A pipeline cancelled five years ago is once again finding its way into the centre of Canada–U.S. trade diplomacy. On November 1, President Donald Trump said a prospective trade agreement with Prime Minister Mark Carney would involve the Keystone XL pipeline, suggesting that construction could proceed as the two countries work toward resolving their broader trade dispute.
The announcement has raised important questions about Canada’s energy exports, its negotiating position with Washington, and whether reviving a controversial pipeline would deliver meaningful economic benefits. Although Trump has spoken confidently about the project’s future, no finalized trade agreement or new pipeline construction commitment has been announced. Meanwhile, a separate private-sector proposal is already advancing along part of Keystone XL’s former route. The distinction between political promises and commercial realities is becoming increasingly important for Canadian energy producers, workers, and policymakers.
Trump Puts Keystone XL Back on the Trade Negotiating Table
Trump’s latest comments did more than revive a familiar pipeline proposal. Speaking to reporters in Dubuque, Iowa, on November 1, he said Washington and Ottawa had the concept of a trade agreement and explicitly brought Keystone XL into the discussion. He predicted that the pipeline would be built, claimed that Canada would pay for it, and suggested that its route had largely been determined. Those statements appeared alongside promises of better treatment for American farmers, placing energy infrastructure and agricultural trade within the same political conversation. However, Trump offered no signed agreement, construction timetable, or explanation of how the project would be financed.
The distinction matters because approving an oil pipeline and completing a trade agreement are separate processes. Pipeline developers must secure customers, obtain regulatory approvals, and demonstrate that a project makes financial sense. Trade negotiators are simultaneously dealing with tariffs and market access affecting multiple industries. Trump’s endorsement can increase political momentum without creating an enforceable Canadian commitment. For businesses caught in the trade dispute, the immediate question remains whether the discussions will produce concrete economic changes.
Ottawa Remains Cautious as Trade Negotiations Continue
Prime Minister Mark Carney has offered a considerably more cautious assessment of the negotiations. Following his conversation with Trump, Carney described discussions as constructive and said both governments would continue working toward an agreement that creates jobs, improves affordability, and respects Canada’s sovereignty. On November 3, he acknowledged that Washington had withdrawn some earlier demands, including one that would have given the United States influence over Canada’s future trade agreements with other countries. Nevertheless, he emphasized that substantial work remained before a deal could be completed.
The uncertainty has consequences far beyond Canada’s oil industry. Trade tensions have affected steel, aluminum, automotive manufacturing, and other businesses that depend on predictable access to the American market. Canadian manufacturers face difficult decisions about production, investment, and employment when tariffs can change the economics of selling across the border. Ottawa must therefore weigh any potential energy cooperation against the concessions Washington might seek elsewhere. A pipeline agreement could become part of a broader settlement, but there is no publicly confirmed commitment connecting Keystone XL construction to specific tariff reductions.
Why Keystone XL Was Cancelled in the First Place
Keystone XL was originally proposed in 2008 as an expansion of the existing Keystone pipeline network. The planned 1,947-kilometre pipeline would have transported as much as 830,000 barrels of crude oil daily from Hardisty, Alberta, to Steele City, Nebraska, connecting Canadian production with major American refining markets. Supporters viewed the project as an opportunity to expand export capacity, generate construction employment, and strengthen North American energy security. Opponents raised concerns about potential oil spills, environmental damage, greenhouse gas emissions, and impacts on Indigenous lands and communities.
The project became entangled in years of political and regulatory disputes. Barack Obama’s administration rejected it in 2015, while Trump supported its revival during his first presidency. On January 20, 2021, President Joe Biden revoked the cross-border presidential permit, effectively ending its prospects under the existing development plan. TC Energy formally terminated Keystone XL on June 9, 2021. Alberta, which had provided financial support for the project, subsequently estimated its final costs at approximately C$1.3 billion. That history explains why promises of another revival are being approached with caution.
A Different Pipeline Proposal Is Already Moving Forward
Although Trump continues referring to Keystone XL, the most concrete development involves a different project. Calgary-based South Bow, which took ownership of TC Energy’s crude oil pipeline business following a 2024 corporate separation, is advancing the Prairie Connector proposal with American partner Bridger Pipeline. The Canadian component would extend approximately 530 kilometres from Hardisty to the international border. It would incorporate roughly 150 kilometres of previously installed Keystone XL pipeline alongside 380 kilometres of new pipe. American connections would provide access to markets farther south.
The proposal has already achieved several important milestones. In April 2026, Trump issued a presidential permit authorizing Bridger’s proposed international border crossing in Montana. South Bow subsequently secured 20-year binding transportation commitments from nine customers, representing 465,000 barrels per day. However, those commitments do not mean construction has been approved or completed. In its November 4 financial update, South Bow confirmed that the project still requires permitting work, financing arrangements, and further engagement with affected communities. Its final investment decision remains targeted for mid-2027, demonstrating the distance between political support and an operating pipeline.
Canada’s Oil Industry Depends Heavily on American Buyers
Canada’s dependence on the American energy market becomes clear when examining the latest annual trade figures. According to the Canada Energy Regulator, the country exported approximately 4.3 million barrels of crude oil per day in 2025. Of that amount, roughly 90.1%, or 3.9 million barrels daily, went to the United States. The value of Canadian crude exports reached approximately $140 billion, with American customers accounting for $126.1 billion. These figures demonstrate why decisions made in Washington can have enormous consequences for Canadian producers and the communities supported by the oil industry.
However, the relationship also creates significant benefits for the United States. Canadian oil accounted for 63.4% of American crude oil imports in 2025, making Canada an exceptionally important supplier. Refineries, pipeline operators, transportation companies, and industrial workers on both sides of the border benefit from this interconnected energy system. Additional pipeline capacity could reinforce those relationships, but it would also deepen Canada’s reliance on American buyers unless export opportunities elsewhere continue expanding. This creates a difficult strategic question for Ottawa: whether strengthening an established market is worth the potential cost of greater dependence.
More Pipeline Capacity Could Improve Canadian Oil Prices
Pipeline capacity has a direct influence on the prices Canadian producers receive for their oil. Western Canadian Select, a benchmark for heavy crude produced in Alberta, generally trades at a discount to the American West Texas Intermediate benchmark. Part of that difference reflects variations in oil quality and transportation costs. However, when available pipeline space becomes insufficient, producers may need to rely on more expensive transportation methods or accept lower prices. The Canada Energy Regulator has documented how transportation bottlenecks contributed to wider Canadian crude discounts during earlier periods of constrained capacity.
A new pipeline could help relieve future transportation pressure by providing another route into American markets. The need is not purely hypothetical: Canada’s major western export pipelines remained heavily utilized even after the expanded Trans Mountain system entered service in 2024. South Bow expects growing western Canadian crude supply to increase demand for export capacity during 2027. Nevertheless, the economic benefits of another pipeline would depend on its construction costs, transportation tolls, customer demand, and prevailing oil prices. Greater export capacity could strengthen producer revenues, but it would not automatically translate into cheaper gasoline or diesel for Canadian households.
Environmental Concerns and Indigenous Rights Remain Important Obstacles
Any attempt to turn renewed political support into construction will face environmental and regulatory challenges. The proposed American Bridger pipeline would extend approximately 647 miles through Montana and Wyoming. In March 2026, the U.S. Bureau of Land Management began seeking public input as part of its environmental assessment. The review considers potential impacts on waterways, wildlife, cultural resources, and surrounding communities. Consultation with Tribal Nations is also part of the process. South Bow has similarly identified engagement with Indigenous communities, landowners, and other stakeholders as necessary before making its final investment decision.
Climate concerns add another dimension to the debate. Environment and Climate Change Canada reported that oil and gas activities accounted for approximately 30% of Canada’s greenhouse gas emissions in 2024, making the sector the country’s largest emissions source. Pipeline supporters argue that expanded infrastructure can improve transportation efficiency and support jobs, while opponents question whether additional oil export capacity is consistent with long-term climate objectives. Those competing priorities mean political approval alone cannot resolve the broader debate over the project’s environmental and social consequences.
Trump’s Claim That Canada Will Pay Raises Financial Questions
One of Trump’s most consequential statements involved the project’s financing. During his November 1 remarks, he suggested that Canada would pay the entire cost of the pipeline while the United States would provide the route. However, a November 4 fact-check by The Canadian Press found no evidence supporting an agreement for Canadian government financing. The current Prairie Connector proposal involves Canadian and American private-sector companies, and no Canadian federal funding commitment had been announced. South Bow has indicated that potential financing arrangements remain under evaluation.
The issue carries particular significance because of Alberta’s previous experience with Keystone XL. The province originally committed substantial financial support to TC Energy, including equity investment and a proposed loan guarantee, before the project was cancelled. Its estimated final costs reached approximately C$1.3 billion. South Bow now expects to spend approximately US$65 million on its share of pre-investment-decision development activities in each of 2026 and 2027, partly supported through cost-sharing arrangements with customers. Those expenditures are separate from the full construction cost. Any proposal involving additional public financing would therefore invite scrutiny over financial risks, potential returns, and the appropriate division of responsibility between governments and private investors.
Ottawa Is Also Trying to Reduce Its Dependence on U.S. Energy Markets
The Keystone XL discussion comes as Canada pursues a broader strategy to reach international oil customers. The expanded Trans Mountain pipeline, which began operating in 2024, increased the country’s ability to move crude oil to the Pacific coast. According to the Canada Energy Regulator, Canadian crude exports to destinations outside the United States reached approximately 403,000 barrels per day in 2025, compared with roughly 90,000 barrels daily in 2021. Although American buyers still dominate the market, the increased export volumes demonstrate that alternatives can provide Canadian producers with additional opportunities.
Ottawa is also advancing a proposed West Coast pipeline called Pacific Link. On October 1, 2026, Carney’s government designated the project as being of national interest, presenting it as part of a strategy to increase access to Asian markets. The proposal envisions transporting up to one million barrels of Canadian crude daily, although it still requires extensive development and regulatory work. This creates an important contrast in Canada’s energy policy. Expanding exports to the United States could deliver near-term commercial advantages, while building access to overseas buyers could strengthen Canada’s long-term negotiating position. Both objectives carry substantial financial, environmental, and infrastructure considerations.
The Next Decisions Will Determine Whether Keystone’s Revival Becomes Reality
The coming months will determine whether Trump’s renewed enthusiasm produces tangible results. South Bow’s November 4 update confirmed that Prairie Connector and its associated American pipeline developments remain on track for a targeted final investment decision in mid-2027. The company’s published schedule anticipates construction activity during 2027 and 2028, with service potentially beginning in late 2028. However, those dates depend on financing, outstanding approvals, stakeholder engagement, and sufficient regulatory certainty. Even strong commitments from oil producers cannot guarantee that a multibillion-dollar infrastructure project will proceed.
Trade negotiations face their own uncertainties. Following the November 3 U.S. midterm elections, Canadian officials indicated that their negotiating priorities would remain unchanged despite a changing political environment in Washington. Carney has continued seeking an agreement that protects Canadian interests, while American lawmakers have begun discussing efforts to challenge Trump’s tariffs. For Ottawa, the central question is whether cooperation on energy infrastructure can contribute to meaningful trade relief without creating new financial or strategic vulnerabilities. Until specific terms are released, Keystone XL remains a prominent negotiating issue rather than a confirmed construction agreement.
