04/30/2014 04:41 EDT | Updated 04/30/2014 04:59 EDT

Canada May Sue U.S. Under NAFTA Over Keystone XL: Report

An activist holds up a sign outside the State Department during a protest of the Keystone XL pipeline on March 7, 2014 in Washington. Activists organized by the Energy Action Coalition marched to the State Department to protest the construction of the pipeline which would carry tar sands oil from Canada. AFP PHOTO/Brendan SMIALOWSKI (Photo credit should read BRENDAN SMIALOWSKI/AFP/Getty Images)

As the U.S. Senate inches closer to a vote that could force the White House to make a decision on the Keystone pipeline, Canada may use the North American Free Trade Agreement to sue the U.S. over the issue, according to news reports.

The government of Prime Minister Stephen Harper is mulling joining forces with Keystone XL builder TransCanada and oil companies to challenge the Obama administration's repeated delays on a decision, the National Post reports, citing unnamed sources.

The U.S. State Department announced earlier this month it is delaying yet again a final decision on the controversial pipeline, until a Nebraska legal challenge is settled. Any decision on the pipeline was effectively pushed off past the U.S. mid-term elections this fall.

The news comes as the U.S. Senate inches closer to a vote on the pipeline that could potentially embarrass the White House.

Senate Majority Leader Harry Reid, a Nevada Democrat, is in talks with Republican and Democratic senators about putting the Keystone XL to a vote next week. The vote would take place in exchange for Republican support of a bipartisan energy efficiency bill.

According to news reports, Reid initially expected it to be a non-binding, symbolic vote that would likely show a majority of U.S. senators in favour of the pipeline. But the latest reports suggest it could be binding legislation that would require the president to make a decision.

Allowing vulnerable Democrats to vote on a bill approving Keystone could give them something to tout on the campaign trail, but approval of binding legislation could embarrass the White House,” The Hill reports.

The Post notes that former prime minister Brian Mulroney, who first signed a free trade deal with the U.S., is among those arguing Canada could successfully sue the U.S. over Keystone.

Mulroney and others argue that the delay amounts to a restriction on the export of Canadian energy to the U.S. Under NAFTA, the U.S. was given unfettered access to Canadian energy, including in emergencies, in exchange for which Canada was given full access to U.S. energy markets.

Under NAFTA, a bi-national arbitration panel has the power to make binding orders on member countries.

Derek Burney, a former Mulroney chief of staff who was instrumental in NAFTA negotiations, said Canada would have a strong case at the arbitration panel, but since the U.S. hasn’t rejected Keystone XL and only delayed a decision, the White House could argue it's simply following necessary procedures.

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