01/18/2012 04:43 EST | Updated 01/19/2012 09:47 EST

Keystone XL Pipeline: Canada Reacts To U.S. Decision Not To Go Ahead With Deal

The Canadian government says it is profoundly disappointed with the Obama administration for scrapping a multibillion-dollar pipeline project that would have carried oil from Alberta to the Gulf of Mexico and created jobs north and south of the border.

Prime Minister Stephen Harper received a phone call from U.S. President Barack Obama Wednesday afternoon after news had already leaked that the president would scrap the deal.

According to Harper’s press secretary Andrew MacDougall, Obama informed the prime minister that his administration was turning down TransCanada’s application to build and operate the Keystone XL pipeline.

“The president explained that the decision was not a decision on the merits of the project and that it was without prejudice, meaning that TransCanada is free to re-apply. Prime Minister Harper expressed his profound disappointment with the news,” MacDougall wrote in a note to reporters.

“(Harper) indicated to President Obama that he hoped that this project would continue given the significant contribution it would make to jobs and economic growth both in Canada and the United States of America.

The prime minister reiterated to the president that Canada will continue to work to diversify its energy exports,” MacDougall wrote.

Natural Resources Minister Joe Oliver told reporters the Conservative government continues to believe the Keystone project is viable, but Wednesday’s decision had stressed the need to focus on other markets to sell Canada’s oil sands.

“We continue to believe that this project is in the best interests of both countries. Our government respects the right of the United States to make its own decisions. However, it is clear that the process is not yet over and we are hopeful that this project will be approved in the future based on its merits,” Oliver said.

The responsible development of the enormous resources provided by the oil sands would create hundreds of thousands of jobs and help pay for social benefits such as health care and education, the minister explained.

“Ninety-nine per cent of our oil exports currently flow to the United States. Today's decision by the Obama Administration underlines the importance of diversifying and expanding our markets, including the growing Asia market to help ensure the financial security of Canadians and families for decades to come,” he said.

Foreign Affairs Minister John Baird told reporters earlier on Wednesday, before the decision was official, that his government had worked very closely with TransCanada to push Keystone XL and had lobbied hard.

The Canadian Government would continue to be an “active supporter” of the project, Baird added, but suggested the Conservatives would now focus their efforts on other potential markets, such as China.

“Listen, it is a challenging political hot potato south of the border, but obviously we were very disappointed with the decision in December,” he said.

“Obviously this whole episode underlines the importance of diversifying our market. We can't have only one customer."

Tim Griffin, a Republican congressman from Arkansas, said Obama had chosen to create jobs in China instead of jobs in the U.S..

“I met with officials there (at the Canadian Embassy), they said they want to do business in the United States but if they can’t do business here, they have to take those oil sands somewhere to have them refined. They said they would do that in China,” Griffin said.

In a statement from The White House, Obama blamed Congressional Republicans for his decision to nix the deal. They had pushed forward a “rushed and arbitrary deadline” that had prevented the State Department from performing a full assessment on the pipeline’s impact, especially on the health and safety of Americans and the environment, he said.

“This announcement is not a judgment on the merits of the pipeline, but the arbitrary nature of a deadline that prevented the State Department from gathering the information necessary to approve the project and protect the American people,” Obama said in a statement.

Although it was disappointed, TransCanada said it had no plans to give up on its pipe dream.

"We will re-apply for a Presidential Permit and expect a new application would be processed in an expedited manner to allow for an in-service date of late 2014,” the company said in a statement.

The NDP’s environment critic Megan Leslie, however, praised the Obama Administration’s decision, but she said scrapping Keystone didn’t mean building the Northern Gateway pipeline to serve Asia was the solution.

Northern Gateway is a pipeline project from Enbridge that would run near Edmonton to a new marine terminal in Kitimat, British Columbia.

The Conservative government has spent “all this money” going down to the U.S. lobbying heavily on Keystone instead of envisioning the future energy economy, Leslie told The Huffington Post.

“It's not about diversifying the buyers for our raw natural resources, it's about diversifying our energy economy for the future,” she said.

“It's a good decision. I think this news doesn't make the Northern Gateway any less risky. So I don't think the automatic answer there is 'well, we have to fast-track Northern Gateway, there are serious concerns with the gateway project as well,” she said.

Leslie said she wasn’t too concerned for the moment that TransCanada would reapply.

“I think it is a pretty stock answer to say 'yeah, you can reapply.' That's a fair thing to say, whether or not TransCanada will be able to fit a new application into the criteria that the Americans are looking for is another question," she said.

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