster over Keystone XL, the oil industry only served to stir up more opposition and, remarkably, unite left-wing environmental groups and the corn ethanol champions of the Nebraska farm belt. Although some opponents would never be satisfied with anything but the cancellation of the project, many, such as those Nebraska farmers, could well have been won over by compromise. The North American energy industry loves to lament the chaotic and incoherent state of energy policy, but it must recognize that its efforts to have its way in the policy arena regardless of the cost must bear some of the blame for this situation.