The proposed pipeline would ship oil derived from Canadian tar sands all the way to the Gulf Coast, unless a opponents sway Obama to block it.
The Atlantic has a very handy run-down of the Keystone XL proposal, and the reasons for its opponents fervor. They include local fears about contamination and spills, especially in Nebraska, where people opposed to the pipeline say spills are inevitable, would do damage to businesses and farmland, and could threaten the massive Ogallala Aquifer, which supplies the region with drinking water.
Others focus on the fact that it is fabulously expensive and resource-intensive to turn tar sands into oil, and that means it's a dirty source of fuel, even by the standards of oil. (Read this comprehensive 2007 account from Elizabeth Kolbert in The New Yorker for more. Also note who was a supporter of tar sands development in 2007: U.S. Sen. Barack Obama.)
Proponents say the project will provide jobs and a domestic source of energy as the U.S. tries to wean itself off the oil it imports from Middle Eastern and African sources. Supporters are wary of the protests, The Washington Post reports:
Canadian ambassador Gary Doer has a straightforward analysis of whether TransCanada will win the Obama administration’s approval to build and operate an enormous pipeline to transport oil from Alberta to the Texas coast.
“If it’s made on merit, we’re confident,” Doer said in an interview. “If it’s made on noise, it’s unpredictable.”
The State Department will rule on whether to approve the question by the end of the year. But the ball is already in Barack Obama's court. He needs only look out the window.