KEY POINTS
- Canada seeks new pipelines to reduce dependence on U.S. oil exports.
- Private investment is unlikely due to regulatory hurdles and financial risks.
- The Trans Mountain expansion project reveals multiple difficulties which occur during major pipeline development.
The potential U.S. tariff on Canadian crude has led Canadian political leaders to pursue the construction of pipeline routes to coastal facilities, as a means of reducing national dependence on U.S. distribution.
As the fourth-largest oil exporter worldwide Canada directs approximately 90 percent of its crude through U.S. refineries which exposes its energy sector to immediate market risks from Washington.
Despite political calls for pipeline expansion, private companies remain hesitant due to regulatory hurdles, environmental concerns, and high costs.
Two major pipeline projects, designed to connect oil-rich Alberta to eastern and western export terminals, have been canceled in the past decade.
Federal authorities became responsible for finishing projects such as the Trans Mountain pipeline expansion because of its extensive development issues and cost overruns.
Industry hesitant as past projects face massive setbacks
Experts state that new pipeline development will not receive private funding except through government actions.
Some attribute the Keystone XL failure to former President Barack Obama who canceled it first and President Joe Biden who revoked it again after Trump supported its recovery.
According to Reuters, Trump has indicated he would support reviving Keystone XL, but his proposed tariffs on Canadian oil could offset any benefits.
These regulations would increase the costs paid by U.S. refiners for Canadian crude, which would reduce oil producer profits alongside new infrastructure incentives.
The Trans Mountain expansion opened up a new pipeline system for Canadian crude export to international ports last year.
The escalated cost of its development took the project from C$4.5 billion to C$34 billion, which highlighted doubts about the monetary safety of pipeline construction.
Regulatory challenges and future uncertainty
Business leaders across Canada maintain that existing regulatory systems act as an obstacle to implementing substantial energy projects.
The Impact Assessment Act functions as a major hindrance by requiring environmental and social and cultural assessments.
Martha Hall Findlay highlights the need for permitting process adjustments because they create essential conditions for private sector investment.
“Without regulatory reforms and government backing, pipeline projects will remain too risky for private companies,” she said.
Some analysts suggest that Canada needs to work with provincial governments to secure financing and incentivize Indigenous investment in energy infrastructure.
Infrastructure projects face challenges from political term fluctuations because new leaders often disrupt established plans particularly through the experience of Keystone XL.
The Canadian government supports a goal of net-zero emissions by 2050, while maintaining the importance of energy sector operations to the economy.
The current decision-making process requires government officials to establish harmony between economic progress and their climate-related responsibility.
