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The revival of the Keystone XL pipeline is boosting Canadian oil patch hopes for a friendly relationship with the Trump administration.

Alex Panetta/THE CANADIAN PRESS

U.S. President Donald Trump's decision to revive TransCanada Corp.'s Keystone XL pipeline proposal within days of his inauguration is boosting Canadian oil patch hopes for a friendly relationship with the new administration – and room to grow exports to U.S. refineries.

In a series of moves that White House press secretary Sean Spicer described as an "energy revolution," Mr. Trump invited TransCanada to submit a new application for the $8-billion (U.S.) Keystone XL project that was rejected by the Obama administration in 2015, as well as giving his blessing to the Dakota Access pipeline that has attracted vehement opposition in North Dakota.

He also signed presidential directives requiring that pipeline projects use U.S. pipe and that environmental reviews be expedited.

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Read more: Trump signs Keystone order, wants terms renegotiated

Read more: Why do we need Keystone XL anyway?

Economic insight: With Keystone in play, oil may be spared from any U.S.-Canada trade spat

TransCanada said late Tuesday it would reapply to the U.S. State Department for project approval. For the battered Canadian oil industry, the move provides a significant boost to Canada's energy sector – which, like other major exporters to the United States, remains jittery about the effects of a protectionist Trump administration.

The Keystone XL project will create a new, more direct transport route for hundreds of thousands of barrels a day of heavy oil production from the Canadian oil sands to eventually reach the U.S. Gulf Coast – the largest refining region in the United States with facilities calibrated to process heavy oil of the type Canada produces.

Genscape oil analyst Carl Evans said that, even with crude prices below $50 (U.S.) a barrel over the past two years, heavy bitumen production in Canada's oil sands region has continued to grow.

Keystone XL would help Canadian producers spend less on transport, and could potentially help them realize better prices for their crude products, Mr. Evans said.

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"At the most basic level, this pipeline increases prices realized by Canadian producers, allows more crude to flow by pipeline out of Western Canada, and consequently lowers the amount of crude by rail which is a much less cost-effective and more polluting method of transport," he said.

RBC analyst Michael Tran said that, even with Canadian government approvals of Kinder Morgan Inc.'s Trans Mountain expansion and Enbridge Inc.'s Line 3 replacement project, no new major pipeline capacity is likely to come on stream until at least 2019 or 2020.

"As of right now, most of the pipelines moving barrels from Canada to the U.S. are full," Mr. Tran said in an interview. "When you look at the amount of growth for Canadian oil sands this year and next year, we're going to run into trouble – I mean we're certainly going to have to tap into rail."

Canada's largest pipeline companies saw an immediate benefit from Mr. Trump's directives Tuesday, with both TransCanada and Enbridge Inc. making gains on the Toronto Stock Exchange. Enbridge has agreed to purchase a stake in the Dakota Access pipeline, subject to conditions.

It remains to be seen what specific conditions the new U.S. President will place on his green-lighting of the Keystone project. TransCanada said little Tuesday except for noting the "best-in-class technology and construction techniques" of the project, and arguing it will generate construction jobs, higher property taxes, and boost U.S. GDP.

But U.S. environmentalists and landowners have drawn attention to the risks of the project and its contribution to increasing global greenhouse gas emissions; in late 2015, then- president Barack Obama rejected the project.

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While environmental protests against both projects will continue, the head of the Canadian Association of Petroleum Producers said the main barrier to Keystone XL has always been the president's desk. Speaking in Calgary, Tim McMillan observed that Mr. Trump had said he would approve Keystone XL throughout the U.S. presidential campaign, but the fact he has moved so quickly after taking office speaks volumes.

Canadian producers battered by the dramatic oil price drop that began in 2014 will likely be keen to take up space on the new pipeline, if it goes ahead, he said.

"The President has said he wants to see this move forward and that is really, really good," Mr. McMillan said.

He said in a period of low-priced crude – and huge new supplies of oil coming from shale production in the Bakken and Permian regions of the U.S. – the efficient transport of Canada's heavy oil is more important than ever.

There are still a number of unknowns about U.S. trade policy, and the looming concern of a sweeping border tax, under a Trump administration and a Republican-controlled Senate and House of Representatives.

Joseph McMonigle, an energy policy analyst at Hedgeye Potomac Research in Washington, D.C., said uncertainties about Trump administration trade policies remain for the time being. However, the good news for Canadian energy industry is that Mr. Trump's focus has been on foreign manufacturing – not oil and natural gas.

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He added there are many U.S. companies invested in the Canadian oil and gas sector, and hopefully Tuesday's announcement on Keystone XL "gets the relationship off on a good start."

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