(Adds Natural Resources minister's comments, industry body, environmental groups, fund manager, changes media slug from CANADA-ENERGY/TRANSCANADA)
CALGARY, Alberta, Oct 5 (Reuters) - TransCanada Corp abandoned construction of its Energy East pipeline on Thursday, taking a C$1 billion ($798 million) non-cash charge and handing environmental groups a major victory in efforts to hamper Canadian oil development.
The decision to scrap the C$15 billion ($12 billion) project came nearly a month after the company asked regulators to suspend the application process in the face of tough official scrutiny. The move is a blow to Canada's oil sands industry and the ailing economy of the New Brunswick province where the pipeline would have terminated.
It heads off a broader political row over the project for Prime Minister Justin Trudeau's Liberal government, which was trying to balance diversifying Canada's oil export markets with its commitment to tackling climate change.
Canada's National Energy Board (NEB) granted TransCanada a 30-day suspension on Sept. 8, after the company said it needed to review the impact of new assessment criteria that would consider the C$15.7 billion ($12.58 billion) project's indirect greenhouse gas contributions.
"After careful review of changed circumstances, we will be informing the National Energy Board that we will no longer be proceeding with our Energy East and Eastern Mainline applications," TransCanada said on Thursday.
The company said it would take a C$1 billion after-tax non-cash charge in its fourth quarter.
Energy East would have taken 1.1 million barrels of crude from Canada's oil heartland of Alberta across the country to east coast ports and helped boost prices for Canadian producers, whose landlocked product trades at a discount to the West Texas Intermediate benchmark.
When it was announced in 2013 it was hailed by the oil industry and government as a nation-building project that would unlock Canadian energy exports after years of delay on other pipeline projects including Keystone XL and Enbridge Inc's Northern Gateway.
The pipeline's importance has somewhat diminished for TransCanada since the United States this year approved Keystone XL pipeline, which would run from Alberta to U.S. refineries, but supporters said they were "extremely disappointed" by the decision.
"The loss of this major project means the loss of thousands of jobs and billions of dollars for Canada, and will significantly impact our country's ability to access markets for our oil and gas," the Canadian Energy Pipeline Association (CEPA) said in a statement.
But environmental groups questioned the need for a pipeline they said was at odds with Canada's commitment to tackle climate change.
"This project was so wrong and so dangerous, its hard to believe it was seriously contemplated," Gretchen Fitzgerald, national program director of environmental organization the Sierra Club, said.
"The emissions associated with new pipelines are inconsistent with our climate imperative and the threat to waterways, wildlife, and lands was enormous."
Environmental Defence, one of the main groups campaigning against the project, said new pipelines could not be justified at a time of declining investment in the tar sands, pipeline overcapacity, and a transition to renewable energy.
Energy East was up for its second NEB review, after the first stalled last year amid protests by environmentalists and after revelations that regulatory panel members met privately with a TransCanada consultant.
Canada's Natural Resources Minister Jim Carr said the cancellation was a business decision by TransCanada given oil market conditions had changed since the pipeline was first proposed. He added that the government's job was to ensure people had confidence in the regulatory system.
The decision had been substantially priced in to the company's shares and TransCanada's stock was last up 0.4 percent on the Toronto Stock Exchange at C$61.15. They had fallen nearly 4 percent since Aug. 23 - when the NEB expanded the scope of its assessment. The broader Toronto share index was up 0.3 percent.
"Obviously it's not great that they've canceled the project, but overall I think it was anticipated," said Manash Goswami, a Portfolio Manager with First Asset Investment Management Inc.
($1 = 1.2531 Canadian dollars) ($1 = 1.2519 Canadian dollars) (Additional reporting by David Ljunggren in Ottawa, Solarina Ho in Toronto and Yashaswini Swamynathan in Bengaluru; Editing by Shounak Dasgupta and Susan Thomas)