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Canadian Prime Minister Justin Trudeau turned down a proposed Enbridge Inc. pipeline to the West Coast that had become a flashpoint for protesters, while approving a less controversial expansion of an existing Kinder Morgan Inc. corridor that will offer landlocked oil sands producers access to tidewater.

Mr. Trudeau rejected Enbridge's yearslong attempt to build the Northern Gateway pipeline, which would have carried 525,000 barrels a day of crude oil along 730 miles to the port at Kitimat, British Columbia. The project was widely supported by Canadian oil sands producers, whose only significant export market is the U.S., but faced the kind of fierce opposition from aboriginal and environmental groups that has mounted across North America in recent years.

But the prime minister approved Kinder Morgan's proposed expansion of its Trans Mountain pipeline, which will nearly triple the capacity of an existing pipeline to 890,000 barrels of crude a day at a cost of 5.5 billion Canadian dollars ($4.1 billion).

The project would increase Canadian crude exports to Asia and reduce its dependence on the U.S. market where Canada's oil sells at a substantial discount to global prices. Kinder plans to increase ship loads of crude oil to foreign markets, including China, to 34 ships a month from five now.

The pipeline decisions point to a careful balancing act on energy by the Trudeau government, which has announced plans to levy a nationwide carbon tax that could make it a leader in the global battle against climate change and has pledged to phase out coal-fired power.

But Canada's economy remains dependent on natural resources, and while he repeated his commitment to fighting climate change in announcing the pipelines Tuesday, Mr. Trudeau said that making a transition away from a fossil fuel economy won't happen overnight. Instead, he said, Canada needs to work on that transition, while still seeking to tap new markets for its energy exports.

"There isn't a country in the world that would find billions of barrels of oil and just leave it in the ground while there is a market for it," Mr. Trudeau said at a press conference.

A cap on greenhouse gas emissions announced by the province of Alberta will place some limits on oil sands development, he said, and the pipelines won't change that.

The government approved Enbridge's proposed Line 3 project, which aims to replace segments of an existing pipeline connecting Hardisty, Alberta, to Wisconsin. The project has a price tag of C$7.5 billion.

A representative Kinder Morgan wasn't immediately available for comment.

Calgary, Alberta-based Enbridge said it would assess its options for the rejected Northern Gateway pipeline. Meanwhile, the Line 3 approval should allow it to start work in 2019, two years later than it had originally planned. "This approval today is an important milestone and brings us one step closer to making this important project a reality," a company spokesman said.

Canada's largest oil producer, Suncor Energy Inc., said it was pleased with the decision on pipeline expansion and disappointed by the decision to reject the third proposal. "Projects such as Northern Gateway, which allows for Canadian resources to access global markets, are a good thing not only for crude producers and marketers, but also the Canadian economy," the Calgary-based company said in a statement.

The approval of Trans Mountain, along with an earlier decision this fall to green light a natural gas plant in British Columbia, could go some way to allaying concerns in the energy patch that the Liberal government's climate policy will make it harder to get projects approved.

But the incoming U.S. administration of President-elect Donald Trump could complicate the Trudeau government's efforts to balance its environmental agenda with the building of pipelines.

Mr. Trudeau didn't directly answer a question at the press conference about whether he would talk to Mr. Trump about reviving the Keystone XL project. Mr. Trump has signaled support for the project, which Canada already has approved but which needs a U.S. presidential permit to move forward. Approval for Keystone XL would further ease the bottleneck on Alberta's landlocked oil sands, but could create a political problem for Mr. Trudeau in his quest to reduce carbon emissions.

Limited access to global markets for Canada's crude oil has hurt the industry for years, contributing to Canada's oil trading at a discount. Better market access would result in lower transportation costs and could be an incentive to boost oil sands output at a time when the oil sands' production growth is being crimped by high extraction costs and concerns about its higher greenhouse gas emissions.

Enbridge's proposed Gateway corridor had faced the fierce opposition, generating debate akin to the fight over Keystone XL in the U.S.

The TransMountain project wasn't expected to generate as much controversy because it follows an existing crude oil pipe that has been shipping oil from northern Alberta to the coast of British Columbia for decades.

But the proposal in 2013 to complete that "twinning" of the line to the coast of British Columbia set off a firestorm of protest, primarily in Vancouver, a birthplace of the modern environmental movement. The most contentious part is the last mile, which runs through a wealthy and leafy suburban area at the base of Burnaby Mountain.

Write to Paul Vieira at paul.vieira@wsj.com and Chester Dawson at chester.dawson@wsj.com

(END) Dow Jones Newswires

November 29, 2016 18:35 ET (23:35 GMT)

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