(BOE Report) – A proposal led by Canadian company South Bow to revive parts of the cancelled Keystone XL oil pipeline could increase Canada’s crude exports to the U.S. by more than 12%, if it gets a green light from U.S. President Donald Trump and additional links to U.S. refining hubs are built.
The new proposal involves a different route through the U.S. than the previous Keystone XL pipeline project cancelled by former U.S. President Joe Biden in 2021 after years of Indigenous and environmental opposition.
South Bow, which was set up by former Keystone XL proponent TC Energy in 2024 to take over its oil pipeline business, is considering reviving some of the line that was already built in Alberta and already has all necessary Canadian permits.
Canadian Prime Minister
Mark Carney brought up the pipeline’s revival in a conversation with Trump in October and it could provide him leverage in upcoming negotiations around renewing the U.S.-Mexico-Canada (USMCA) trade agreement.
Trump – whose tariff wars and annexation threats have strained relations with Canada – has repeatedly called for lower oil prices and many U.S. refiners depend on the roughly 4.4 million barrels per day of exports that Canada sends south of the border.
South Bow’s potential U.S. partner, Bridger Pipeline, recently filed a proposal with Montana regulators that describes the construction of a 645-mile (1,038-km) pipeline – capable of transporting up to 550,000 bpd – beginning near the U.S.-Canada border in Phillips County, Montana, and transiting to Guernsey, Wyoming.
But analysts say Guernsey is not an end market for crude oil, so additional links would need to be built to transport oil to refining hubs such as Cushing, Oklahoma; Patoka, Illinois; and the U.S. Gulf Coast.
The most credible configuration would be a new pipeline spanning roughly 425 miles from Guernsey to Steele City, Nebraska, where it could connect to the existing Keystone mainline system, said Matthew Lewis, founder of Plainview Energy Analytics. From there, the oil could move into underutilized pipelines running toward Cushing, Patoka and Wood River, Illinois.
It remains unclear, however, who would be willing to take on the risk associated with that leg of a project.
“The biggest challenge in this plan in a Guernsey-to-Steele City segment is gaining permits, and building new pipeline that would likely face environmental litigation tying up such a project up in court,” Lewis said.
South Bow said its proposal could connect to downstream pipelines in the U.S. but declined to comment further. Bridger Pipeline declined to comment.
LEVERAGING EXISTING INFRASTRUCTURE
Bridger is proposing to build the Montana-to-Guernsey leg in locations alongside existing pipeline infrastructure, its application states, which would likely make getting required permits easier. On the Alberta side, approximately 150 km of Keystone XL pipe is already built and has been sitting idle since that project was cancelled.
A White House spokesperson declined to comment on the South Bow-Bridger proposal, but analysts said a presidential permit would be required for the segment that crosses the U.S.-Canada border. Even if the Trump administration supports the plan, there is no guarantee that the next U.S. administration would, said Richard Masson, former CEO of the Alberta Petroleum Marketing Commission.
While the proposal may be different than Keystone XL, it remains a large-scale pipeline expansion and will likely attract the ire of environmentalists, landowners and Indigenous communities, he said.
Many pipeline projects in the U.S. have been cancelled or bogged down in litigation. Trump and his team have tried to cut regulation and speed permits, but a multi-year project across more than one administration would carry political risk.
“It brings up all the same issues. For those who wanted Keystone XL cancelled, this is all the same stuff,” Masson said.
COMPETING EXPORT PIPELINE EXPANSIONS
The proposed project comes at the same time that the company behind the Trans Mountain pipeline from Alberta to Canada’s west coast is planning a series of enhancements that could increase its capacity by 360,000 bpd.
South Bow’s competitor, Enbridge, has already approved expansion projects for its Flanagan and Mainline pipeline systems, which will add a combined 250,000 bpd of capacity for Canadian heavy oil shippers moving crude to the U.S. Midwest and Gulf Coast.
Those projects are less complicated than South Bow’s proposal and will be more economic, said TD Securities analyst Aaron MacNeil.
He said South Bow will face questions from investors about its ability to finance a new pipeline project while maintaining its dividend and avoiding taking on too much debt.
(Reporting by Amanda Stephenson in Calgary; additional reporting by Siddharth Cavale in New York, Valerie Volcovici in Washington and Georgina McCartney in Houston; Editing by Caroline Stauffer and Nia Williams)
