Keystone XL returns as Canada looks for oil buyers beyond the US | Spare News

As Ottawa and Alberta push for a new West Coast pipeline, Keystone XL is back in the debate as a potentially cheaper and faster way to move more Alberta crude.

First proposed in 2008, Keystone XL was meant to carry oilsands crude from Alberta into the US pipeline system and toward Gulf Coast refineries built to process heavy oil. US President Donald Trump brought the issue back into focus Tuesday when he delayed threatened tariffs on Canadian goods for three days and said Keystone XL “may be awoken from the grave.”

The comments land as the provincial and federal governments are advancing a West Coast pipeline as a nation-building project that would open markets in Asia and reduce Canada’s exposure to US trade threats.

But the Keystone route has a stronger near-term business case because it connects Alberta crude to refineries that already want it, said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission.

“The reality is Canada wants to maintain and enhance the US market, because that’s a good market for us, but we also want to have diversification, which means getting to the West Coast,” Masson said.

Alberta Premier Danielle Smith said the province is pursuing pipeline options in multiple directions.

“While there’s still more work to be done, I’m encouraged by the recent progress we’ve seen in Canada-US trade negotiations,” Smith said in an email statement to Canada’s National Observer. “As we await the details of this deal, I urge the federal government to continue negotiating to resolve the remaining tariff issues and restore free and fair trade with the United States, while also diversifying and strengthening the Canadian economy.”

“Alberta wants to build new pipelines West, East, North, and South, and we are always in discussions with industry to support these opportunities,” Smith said.

Masson said the two routes serve different purposes. A southern pipeline has the clearer commercial case because it would add capacity to the US, Canada’s largest oil market, where Gulf Coast refineries are built to process heavy crude from Alberta. The US received 97 per cent of Canada’s crude oil exports by value in the decade before the Trans Mountain expansion. Even after the expansion, it still accounted for 90.1 per cent of crude exports in 2025.

If Alberta crude can reach Gulf Coast refineries efficiently, Masson said producers are more likely to receive world prices; currently Canadian oil bound for the US is sold at a discount relative to global prices for similar products. Higher producer returns also mean more royalties and taxes for governments.

Expanding or optimizing an existing pipeline system would likely be the lowest-cost way to increase Canada’s export capacity, said Celina Hwang, director of Canadian crude oil markets at S&P Global Energy. But she said the lowest-cost route for a pipeline operator may not be the best economic choice for Canada.

Hwang said Alberta sees new pipeline capacity as a way to attract more investment into Western Canada’s oil sector. The choice for Canada is whether to keep expanding through the US system or take the harder but more independent route of building new access to global markets from Canada’s West Coast, she added.

The West Coast proposal would give Canadian producers access to more buyers in Asia and reduce dependence on the US, but Masson said diversification would come at a higher cost. The federal-Alberta proposal would largely follow the existing Trans Mountain corridor through BC to a deepwater port near Delta, including Roberts Bank, but would still require a major new pipeline, pump stations and export infrastructure.

“Certainly Canada wants to have a sovereignty that comes with having customers from many countries,” Masson said. “And we may have to pay a cost for that.”

Masson said the Keystone project has changed since the original proposal was cancelled. TC Energy, the company that twice tried to build Keystone XL, has since spun its oil pipeline business into a new Calgary-based company called South Bow. That company now owns the existing Keystone pipeline system, along with some assets left over from the cancelled Keystone XL project, which had been intended to expand Keystone’s capacity. Masson said South Bow has been testing whether oil producers and refiners still want more pipeline space to the US, and that work has now taken shape as Prairie Connector, a proposed line from Hardisty, Alta. to the US border, where it would connect with Bridger’s proposed US pipeline system to carry oil farther south toward major refining and storage hubs.

South Bow has secured 20-year commitments from nine customers for 465,000 barrels per day of service to US delivery points and is targeting a final investment decision in mid-2027. 

Masson said that backing shows the proposal is being driven by companies and shippers, rather than being reliant on a political push from Canada  or Alberta. The proposed West Coast pipeline, by contrast, has only a 10 per cent buy-in from a private backer, with the majority of funding coming from government-owned sources.

Masson said the Canadian section of Keystone XL is relatively short and already permitted, while the remaining uncertainty sits largely in the US, where the project still faces presidential politics and opposition from environmental groups, landowners and Indigenous communities.

The project was rejected under Barack Obama, revived during Trump’s first term and cancelled again by Joe Biden in 2021. Masson said TC Energy and shippers lost more than $1.5 billion, while Alberta lost about $1.3 billion after backing the project in an attempt to get construction far enough along that it would be harder for a new US administration to cancel.

Trump has already issued a presidential permit for Bridger’s border-crossing facilities in Montana. But “it could still get pulled again if the pipeline is something that the next president doesn’t like,” Masson said.

Canada’s National Observer did not receive responses from the Prime Minister’s Office, Natural Resources Canada or South Bow before publication deadline. Sonal Gupta / Local Journalism Initiative / Canada’s National Observer.