The U.S. tariff threat was a wake-up call for Canadian policymakers that the federal and provincial governments may have too hastily scrapped over the past decade Alberta-to-coast pipeline projects that could have diversified Canada’s oil and gas exports.
Everyone in Canada agrees that energy exports are the biggest leverage the country has in a trade war with its neighbor to the south.
Canada supplies around 60% of all U.S. oil imports. The oil province of Alberta alone supplies 56% of all U.S. oil imports—twice as much as Mexico, Saudi Arabia, and Iraq combined, Alberta Premier Danielle Smith says.
But the heavy dependence on the United States for Canadian oil exports has rekindled talk about resuscitating previously abandoned Alberta-to-coast pipeline projects that would give Canada access to more markets.
Over the past decade, only one pipeline made it through all the protests. The Trans Mountain Expansion Project, after it was abandoned by Kinder Morgan and purchased by the federal government, tripled the capacity of the original pipeline to 890,000 bpd from 300,000 bpd to carry crude from Alberta’s oil sands to British Columbia.
For other projects, it’s all just talk for now. No company is officially proposing reviving any scrapped pipeline plan, but politicians outside of Alberta have started to realize that things could change as the rules of the game have changed.
There has been talk of the scrapped projects Energy East, which would have delivered oil from Alberta east to Ontario and Quebec shores, and of Northern Gateway, which would have run from north of Edmonton in Alberta to Kitimat on British Columbia’s North Coast.
These two projects were scrapped between 2016 and 2017. Back then, Canada’s federal government led by Justin Trudeau was rejecting oil and gas projects on environmental grounds. In addition, green activists’ opposition in provinces other than Alberta was killing off many attempts of Alberta-based oil producers and pipeline operators to have pipelines built to Canada’s shores—and not only those going straight south to the biggest refining centers in the U.S.
With tariffs and trade war back on the table for Canada’s economy, politicians and pipeline industry executives say that the narrative has shifted.
Earlier this month, Canada’s Industry Minister, François-Philippe Champagne, said that the country may need an Alberta-East Coast pipeline.
“Things have changed … you cannot be in the past,” Champagne told CTV in an interview on February 9.
“We cannot be dependent,” the minister said.
Canadians have increased their support for Alberta-to-coast pipelines. Public support to revive Energy East has jumped to 65% from 58% since 2019, with support in Quebec growing from 33% to 47%, a new poll from the non-profit Angus Reid Institute showed last week.
Northern Gateway (Alberta to B.C.) generates the support of a slight majority of Canadians, with one-quarter opposing it. Notably, Northern Gateway generates 55% support in British Columbia, with 32% opposition, the polling showed.
Among all Canadians, the majority, 63%, believe the economy would greatly benefit from the expansion of oil and gas pipeline capacity, according to the poll.
Compared to 18 months ago, Canadians are now also nearly twice as likely to emphasize economic growth as a key factor in deciding energy policy, with a corresponding decline in the importance of environmental concerns, a separate Angus Reid Institute poll found last week.
Canadian federal Natural Resources Minister Jonathan Wilkinson said earlier this month that Canada should consider a West-East pipeline as U.S. President Donald Trump’s tariffs threats exposed a “vulnerability” in Canada’s energy infrastructure.
“There are some vulnerabilities that we did not actually believe existed. We should be reflecting on the vulnerabilities and deciding whether there are some things we should do,” Wilkinson said.
Pipeline giants, however, are less enthusiastic—they had to cancel projects due to too much regulatory burden, opposition at federal and provincial level, and environmental campaigns against pipelines.
Enbridge, which had its Northern Gateway proposed pipeline scrapped by the federal government in the 2010s, says that Canada needs real change in many aspects of its regulatory and approval processes.
“For us to be willing to seriously consider reinvesting in a project like that, whether it’s east or west or just west, we need to see real change on numerous fronts,” Enbridge’s president and CEO Greg Ebel said on the Q4 earnings call this month.
“We would need to see real legislative change at the federal and provincial government level that specifically identifies major infrastructure projects like Northern Gateway as being in the national interest and therefore legally required,” Ebel said.
Permitting changes and federal and provincial support for more energy would also help the potential revival of pipeline plans, the executive added, noting that there have been positive comments from Canada’s policymakers since the U.S. tariff threats.
“They’re saying the right things, but it’s going to take real actions, laws, regulation to attract the capital in our view,” Ebel concluded.
Source: By Tsvetana Paraskova from Oilprice.com