Jonathan Chait is wrong, for many reasons. Joe Romm and Charlie Pierce do the dozens on Chait's politics, Eli is going to take a minute to talk loonies.
Chait's argument is that opposition to Keystone is a distraction, that the central issue for the Obama administration is regulation of power plants.
My view, which I laid out in a long feature story last spring, is that the central environmental issue of Obama’s presidency is not Keystone at all but using the Environmental Protection Agency to regulate existing power plants.Eli pointed out that the Obama administration was going to use regulation as a club, oh about four Brian already discussed Chait in May. Chait cites the Congressional Research Service which reported that the pipeline itself would raise US emissions only by a small amount. OTOH, as Simon Donner points out, development of the oil sands adds enough carbon to the atmosphere to take us through a 6 C world. Many argue that if Keystone is not built, the Canadians will build pipelines east and west to export the oil.
Eli, Eli, as he said, looks at the loonies. Oil extracted from tar sands is expensive oil, ~$85/bbl to produce as an estimate. Then you have to refine it, but refining the bitumen from the tar sands is itself expensive, and can only be done at refineries that have a special, expensive piece of equipment called a coker for refining heavy oil. Most of the refining capacity for heavy is in Houston, where it was built up for handling the heavy oil from the Oronoco basin (e.g. Venezuela and Trinidad and Tobago). This econopolitical fact drives the relationship between Venezuela and the US. Both parties need each other economically. The cost of the refined bitumen probably has to be below $100/bbl to justify investment, and the $85/bbl for extraction leaves a very small margin for refining.
The Keystone pipeline would be the most economical way of moving the bitumen to Houston. Shipping via other methods, such as pipelines to the Canadian coasts and then by ship to Houston, or by tanker to Houston (rail or truck), or building new cooker units at Canadian refineries, simply puts the cost of tar sand oil well beyond what the future prices of oil are thought to be. Thus, development of the tar sands depends crucially on the Keystone pipeline being built.
A useful thought on the issue is the failure of alternate energy policies in the Carter administration (1976-1980). No one was going to seriously invest when the Saudi's could turn on the tap and produce at a cost below (then) of $1/bbl. Other sources of oil were developed, not when discovered, but when production costs from those sources were lower than the projected cost of oil in the future.
Anybunny seeking more detail should read Derek Leahy at the Canadian deSmog, and Simon Donner at Maribo. They are Canadians, not loonies.