November 6, 2015 / 7:09 PM / 2 years ago

UPDATE 2-Canada PM disappointed on Keystone but sees fresh start with Obama

(Adds remarks from Kenney, Dion and Notley, implications for Energy East)

By Randall Palmer and Leah Schnurr

OTTAWA, Nov 6 (Reuters) - Canadian Prime Minister Justin Trudeau said on Friday he was disappointed at the U.S. decision to block the proposed Keystone XL oil pipeline but didn't see it standing in the way of improving relations between the two countries.

Canada's newly elected Liberal government also reiterated it was prepared to support domestic pipeline projects like TransCanada Corp's Keystone alternative Energy East, but only if there was buy-in from local communities.

While he openly backed Keystone XL ahead of last month's Canadian election, Trudeau made clear he would adopt a different tack than the outgoing Conservatives, who irritated the U.S. administration with constant pressure to approve the cross-border pipeline.

"The Canada-U.S. relationship is much bigger than any one project and I look forward to a fresh start with President Obama to strengthen our remarkable ties in a spirit of friendship and cooperation," the Liberal leader stated.

"We are disappointed by the decision but respect the right of the United States to make the decision."

By contrast, prominent opposition Conservative legislator Jason Kenney characterized the U.S. move as "insulting" and accused Trudeau of waving the white flag.

Trudeau has been vocal about the need to fight global warming and had not raised the pipeline with Obama when the President congratulated him on his electoral victory last month. He plans to meet Obama during a Nov. 15-16 summit in Turkey.

While the Liberals have promised carbon reductions, Foreign Minister Stephane Dion said the government did not share the position of environmentalists who oppose expansion of the country's carbon-intensive oil sands.

"We didn't say we will close the shop and then you won't have any pollution. We want sustainable development," he told reporters.

Most of Canada's oil comes from the landlocked provinces of Alberta and Saskatchewan. Alberta Premier Rachel Notley said she was not surprised by the U.S. decision and had spoken with Trudeau about getting Alberta oil to international markets.

"We need to focus our efforts on the other pipelines over which we have greater domain," Notley said, adding that the U.S. decision "underlines the need to improve our environmental record."

Energy East would carry Alberta crude to Canada's East Coast, where it could be refined or sold onto international markets.

Foreign Minister Dion said Obama's decision did not change the Liberal policy of supporting Energy East as long as it can win the "social license" of local support. The project faces opposition from environmental groups and some communities along the route.

"In Canada, if we want these projects to go through, we need to rebuild our environmental assessment and the confidence communities may have (in) us. Otherwise, we'll not be able to go ahead," he said.

Dion added that a "serious trading country like Canada" had a duty to bring products to market and if it was not through a pipeline it would go another way that might not be as safe or environmentally sound.

Transport Minister Marc Garneau had said on Thursday that well-built pipelines are recognized as safer than rail. (Additional reporting by David Ljunggren; Editing by Christian Plumb and James Dalgleish)

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