Canada wants new pipelines in order to avoid Trump tariffs, but no one wants to build them.

Industry experts say that the Canadian government will have to play an important role in any project to construct new oil pipelines within Canada in order to overcome regulatory, political, and financial hurdles, as well as activist opposition.

As U.S. president Donald Trump threatens tariffs on Canadian oil imports, several Canadian politicians are calling for new pipelines that connect to coastal terminals in order to reduce dependence on the U.S.

Canada is the fourth largest oil exporter in the world. It exports 4 million barrels of crude oil per day to U.S. refining plants. This is approximately 90% of Canada's total oil exports.

The Liberal Energy Minister of Canada, the leader of the Conservative opposition and several provincial premiers all call for new pipelines that will transport crude oil to Canada's east, west and north coasts. No private company has recently expressed interest in undertaking such a multi-billion dollar project that could take up to a decade.

In the past decade, two major east-west projects were canceled. A Canadian company lost billions of dollars when the former U.S. president Joe Biden revoked the permits for the Keystone XL Pipeline project in the U.S. by 2021.

Trump said on Monday that he wants Keystone XL to be built, and he promised easy regulatory approvals. On the same day he announced that tariffs would be imposed on imports of U.S. goods from Canada and Mexico in March.

Tariffs could make Canadian crude less affordable for U.S. refining companies or reduce margins for Canadian producers. This would hurt demand for pipelines.

Dennis McConaghy is a former executive of TransCanada Corp. (now TC Energy). He said that building pipelines still poses too many risks to Canadian companies. He was involved in the ill-fated Keystone XL pipeline project. McConaghy stated in an interview that if he were on the board of a pipeline company, he would find it difficult to justify taking these risks.

Trans Mountain, a pipeline that runs from Alberta's oil-producing province to British Columbia's west coast, is Canada's current alternative to bypassing the U.S. The crude can be exported to foreign markets. Kinder Morgan completed the expansion of the line last year, seven years after it threatened to cancel the line due to strong environmental and Indigenous resistance.

Ottawa purchased the Trans Mountain system in 2018 for C$4.5billion (US $3.15billion) to complete the expansion. The cost of the project grew to C$34billion over four years due to budget overruns and construction delays.

Kent Fellows is an energy economist with the School of Public Policy at the University of Calgary.

Canada's energy industry has complained for years about the long permitting processes and regulatory uncertainty that slow down projects and scare away potential investors.

Martha Hall Findlay is a former Suncor Energy Inc. executive and Liberal member of parliament. She is now the director of the School of Public Policy at the University of Calgary.

In 2019, the act will require pipelines to be assessed for their social and cultural impacts, as well as their environmental impact. Only one project, the Cedar LNG Project, has completed the process successfully since then. It took three-and-a half years.

Hall Findlay stated that "working collaboratively with provinces will be critical -- and it will require some serious political leadership."

Enbridge, a Canadian energy infrastructure company, said in a recent conference that it would not consider any Canadian pipeline projects unless Ottawa reversed its policy on energy infrastructure.

He said that the country needed to reform its permitting system, eliminate the cap on emissions generated by oil and gas production and expand federal and provincial loan guarantees programs, allowing Indigenous Communities to invest in pipeline projects as equity investors.

Ebel stated that "we would need to see a real legislative change on the federal and province government level which specifically identifies the major infrastructure projects as being in national interest."

The companies must also have confidence in the ability of Canada's oil-sands sector to increase production and fill a new pipe. It took oil sands producers years to ramp-up production to reach record levels last year for the Trans Mountain expansion. S&P Global Commodity Insights published a report in 2013 that said Canadian oil sands production increased by 1.3m barrels per day over the past decade and could increase by another half-million bpd before 2030.

OIL SANDS GROWTH IS UNCERTAIN

Canada has pledged to achieve net-zero emissions of greenhouse gases by 2050. This goal is in direct opposition to any increase in oil production.

The Canada Energy Regulator's 2023 forecast suggested that oil sands production would decline by 30 percent by 2050 to achieve the net-zero goal of the country.

The S&P Global Report predicts a decline in production starting as early as 2035.

Hall Findlay said that for now, the threat of tariffs has shifted the balance away from climate change and towards building pipelines.

Alberta Premier Danielle Smith called on federal and provincial governments in Washington, D.C. to build oil and gas pipelines from the east, west, and north coasts of Canada.

Hall Findlay stated that if the federal and provincial governments supported a pipeline via a public-private partnerships or other forms of financial support, this might attract private capital.

Kevin Birn is chief Canadian oil market analyst at S&P Global. He believes that a change of government could boost confidence in Canada’s energy sector.

This month, opposition leader Pierre Poilievre said to reporters that a Conservative Government would "repeal laws against energy" and "build pipes."

Birn stated that even then, there was no guarantee of a long-term solution. Birn noted that former U.S. president Barack Obama's government rejected the Keystone XL Project. Trump revived the project during his first term, but Biden revoked it. Now Trump is encouraging its revival.

Birn, in an interview, said that "part of the problem" is the fact that infrastructure development now needs to be viewed in terms of political cycles.

If you want to build large infrastructures in North America, now you need to ask yourself, "Can I do this in one term? (Reporting and editing by Caroline Stauffer, David Gregorio and Amanda Stephenson)

(source: Reuters)