The Canadian government is under pressure to develop new oil pipelines to reduce reliance on the U.S. market, especially with President Donald Trump threatening tariffs on Canadian oil exports. However, significant regulatory, financial, and political hurdles, along with activist opposition, pose challenges for any new pipeline projects.
Key Highlights:
Urgency for New Pipelines:
Canadian politicians, including Liberal Energy Minister and Conservative opposition leader, are advocating for new pipelines to coastal export terminals. Currently, about 90% of Canadian oil exports (approximately 4 million barrels per day) go to U.S. refiners.
Lack of Private Interest:
Despite calls for new pipelines, no private company has shown interest in undertaking such multibillion-dollar projects, which could take a decade to complete. Previous projects, including two major east-west pipelines, have been canceled in the last decade.
Impact of Tariffs:
Trump’s recent comments included a desire to build the Keystone XL pipeline, but he also announced that tariffs on U.S. imports from Canada and Mexico would take effect in March. These tariffs could make Canadian crude more expensive for U.S. refiners, thereby reducing demand.
Current Pipeline Options:
The Trans Mountain pipeline system, which runs from Alberta to British Columbia, is currently the only option for bypassing the U.S. This system was expanded after heavy opposition, and its total cost ballooned to C$34 billion over four years.
Regulatory Challenges:
Canada’s energy sector has long complained about lengthy permitting times and regulatory uncertainty. The Impact Assessment Act, effective since 2019, has made it difficult for new projects to proceed, with only one project successfully completing the process in over three years.
Need for Government Action:
Industry leaders, including Enbridge CEO Greg Ebel, have stated that significant legislative changes are needed to encourage new pipeline projects. This includes reforms to permitting processes and financial support for Indigenous communities to invest in these projects.
Environmental Goals vs. Oil Production:
Canada aims to achieve net-zero greenhouse gas emissions by 2050, which conflicts with plans for increased oil output. The Canada Energy Regulator forecasts a potential decline in oil sands output by 30% by 2050 to meet this goal.
Political Climate:
The political landscape plays a crucial role in pipeline development. Opposition leader Pierre Poilievre has promised to repeal “anti-energy laws” and support pipeline construction if elected. However, the uncertainty surrounding political cycles complicates long-term planning for infrastructure projects.