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US rejection of Keystone pipeline won't sour Canada ties

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Washington's rejection of a pipeline to bring Canadian crude oil to the US Gulf Coast won't sour bilateral ties, the prime minister said Friday, as the builder signaled it wasn't ready to give up.

[Ottawa] Washington's rejection of a pipeline to bring Canadian crude oil to the US Gulf Coast won't sour bilateral ties, the prime minister said Friday, as the builder signaled it wasn't ready to give up.

"The Canada-US relationship is much bigger than any one project," Justin Trudeau said in the wake of the long-awaited announcement seen as a blow to the new leader.

Still, the decision to scrap TransCanada's Keystone XL pipeline marks the first major rift in nearly a century of Canada-US energy cooperation that saw unrivaled integration of the two neighbors' energy infrastructure, including power transmission lines and 70 existing cross-border oil and gas pipelines.

It also means Canada must now find an alternate route to get oil from landlocked Alberta to new markets overseas, with current proposals to build conduits to Pacific and Atlantic oil terminals also under fire, and musings about a link through the Arctic not making any headway.

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Pipeline builder TransCanada appeared undeterred and keen to press on with the project.

"TransCanada and its shippers remain absolutely committed to building this important energy infrastructure project," company chief executive Russ Girling said.

"Today, misplaced symbolism was chosen over merit and science - rhetoric won out over reason," he added in remarks aimed at environmental activists who lobbied against the project.

TransCanada, which saw its share price fall five percent after the snub, said it would not give up so easily and was considering filing another application to the US State Department to build a cross-border pipeline.

Some officials stressed that the scrapping of Keystone won't mean much for oil exports from Canada to its southern neighbor.

"The rejection of Keystone will not stop Canadian oil exports to the United States," Tory leader Rona Ambrose said.

"It simply means we will continue to rely on transportation alternatives like shipping and rail." For many, the objections to the pipeline were a proxy for their fight against climate change. They charged that a more carbon-intense process of extraction and processing is required to produce crude from the oil sands.

But several reviews of the project first proposed in 2008 found that denying its construction would in fact not stem development of the oil sands, which was one of the biggest drivers of the Canadian economy before a slump in oil prices last year.

Many foreign energy firms are also heavily invested in the region, with oil shipments to the United States - Canada's main energy customer - topping three billion barrels each day.

Foreign Minister Stephane Dion said Canada, the world's fifth largest oil producer, would not "close the shop" in order to "not have any pollution." Some appeared put off by President Barack Obama's remarks about the failed bid.

Among other things, Obama said allowing in "dirtier" oil from Canada's oil sands would be a setback in long-term efforts to reduce US reliance on fossil fuels as it looks to curb global warming.

"I don't think they needed to be quite so critical of our energy product (calling it dirty oil)," said Rachel Notley, the premier of Alberta, where tens of thousands of oil jobs have been lost over the past year.

"But it highlights that we need to do a better job on climate change."

AFP

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