South Bow Weighs Keystone XL Revival as 550,000 bpd Montana Pipeline Proposal Emerges
South Bow is evaluating a revival of the Keystone XL system as a new 550,000 bpd pipeline proposal in Montana could boost Canadian crude exports to the U.S. by up to 12.5%.
(Reuters) — Canadian Prime Minister Mark Carney was aware of oil company South Bow's plans to revive parts of the canceled Keystone XL pipeline expansion to the United States when he floated the idea to U.S. President Donald Trump in October, a federal government source familiar with the matter said on Feb. 24.
South Bow, the Canadian pipeline company behind the canceled Keystone XL pipeline, is considering reviving some of the already-built line in an expansion project in Alberta aimed at transporting more Canadian oil to the United States, the source said.
A South Bow spokesperson said the company, which took over Keystone XL assets from TC Energy after the project was canceled by President Joe Biden, was evaluating an expansion to leverage existing infrastructure and permitted corridors in Canada, but did not say if that would include Keystone XL. The expansion proposal is still at a very preliminary stage, the spokesperson said.
According to estimates by Bridger Pipeline, a potential South Bow partner on the U.S. side, it could increase Canada's oil exports to the U.S. by about 12.5%. That would give Carney greater leverage in upcoming negotiations over the Canada-United States-Mexico (CUSMA) trade agreement.
During Carney's October meeting at the White House, he raised with Trump the prospect of reviving the Keystone XL oil pipeline from Alberta to the United States as part of his efforts to ease trade tensions between the two countries.
Carney Faces Pressure from U.S. Tariffs
Carney, who was under increasing pressure in Canada to address painful U.S. tariffs on steel, autos and other goods, asked Trump if he would be interested if the Keystone project were to be revived and had Canadian support, Reuters reported in October.
At that time, South Bow said it had "moved on" from Keystone but was supportive of efforts to increase the transportation of Canadian oil. Carney was aware, however, that South Bow was in talks with potential U.S. partners to resurrect part of the old Keystone XL line, the source told Reuters.
"He certainly was aware that there would be some private-sector interest," the source said. The source declined to be named in order to speak freely about the matter.
The Canadian government is not involved in any way with the South Bow proposal, the source said, but added that energy in general will be an important part of negotiations during the upcoming CUSMA review.
A spokesperson for Carney's office declined to comment, referring questions to Canada's Department of Natural Resources.
Natural Resources spokesperson Charlotte Power, in an emailed reply to a Reuters query, said: "Canada is an energy superpower, and we have what the world wants.
"As the federal government prepares for the CUSMA review, we are actively engaging with industry leaders and provinces and territories to ensure our negotiating position reflects Canada's economic interest."
Bridger Files Pipeline Proposal with Regulators
Bridger Pipeline recently filed a proposal with Montana regulators that describes the construction of a potential 645-mile (1,038-km) pipeline beginning near the U.S.-Canada border in Phillips County, Montana, and transiting to Guernsey, Wyoming.
Much of the new pipe would be built in locations alongside existing pipeline infrastructure owned by Bridger and other operators, the application states.
The purpose of the new pipeline, it said, would be to transport up to 550,000 barrels per day of Canadian crude oil to the U.S. market. Canada exported 4.4 million barrels of oil per day on average to the U.S. in 2024.
Bridger declined to comment on the application.
South Bow declined to comment on a potential U.S. partner. The source said the government was aware of discussions between South Bow and Bridger on the matter before Bridger filed its application.
RBN Energy analyst Liz Dicken said in a blog post that the only existing Canadian infrastructure that could be leveraged for a project of that size is the partially constructed Keystone XL system in Alberta, which has sat idle since the pipeline's cancellation in 2015.
Dicken also pointed out that Guernsey, Wyoming, is not an end-market for crude oil, so additional downstream links would need to be built to transport oil to refining hubs such as Cushing, Oklahoma, Patoka, Illinois, and the U.S. Gulf Coast.
Keystone XL was a proposed crude pipeline roughly 1,900-kilometers (1,181 miles) long that would have carried 830,000 barrels per day of oil from the oil sands of northern Alberta through the Dakotas and Nebraska to the major U.S. storage hub at Cushing, Oklahoma, and then to Gulf Coast refineries.
TC Energy first proposed the project in 2008 but it quickly attracted significant environmental and Indigenous opposition.
It was rejected by President Barack Obama's administration and then revived during Trump's first term, only to be canceled again by Biden in 2021.
TC Energy lost billions on the project and set up South Bow as a new company to take over its oil pipeline business. No significant Keystone XL infrastructure was built within the United States before the halt.