09/01/2011 05:42 pm ET | Updated Nov 01, 2011

Keystone Pipeline Fight: Wall Street Is Watching

Actresses Darryl Hannah and Margot Kidder and hundreds of less well-known activists are ending a two-week civil disobedience campaign focused on preventing Obama administration approval of a pipeline to ferry oil extracted from Canadian tar sands to U.S. refineries. They say it threatens forests, water supplies, and will radically worsen global warming.

But climate scientists and oil industry analysts say more is at stake than the fate of the so-called Keystone XL project. It is among a handful of energy projects in North America whose approval could boost investment and create momentum for unconventional sources of fossil fuels. Many scientists believe increased use of such dirtier energy could make it harder to avert a climate crisis.

While protestors want White House officials and the public to notice, investors already are watching developments closely - and the pipeline's builder, whose chief lobbyist has deep connections in Washington, is spending heavily to influence the outcome. To Wall Street, approval of extending the pipeline to refineries along the Gulf of Mexico would be more than symbolic.

"It could give a signal that the U.S. isn't necessarily going to step up regulations" on new and dirtier forms of fossil fuels, said Jacob Correll, a commodities analyst at Summit Energy , a consulting firm. "It might give investors more comfort that it's going to be a country that's more conducive to continuing these drilling investments going forward."

If TransCanada Corp., a Calgary, Alberta-based energy company, receives administration approval to build the $7 billion pipeline expansion, it "could add incentives for refineries" to process dirtier grades of crude, said Sparsh Khandeshi, a refineries law fellow at the Environmental Integrity Project, an advocacy group founded by former Environmental Protection Agency enforcement attorneys. The organization noted in June 2008, before the financial crisis sapped the global demand for oil, that U.S. refineries already were " placing a major bet on a fuel source which is dirtier to mine, process and refine."

Keystone XL backers in the oil industry claim the pipeline project would create tens of thousands of American jobs while reducing U.S. dependence on foreign oil. The American Petroleum Institute, the oil industry's lobbying arm, argues that the environment will be better safeguarded if the oil sands crude flows to the U.S. rather than to other nations.

"It could be exported to other countries, many of which do not have the same stringent environmental regulations that are in place here in the United States," API asserts. "China, for example, has been actively seeking energy resources."

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