The Keystone XL oil pipeline has been dead for years — but leaders of Canada and the United States are mulling a revival of the cross-border project.

Any plan will depend, in part, on cooling a trade war between the two countries.

Canadian Prime Minister Mark Carney raised the prospect of pursuing the oil pipeline this month in an Oval Office meeting with President Donald Trump. The countries’ relationship has since soured over an Ontario ad campaign that blasted U.S. tariffs, delaying any public push to reboot the project.

Energy resources have featured prominently in multiple countries’ trade talks with the Trump administration, however, and the potential revival of Keystone XL is something that fits into Trump’s energy agenda.Trump issued a presidential permit for the project in 2019 and blasted former President Joe Biden for his decision two years later to pull the permit via executive order, ultimately dooming it.

Many of Trump’s trade deals involve “billions of dollars of new investment, billions of big projects — things that really look good at the announcement,” said Christopher Sands, director of Johns Hopkins University’s Center for Canadian Studies. “They’re often, as we’ve seen so far, a little thin on details, and the follow-through is critical.”

The Keystone XL project is a “big one” that could be used as “a cornerstone of a large deal,” Sands said, noting that Canada has also been pushing for greater energy exports. The U.S. is the world’s top oil producer, but it also relies on oil imports at a number of refineries that need more than just domestic grades of crude.

In 2023, TC Energy CEO François Poirier told POLITICO’s E&E News the Keystone XL project was “no longer an opportunity” for the company. South Bow, which spun off from TC Energy last year, now owns the Keystone pipeline system. Canada-based South Bow hasn’t announced any plans to reboot Keystone XL, though it is looking for ways to expand.

On the 2024 presidential campaign trail, Trump pledged that his administration would “allow the Keystone pipeline.” The Keystone XL project — which TC Energy abandoned in June 2021 — would have carried crude from Canada through Montana and South Dakota before connecting to the existing Keystone system in Nebraska.

Carney has downplayed the immediacy of a potential U.S. trade deal tied to steel, aluminum and energy. Gabriel Brunet, press secretary for Canada-U.S. trade minister Dominic LeBlanc, declined last week to comment on questions around reviving Keystone XL and trade.

“We cannot comment on current negotiations as both sides agree to not disclose publicly the content of their discussions,” Brunet said in a statement. Still, Carney has indicated he hopes to move past the latest dustup with the U.S.

The White House did not respond to a request for comment. But U.S. trade policies have been a moving target this year.

In late July, Trump signed an executive order increasing the tariff rate on Canadian products to 35 percent from 25 percent, with exceptions for goods covered by the earlier United States-Mexico-Canada Agreement. The U.S. has said some Canadian crude oil volumes could potentially be exempt from higher tariffs. Then last weekend, Trump said he was raising tariffs on Canada by 10 percent, according to a social media post.

In trade negotiations, there’s often an attempt to find mutual areas of interest, according to Kristin Vekasi, a political science professor at the University of Montana.

Carney sees the Trump administration as “really focused on energy, particularly fossil-fuel-based energy, and this is a clear issue linkage where we might be able to find common ground and get past some of the contentious trade negotiations,” Vekasi said.

Others said Carney is likely trying to get on Trump’s good side.

Paul Blackburn, an attorney for the Bold Alliance pipeline opposition group, said bringing up the Keystone XL project is a way to ingratiate himself with Trump with few consequences.

“Unfortunately, you live in a time where, you know, the president’s whims can make a huge difference in terms of what all kinds of people around the world say and do,” Blackburn said. “It’s a political card to play.”

More likely, Blackburn said, is the expansion of existing cross-border pipelines. That could include Enbridge’s Line 3/Line 93 system, which moves crude 1,174 miles from Edmonton, Alberta, in western Canada to Superior, Wisconsin.

Oil imports from Canada have not been rising very fast, he said, and expanding an existing line can be done much more cheaply.

“I would assume industry always looks for the cheapest solution,” Blackburn said. “There’s cheaper ways to do it in the long term.”

One option instead of a full-blown system expansion or a new greenfield pipeline could be a short, cross-border connection to an existing system.

Energy Transfer and South Bow floated the idea of a short pipeline connecting Canada to the Dakota Access oil pipeline, but there wasn’t enough interest to proceed with the so-called Big Sky project. Blackburn called that “a pretty good indication” that Keystone XL won’t be built.

Solomiya Lyaskovska, a South Bow spokesperson, said that South Bow and Energy Transfer have “closed the Big Sky open season based on customer feedback and are not pursuing this project at this time.”

In contrast, Enbridge officials say they found significant interest in expanding their Mainline oil pipeline system that connects Edmonton to Houston. For much of this year, demand has exceeded the system’s capacity, Enbridge CEO Greg Ebel said during an August earnings call.

The company is formally evaluating the first phase of what it calls its Mainline Optimization program, which could supply an additional 150,000 barrels of oil per day by 2027. Enbridge has said two-thirds of that would travel all the way from Edmonton to Houston-area refineries.

An “open season” for expansion of the Flanagan South pipeline — which is part of the Mainline system that runs from Chicago to Cushing, Oklahoma — had more than enough interest from potential customers, Ebel said.

The Alberta government in January unveiled a partnership with Enbridge to support its goal of increasing the province’s oil and gas pipeline capacity.

Company spokesperson Michael Barnes said in an emailed statement that the company is “optimistic” about the interest being shown by U.S. and Canadian officials about adding oil pipeline capacity along the countries’ shared border.

And the company is promoting the idea that expanding existing pipes is easier and cheaper than cutting new routes for brand-new pipelines.

“Our approach is less impactful on stakeholders, communities and the environment relative to large-scale greenfield projects,” Barnes said.

In Alberta, oil sands production made up nearly 85 percent of oil production in the province in August, according to an online dashboard. That was up 4.9 percent from the same month a year earlier . Oil sands operations are criticized frequently by environmental groups for their emissions compared to other forms of energy.

After Carney’s meeting with Trump on Oct. 7, Alberta Premier Danielle Smith told reporters this month that she was encouraged by headlines suggesting a deal was possible on energy, steel and aluminum.

“That’s been our position for a long time,” Smith said, according to a recording of remarks to reporters provided to POLITICO’s E&E News. “One of the first things I told the prime minister is that we shouldn’t be threatening to sell the Americans less — we should be promising to sell them more.”

Smith said she’s had meetings with Interior Secretary Doug Burgum — even before he joined Trump’s Cabinet — about building more pipeline “egress” into the United States. Burgum previously was a Republican governor of North Dakota.

“I’m glad that it became a source of conversation [on Oct. 7] with the two leaders because I do see that as a way to ultimately get to a broader and complete renegotiation of the Canada-U.S. free trade agreement that benefits everyone,” Smith told reporters.

Sam Blackett, a spokesperson for Smith, said in an email last week that there is interest in building new pipelines, citing discussions with “various pipeline companies” in Canada and the United States.

The revival of Keystone not only fits into the Trump playbook, but it also gives Carney a shot to address a trade imbalance and tariffs, said Michael Card, professor emeritus of political science at the University of South Dakota.

“It seems to me that a deal could be made with the Canadian government,” Card said, though he wondered how much work that would take. “I’m certain that there is at least a touch of this that is an anti-Joe Biden measure, but it doesn’t seem to be nearly as powerful as one of President Trump’s ‘drill, baby, drill’ lines from his campaign.”

In this instance, the U.S. would get some of Canada’s oil and “we don’t have to deplete our reserves,” Card added.

`In 2023, roughly 60 percent of U.S. crude oil imports originated in Canada, EIA said in an analysis last year.’

In a recent statement, South Bow emphasized that it’s “supportive of efforts to find solutions that increase the transportation of Canadian crude oil,” but the company didn’t directly mention Keystone XL.

“We will continue to explore opportunities that leverage our existing corridor with our customers and others in the industry,” said South Bow’s Lyaskovska.

At a recent event in Washington, CEO Mike Sommers of the American Petroleum Institute trade group said he was encouraged by Keystone XL popping up during Carney’s White House meeting.

“We’d love to get it moving again,” Sommers said. The project is “one of those marquee examples of a permitting process that was completely abused by the previous administration.”

Sommers said he’s been “very encouraged” by the Carney administration so far, “that they’ve really focused on developing their energy resources and really focused on making sure that we can continue to have those cross-border communications.”

Any company that would try to build an oil pipeline will have to take a long-term view that goes beyond Carney and Trump, said Ernie Goss, an economics professor at Creighton University.

“There are dangers of moving forward because the upfront costs are so great,” said Goss, who once authored a report on Keystone XL’s economic effects in Nebraska.

Goss said Carney is taking a different approach to energy than Justin Trudeau, who served as Canada’s prime minister for more than nine years and was in office as the Keystone XL project advanced.

Trudeau in “many ways was anti-energy expansion, and so I think [Carney] is at least indicating he may be supportive of the energy sector,” Goss said.

Earlier this year, Carney said he wants Canada to become an energy superpower. The Trump administration has consistently pushed for the United States to boost output of traditional energy sources like oil, natural gas and coal.

“There’s plenty of room for both the U.S. and Canada, working in collaboration” to achieve those goals, Goss said, adding that, “I think Trump would certainly be open to that,” despite some of his past rhetoric around annexing Canada.

Whether the Keystone XL project itself comes back through trade negotiations isn’t the real story, according to Landon Derentz, senior director at the Global Energy Center at the Atlantic Council, in an interview. Another cross-border pipeline is a possibility, he said.

“I see a demand signal from industry, and that’s ultimately who needs to believe in this to actually make it happen,” Derentz said.

What Trump can provide is certainty that a “federal-level cloud is going to dissipate, and it’ll be as efficient as possible, in terms of the environmental process for the transboundary component of the pipeline,” he added.

This is all political theater. This project is dead and it appeared Carney is just using this to get into the good graces of Trump. I think this pipeline could’ve brought benefits to both countries at the expense of the environment but it’s a shame it was cancelled. Crazy to see all that wasted pipe in the project.