Politicians are pushing pipelines amid tariff threats. But companies are past that

Under threat of a trade war with the United States, where energy security is top of mind, political pressure to revive fossil fuel megaprojects is growing — even as major pipeline companies say they have no immediate plans to resurrect dead projects. 

In recent weeks, Energy and Natural Resources Minister Jonathan Wilkinson has suggested Canada must become more economically resilient. If elected, Conservative Party Leader Pierre Poilievre has promised more fossil fuel infrastructure — LNG plants, pipelines, refineries and more. And if they win, Liberal leadership hopefuls Chrystia Freeland and Frank Baylis have pledged more LNG plants and gas pipelines, respectively.

In an interview with Canada’s National Observer, Wilkinson said his recent comments that the federal and provincial governments should discuss a West-East oil pipeline were misunderstood. He does not want to be prescriptive about whether Canada should build more fossil fuel infrastructure, but believes the country needs a conversation on how to build an economy more resilient to shocks from south of the border, he said.

“I don't think as Canadians we're going to go back to the same kind of mentality we had prior to President Trump's threats of tariffs, where we were willing to essentially accept that the United States was always going to be friendly with us,” he said. “That is something that has certainly been shaken by President Trump's actions.”

Some areas to improve resilience include knocking down interprovincial trade barriers, deepening trade relations with other countries, and reducing transportation bottlenecks at ports and rails. But as a major consumer and producer of oil and gas, Canada’s vulnerability to fossil fuel imports and exports must be thoughtfully considered, he said. 

Many premiers are advocating for more fossil fuel infrastructure in a gambit to improve the country’s economic resilience. 

Nova Scotia Premier Tim Houston has called for the federal government to “approve” the Energy East, a pipeline stretching from Alberta to New Brunswick. It was cancelled in 2017 and currently has no proponent, therefore there is nothing for Ottawa to approve or reject. 

B.C. Premier David Eby is fast-tracking $20-billion worth of resource projects, including Cedar LNG and two natural gas pipeline projects in the northeastern corner of the province. And Alberta Premier Danielle Smith has called for a revival of both the Energy East and Northern Gateway pipelines, effectively boosting Alberta’s fossil fuel economy by adding new pipelines going east, west and north. 

Wilkinson said it is too soon to speculate on what the federal government’s role could be, given there hasn’t yet been robust public debate about whether this is a path the country wants to pursue. 

“With respect to fossil fuel infrastructure, we obviously would prefer that to be the private sector taking the lead,” he said. 

“No longer in oil pipeline business”

But here’s the rub: Canada’s pipeline majors don’t see a business case, and on earnings calls Friday told analysts that if Canada wants more pipelines, governments would have to make it worth their while. 

Enbridge would have to see “real change on numerous fronts” before it would seriously consider re-investing in a new project to ship energy from Alberta to Eastern Canada, or a pipeline to the west coast for export, Enbridge CEO Greg Ebel said.

“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,” he said. 

A favourable environment for future pipeline projects would include repeal of Bill C69, the Impact Assessment Act passed in 2019 that assesses how major infrastructure projects like pipelines affect the environment, he said. It could also include the federal government offering more loan guarantees to Indigenous communities to buy into new projects, he said. 

Generally, Ebel added that he’d want to see support for energy production, rather than policies that reduce it, citing the carbon price and forthcoming cap on oil and gas pollution as examples. 

It’s a similar case with TC Energy, the former proponent of Energy East. The company told Canada’s National Observer that since creating a new entity, South Bow, to handle its oil business last October, “we are no longer in the oil pipeline business” and are focused instead on increasing gas exports to countries in Asia using West Coast LNG export terminals. 

Speaking to analysts on Friday, TC Energy CEO Francois Poirier quashed expectations that additional fossil gas could flow through the national Canada Mainline pipeline.

The pipeline had “very little" spare capacity given that demand has grown to five billion cubic feet per day from three billion cubic feet in 2023, he said, adding a new West to East pipeline for gas would have to “compete for capital” with power transmission infrastructure to be built. 

South Bow said in an emailed statement it’s not actively looking at new oil pipelines, but is focused on using “our existing infrastructure and corridor to enhance energy security by increasing Canadian crude oil supplies to meet growing U.S. demand.”

Wilkinson emphasized that the International Energy Agency (IEA) expects global oil demand to peak within the next few years, and so for him, the debate about whether the country needs more fossil fuel infrastructure is not about increasing exports, it’s about maintaining existing supply. 

More pipelines “insane”

Aaron Cosbey, an economist and senior associate with the International Institute for Sustainable Development, said it would be “insane” to counter the Trump threat by building more pipelines. 

It’s economically foolish, environmentally harmful, and building pipeline megaprojects will take many years, stretching past Trump’s term in office, he said. For those reasons, governments should focus on diplomacy to avoid tariffs, and in the event they come, work to have them removed.

“Last among all the options is get the Canadian taxpayer to foot the bill for a hugely expensive and probably impossible piece of infrastructure that would take 10 years to build if it could ever be completed,” he said. 

“The risk is you get a government that is willing to do it anyway, for more ideological or political reasons, and even worse, they bring on board Indigenous investors to try to cover their economic foolishness and then, leave them holding the bag decades down the road,” Cosbey said, referring to the risk of stranded assets. 

Focusing on the feasibility of specific projects misses the forest for the trees, Cosbey said. Whenever a crisis strikes, the oil and gas industry uses it as justification to increase production regardless of whether it makes sense. 

“Even if the threatened 10 per cent tariff on Canadian energy is imposed by Trump, oil and gas will continue to flow, he said. 

“The economic impact of a 10 per cent tariff is dwarfed by just the cyclical market price swings,” he said. “It's a blip, it's noise in the signal, we're not talking about the death of Canadian gas exports.”

Meanwhile, energy companies are searching for growth opportunities outside the pipeline business. 

TC Energy is exploring deals to feed power-hungry data centres now being built across North America to provide the computing power needed for artificial intelligence.

Chief Operating Officer Tina Faraca told analysts the company is currently considering 10 gigawatts of demand requests and has engaged with more than 20 data centre developers across North America on deals potentially worth $2 billion.

She said TC Energy is moving ahead with its ANR Heartland gas pipeline extension project in the U.S. state of Wisconsin to meet growing demand for gas-fired power generation for data centres being developed in the region.  

The company also had power plant interconnection projects totalling 4.7 gigawatts to meet growing electricity demand, including from data centres.

“We are in ongoing discussions with several customers to deliver power for new data centre projects where demand is being upsized,” said Faraca.