With rising tensions over U.S. tariffs on Canadian oil, the question of building new pipelines has re-emerged as a major economic and political issue. While Canada remains one of the world’s top oil exporters, its heavy reliance on the U.S. market has raised concerns about energy security. However, regulatory hurdles, environmental opposition, and financial risks have made private investment in new pipelines increasingly difficult.
U.S. Tariffs and the Push for New Pipelines
Canada exports nearly 90% of its oil to the U.S., making it the country’s most valuable export. However, former U.S. President Donald Trump has proposed imposing tariffs on Canadian oil imports, a move that could hurt Canadian producers and make crude more expensive for U.S. refiners.
In response, Canadian politicians across party lines have renewed calls for pipelines that would transport oil to coastal export terminals, reducing dependency on the U.S. market. While proposals have been made for pipelines to the west, east, and north coasts, no private company has stepped forward to take on these massive projects.
Regulatory and Financial Challenges
Despite political support for new pipelines, industry experts argue that the regulatory environment and financial risks make such projects unattractive to investors. Two major east-west pipeline projects were scrapped in the past decade, and the Keystone XL pipeline project to the U.S. was canceled after former U.S. President Joe Biden revoked its permits in 2021.
Even Canada’s Trans Mountain pipeline expansion, which connects Alberta’s oil sands to British Columbia’s west coast, faced significant obstacles. Originally a private project by Kinder Morgan, the company threatened to abandon it due to opposition from environmental and Indigenous groups. In 2018, the Canadian government stepped in, purchasing the pipeline for C$4.5 billion. Since then, delays and cost overruns have pushed the project’s final price tag to C$34 billion—a warning sign for private investors.
Industry Concerns and Government Policies
Pipeline companies have voiced frustration over Canada’s lengthy permitting process and unclear regulations. The Impact Assessment Act, introduced in 2019, requires extensive environmental, social, and cultural assessments for new projects. So far, only one major project—the Cedar LNG pipeline—has successfully navigated the process, taking 3.5 years to gain approval.
Executives from Canada’s top energy companies argue that without major policy changes, no private investor would consider a new pipeline project. Industry leaders have called for:
- Regulatory reforms to speed up approvals
- Removal of emissions caps on oil and gas production
- Expansion of loan guarantee programs for Indigenous equity investment in pipeline projects
The Oil Production vs. Climate Policy Conflict
A key issue complicating the pipeline debate is Canada’s commitment to achieving net-zero emissions by 2050. While oil sands production has increased in recent years—rising by 1.3 million barrels per day over the last decade—Canada’s climate policies aim to reduce output by 30% by 2050. This contradiction makes it unclear whether there will be enough future production to justify a new pipeline.
A Shift in Priorities?
The threat of U.S. tariffs has pushed economic concerns to the forefront, shifting the conversation away from environmental issues and towards energy security. However, without major regulatory changes, private companies are unlikely to invest in new pipelines. The Canadian government may once again have to step in if it wants to see new infrastructure built.
For now, Canada’s energy future hangs in the balance, caught between the need for stable oil exports and its long-term environmental commitments. The coming months will determine whether the government prioritizes climate goals or economic security in the face of global market uncertainties.
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