Canada looks at alternatives to nixed U.S. pipeline

TORONTO -- Canada is looking at alternatives for exporting its oil since U.S. President Barack Obama announced he was blocking a pipeline from Alberta to Texas.

A pipeline executive said Thursday that the company was weighing whether to build a segment of the line -- from Oklahoma to Texas -- that wouldn't require U.S. State Department approval. And government officials said Canada would push harder for a pipeline to the Pacific Coast, where oil could be shipped to China.

At the same time, Canadian officials said, they are hopeful the 1,700-mile Keystone XL pipeline will be built.

Alberta Premier Alison Redford, the leader of the Canadian province that has the world's third-largest reserves of oil, said that while Canada is disappointed at Obama's decision, the government believes Obama has made it clear the U.S. would consider a new Keystone XL pipeline application with a new routing.

Obama called Prime Minister Stephen Harper to explain that the decision Wednesday was not on the merits of the pipeline but rather on the "arbitrary nature" of a Feb. 21 deadline set by Republican legislators as part of a tax measure he signed, Harper's office said.

"The fact that the president has said that the decision was not based on the merits we take as a signal that there is an opportunity to make a decision that is in the national interest that allows the project to go ahead," Redford said.

Calgary-based TransCanada Corp., which proposed the pipeline, said Thursday it was considering building the pipeline in segments, with the first connecting an existing pipeline in Oklahoma to refineries in Texas.

The Obama administration had suggested development of an Oklahoma-to-Texas line to alleviate an oil glut at a Cushing, Oklahoma, storage hub.

"If our shippers are interested in building that portion of the pipeline [first], we would look at that," TransCanada president and CEO Russ Girling said.

Obama's rejection of Keystone XL "clearly gives flexibility to do that," Girling said. He emphasized that the company had made no decisions.

U.S. officials have said that building the pipeline in sections could speed up the process since the U.S. State Department would not be involved if the pipeline does not cross the U.S.-Canada border.

Girling's remarks were in contrast to a statement TransCanada issued on Wednesday declaring it would reapply for a presidential permit to build the full pipeline. Girling said the company still expects to reapply, but "will take our time for how to refile it."

He said a new route that avoids environmentally sensitive areas of Nebraska should be made public in a matter of weeks.

In Washington, the proposed $7 billion pipeline has become a political hot potato.

Republicans -- who earlier put the president in the awkward position of having to make a decision on it before Feb. 21 -- now hope to force Obama to deal with it yet again before next November's presidential election. He wants to put it off beyond that.

Republicans are looking to drive a wedge between Obama and two key Democratic constituencies. Some labor unions support the pipeline as a job creator, while environmentalists fear it could lead to an oil spill disaster.

The Alberta-to-Texas pipeline proposed by TransCanada would carry 800,000 barrels of oil a day from Alberta across six U.S. states to the Texas Gulf Coast, which has numerous refineries.

Natural Resource Minister Joe Oliver said it's clear the process is not yet over and said Canada is hopeful the pipeline will be accepted on its merits.

Redford said Obama's decision adds urgency to Enbridge's proposed pipeline to the Pacific Coast of British Columbia that would allow Canadian oil to be shipped to Asia for the first time.

The project is undergoing a regulatory review in Canada.

"Asian markets are a very viable alternative. I say alternative, I probably shouldn't. It's not an either or situation. There's an opportunity here for us to grow our markets in both directions and we'd like to be able to do that," Redford said.

Canadian officials see the pipeline to the Pacific coast as critical as Canada seeks to diversify its energy customer base beyond the United States, which Canada relies on for 97 percent of its energy exports.

Alberta has more than 170 billion barrels of oil reserves. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves.

Sinopec, a Chinese state-controlled oil company, has a stake in Enbridge's proposed $5.5 billion Northern Gateway Pipeline. Chinese state-owned companies also have invested more than $16 billion in the oil sands in the last two years.

Tens of billions more are expected to be invested in Canada's oil sands if the Pacific pipeline is built.

There is fierce environmental and aboriginal opposition to the Pacific pipeline, but Harper's government has called it a nation-building project that is crucial to the country's goal of becoming an energy super power.

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Associated Press writer Matthew Daly contributed to this story from Washington, D.C.