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The option is being discussed and could be prepared as a contingency, but a decision hasn’t been made, according to Ottawa sources.

Former Canadian Prime Minister Brian Mulroney and his former chief of staff, Derek Burney, who played central roles in negotiations that led to the Canada-U.S. Free Trade Agreement and subsequently NAFTA, suggested in separate speeches in recent days that Obama’s persistent delays are offside the spirit of the agreement.

“A negative verdict by the U.S. government would contravene a major tenet of NAFTA under which the U.S. was guaranteed unfettered supply in exchange for unfettered access by Canadian exporters to its market,” Mr. Mulroney, now a senior partner at Norton Rose Fulbright LLP in Montreal, said April 9.

In a separate speech April 23, Mr. Burney said: “A negative verdict, based on dubious environmental concerns, would actually run counter to a central pillar of our NAFTA trade agreement in which we agreed to U.S. demands for open or unfettered access to energy supply from Canada including times of emergency. The quid pro quo of that bargain was that Canada would, in turn, have unfettered access to ship energy to the U.S.”

In an interview Tuesday, Mr. Burney, a strategic advisor at Norton Rose in Ottawa and a director of TransCanada but says his views are his own, said Canada would have a strong case if the pipeline were outright rejected.

So far, though, Obama’s delay strategy complicates a NAFTA challenge because the U.S. administration could argue that it’s following its processes, even though they have been used to dodge making a decision, he said.