TORONTO (AP) -- Pipeline company TransCanada said Thursday it will proceed with a $12 billion plan to pipe 1.1 million barrels of oil per day from Western Canada to the country's Atlantic coast — moving enough oil to replace all imports in Eastern Canada and still have enough left for exporting crude overseas.
The announcement of the Energy East pipeline comes as TransCanada faces stiff environmental opposition to its proposed Keystone XL pipeline from Alberta to refineries in Texas. President Barack Obama's initial rejection of Keystone XL went over badly in Canada, which relies on the U.S. for 97 percent of its energy exports.
The pipeline, the most expensive in TransCanada's history, would run from Hardisty, Alberta, to Saint John, New Brunswick. It will end where a new deep-water marine terminal would be built by TransCanada and Irving Oil to handle the world's largest crude-carrying vessels.
TransCanada CEO Russ Girling said Canadian producers want access to international markets but said the primary purpose of the Energy East pipeline will be to supply refineries in Eastern Canada which imports 750,000 barrels of foreign oil a day. The Canadian government said 83 percent of crude oil deliveries to Atlantic Canadian refineries and 92 percent of oil deliveries to refineries in Quebec in 2012 were imported, primarily from the Middle East, Nigeria and Angola.
Girling called it an historic opportunity to connect the oil resources of Canada's west to eastern consumers and noted that Canadian oil could be shipped to the U.S. Eastern seaboard, Asia, including China and India, and Europe.
"It's a bit farther to get to Asia from the East Coast than the West Coast but it can be competitive in certain circumstances," Girling said. "This provides them with the option and opportunity to do that."
Canada has stepped up efforts to diversify its energy exports, but a proposal by Enbridge to build a pipeline from Alberta to Canada's Pacific Coast that would allow for exports to Asia faces stiff environmental and aboriginal opposition.
TransCanada's Energy East pipeline has broad political support in Canada, however, and is far more likely to be approved than Enbridge's proposed pipeline to Canada's Pacific Coast, where the fear of oil spills is especially acute in British Columbia, with its snowcapped mountains and deep-ocean inlets.
All three pipelines require approval. The $7 billion Keystone XL pipeline has become a contentious issue in the United States. Project supporters, including unions and lawmakers from both parties, tout the jobs it would create and demand its approval, while environmentalists urge the president to reject it, saying it would carry dirty, carbon-intensive oil.
The State Department expects to issue a final report on Keystone XL later this year on whether the project should move forward. The department has authority over the pipeline because it crosses a U.S. border.
New pipelines are critical to Canada, which needs infrastructure in place to export its growing oil sands production from northern Alberta. The region has the world's third largest oil reserves, with 170 billion barrels of proven reserves. Daily production of 1.5 million barrels from the oil sands is expected to increase to 3.7 million in 2025. Only Saudi Arabia and Venezuela have more reserves.
A lack of pipelines and a bottleneck of oil in the U.S. Midwest reduced the price of Canadian crude in recent years and led to a boom in transporting oil by train. A fiery train derailment that killed 47 in Quebec last month highlighted the danger of moving oil by rail.
That train was headed to the Irving Oil refinery in Saint John, New Brunswick. Bank of Nova Scotia senior economist Patricia Mohr said a pipeline would diminish the need to ship oil by train and said it would be a safer and less costly option — in some cases it costing half as much to transport via pipeline than train.
Mohr said the pipeline should eliminate the need for any imported crude and allow for some export opportunities. She said initial Asian demand would come from India.
"It's a very interesting new export opportunity because it turns out to be quite economic to transport bitumen from Alberta and get it all the way to refineries on the west coast of India," Mohr said. "They talked to refineries both in India and China and I do know there is a lot of interest in India."
Shares of TransCanada closed up 1.4 percent, or 66 cents to $46.38, on the New York Stock Exchange.