Enbridge's pipeline would transport 525,000 barrels of oil a day from Alberta's oil sands to the Pacific to deliver oil to Asia, mainly energy-hungry China. About 220 large oil tankers a year would visit the Pacific coast town of Kitimat and opponents fear pipeline leaks and a potential tanker spill on the pristine Pacific coast.
Conservative Prime Minister Stephen Harper has said Canada's national interest makes the pipelines essential.
He was "profoundly disappointed" that U.S. President Barack Obama delayed a decision on the Texas Keystone XL option, and spoke of the need to diversify Canada's oil industry. Ninety-seven percent of Canadian oil exports now go to the U.S.
Meanwhile, China's growing economy is hungry for Canadian oil. Chinese state-owned companies have invested more than $40 billion in Canadian energy in the past few years.
"They are watching this very, very closely," said Wenran Jiang, an energy expert and special adviser to Alberta's Department of Energy.
"They told us as recently as a couple of weeks ago that further investment will depend on whether there will be at least opportunities to ship some of this crude to China. Currently all of their investment and production goes into the U.S. They are currently living with that," he said.
Jiang said Canada ships all its oil to the U.S. so it's vital that Canada diversify its energy exports. Canadian oil is sold at a discount compared to the prices elsewhere.
The Harper government declined requests for comment on Tuesday, only issuing a statement.
Canadian Natural Resources Minister Greg Rickford said in a statement that Enbridge must meet the 209 conditions Canada's regulator imposed on the pipeline. The company has previously said it would.
Enbridge President and Chief Executive Officer Al Monaco welcomed the decision but noted "we still have some more work to do."
The fear of oil spills is especially acute in the pristine corner of northwest British Columbia, with its snowcapped mountains and deep ocean inlets. Canadians living there still remember the Exxon Valdez oil spill of 1989. British Columbia Premier Christy Clark set out five conditions for British Columbia's support, and on Tuesday she repeated her contention that those conditions have yet to be met. Harper will have win support in British Columbia where he'll want to preserve the 21 seats he has there. The British Columbia government can deny permits. Aboriginals could also get in the way of construction trucks.
Environmentalists and Canada's native tribes could delay approval all the way to the Supreme Court, and the tribes still hold title to some of the land the pipeline would cross. That means the government will have to move with extreme sensitivity.
Union of British Columbia Indian Chiefs Grand Chief Stewart Phillip said aboriginal people will blockade any attempt by Enbridge to start work.
A statement issued by a broad coalition of British Columbia aboriginal groups vowed that they would "defend our territories whatever the costs may be."
Environmental groups said Ottawa's approval is no guarantee that the controversial project will be built.
"We are deeply disappointed, but you need to look no further than the spate of legal challenges filed against this project to know that Cabinet's approval is by no means a guarantee that this project will ever be built," said Barry Robinson, a lawyer for Ecojustice.