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Asia a Priority for Canada After U.S. Delays Keystone

by Rachelle Younglai and David Lawder

HONOLULU - Canadian Prime Minister Stephen Harper said he will step up efforts to supply energy to Asia after Washington delayed a decision on whether to approve a new oil pipeline from Canada to the United States.

In a subtle warning to Washington, Harper told Chinese President Hu Jintao that providing energy to Asia was an important priority for Canada.(photo: Clayton Conn / Tar Sands Action)

"This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products," Harper told reporters on Sunday at the Asia-Pacific Economic Cooperation leaders' meeting in Hawaii.

"That will be an important priority of our government going forward and I indicated that yesterday to the president of China."

Citing health, safety and environmental concerns, President Barack Obama's administration said it would now study a possible new route for TransCanada Corp's Keystone XL pipeline.

The delay could end up killing the $7 billion project altogether if supporters back out or the administration is unable to chart a new route.

Canada is already the largest foreign supplier of oil, natural gas, electricity and uranium to the United States. The proposed pipeline has the capacity to move 700,000 barrels of crude produced from the Alberta tar sands to refineries in Texas.

But the pipeline would have crossed an ecologically sensitive region in Nebraska, causing thousands to protest and derailing Canada's plans.

HARPER DISAPPOINTED

Harper's conservative government has repeatedly voiced disappointment at the delay and some big businesses say the move by the Obama administration was purely political to push the decision out past the November 2012 election.

"It's important to note there has been extremely negative reaction to this decision in the United States," Harper said before a one-on-one meeting with Obama.

But Harper's reaction did little to sway Obama.

At their meeting, Obama told Harper he stood by the decision to delay the verdict. Harper said he told Obama the delay highlighted why Canada had to increase its efforts to supply energy outside of the United States and into Asia.

"In the meantime, Canada will step up its efforts in that regard," Harper told reporters.

It is unknown whether the administration will be able to find a route around Nebraska that does not infringe on other environmental sensitive regions or areas tied up in land claims.

Obama and Harper are due to meet in December in Washington. Hu invited the Canadian prime minister to China in 2012.

(Additional reporting by Laura MacInnis; Editing by John O'Callaghan and Yoko Nishikawa)

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