Canada wants new oil pipelines to avoid Trump tariffs; nobody wants to build them #CanadaFinance

Canada’s energy sector has long complained of lengthy permitting times and regulatory uncertainty slowing projects and scaring potential investors.

Companies would be unwilling to consider a new pipeline proposal unless the federal government quickly amends the Impact Assessment Act, said Martha Hall Findlay, a former Liberal Member of Parliament and Suncor Energy Inc. executive, now director of the University of Calgary’s School of Public Policy.

The act, effective in 2019, required social and cultural assessments of pipelines as well as environmental impacts. Since then, only one project — the Cedar LNG project — has successfully completed the process, and that took 3-1/2 years.

“Working collaboratively with the provinces will be key — and will take some serious political leadership,” Hall Findlay said.

Canadian pipeline operator Enbridge would not consider a Canadian pipeline project absent a reversal in Ottawa’s policy toward energy infrastructure, CEO Greg Ebel said on a recent conference call.

He said the country needs permitting reforms, elimination of the proposed cap on emissions from oil and gas production, and expansion of federal and provincial loan guarantee programs allowing Indigenous communities to become equity investors in pipeline projects.

“We would need to see real legislative change at the federal and provincial government level that specifically identifies major infrastructure projects … as being in the national interest,” Ebel said.

Companies also need confidence that Canada’s oil sands industry could increase output to fill a new pipeline. Oil sands producers took years to ramp up to hit record production last year to fill the Trans Mountain expansion.

A report last year by S&P Global Commodity Insights said Canadian oil sands output rose by 1.3 million barrels per day in the last decade, and could rise an additional half-million bpd by 2030.

OIL SANDS GROWTH UNCERTAIN

Canada has committed to reach net-zero greenhouse gas emissions by 2050, a goal at odds with any dramatic increase in oil output.

A 2023 forecast from the Canada Energy Regulator suggested that to reach the country’s net-zero target, oil sands output would likely decline by 30% by 2050.

The S&P Global report predicts declines in production beginning as early as 2035.

For now, threatened tariffs have tilted the scales away from climate and toward building pipelines, said Hall Findlay.

“I do think in Canada, this has caused some reflection on whether, perhaps in some areas, we are too dependent on infrastructure in particular that flows only through the United States,” Energy Minister Jonathan Wilkinson said this month at an event in Washington, D.C.

Alberta Premier Danielle Smith has called for federal and provincial governments to build multiple oil and gas pipelines to the “east, west and north coasts of Canada.”

Hall Findlay said if federal and provincial governments were to support a pipeline through a public-private partnership or some form of financial backstop, that might attract private capital.

A change in government could also boost confidence in Canada’s energy sector, said Kevin Birn, chief Canadian oil market analyst for S&P Global.

Opposition leader Pierre Poilievre told reporters this month that a Conservative government would “repeal anti-energy laws” and “build pipelines.”

Even then, there would be no long-term guarantee, Birn said. He noted that the Keystone XL project was rejected by former U.S. President Barack Obama’s administration. It was revived by Trump during his first term before being revoked by Biden and now is being encouraged again by Trump.

“Part of the problem is that the development of infrastructure now has to be thought of in terms of political cycles,” Birn said in an interview.

“If you’re looking to build large infrastructure in North America, you now need to ask, ‘can I get this done in one term of office?'”

(Reporting by Amanda Stephenson; Editing by Caroline Stauffer and David Gregorio)