Alberta
Why U.S. tariffs on Canadian energy would cause damage on both sides of the border
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Marathon Petroleum’s Detroit refinery in the U.S. Midwest, the largest processing area for Canadian crude imports. Photo courtesy Marathon Petroleum
From the Canadian Energy Centre
More than 450,000 kilometres of pipelines link Canada and the U.S. – enough to circle the Earth 11 times
As U.S. imports of Canadian oil barrel through another new all-time high, leaders on both sides of the border are warning of the threat to energy security should the incoming Trump administration apply tariffs on Canadian oil and gas.
“We would hope any future tariffs would exclude these critical feedstocks and refined products,” Chet Thompson, CEO of the American Fuel & Petrochemical Manufacturers (AFPM), told Politico’s E&E News.
AFPM’s members manufacture everything from gasoline to plastic, dominating a sector with nearly 500 operating refineries and petrochemical plants across the United States.
“American refiners depend on crude oil from Canada and Mexico to produce the affordable, reliable fuels consumers count on every day,” Thompson said.
The United States is now the world’s largest oil producer, but continues to require substantial imports – to the tune of more than six million barrels per day this January, according to the U.S. Energy Information Administration (EIA).
Nearly 70 per cent of that oil came from Canada.
Many U.S. refineries are set up to process “heavy” crude like what comes from Canada and not “light” crude like what basins in the United States produce.
“New tariffs on [Canadian] crude oil, natural gas, refined products, or critical input materials that cannot be sourced domestically…would directly undermine energy affordability and availability for consumers,” the American Petroleum Institute, the industry’s largest trade association, wrote in a recent letter to the United States Trade Representative.
More than 450,000 kilometres of oil and gas pipelines link Canada and the United States – enough to circle the Earth 11 times.
The scale of this vast, interconnected energy system does not exist anywhere else. It’s “a powerful card to play” in increasingly unstable times, researchers with S&P Global said last year.
Twenty-five years from now, the United States will import virtually exactly the same amount of oil as it does today (7.0 million barrels per day in 2050 compared to 6.98 million barrels per day in 2023), according to the EIA’s latest outlook.
“We are interdependent on energy. Americans cutting off Canadian energy would be like cutting off their own arm,” said Heather Exner-Pirot, a special advisor to the Business Council of Canada.
Trump’s threat to apply a 25 per cent tariff on imports from Canada, including energy, would likely “result in lower production in Canada and higher gasoline and energy costs to American consumers while threatening North American energy security,” Canadian Association of Petroleum Producers CEO Lisa Baiton said in a statement.
“We must do everything in our power to protect and preserve this energy partnership.”
Energy products are Canada’s single largest export to the United States, accounting for about a third of total Canadian exports to the U.S., energy analysts Rory Johnston and Joe Calnan noted in a November report for the Canadian Global Affairs Institute.
The impact of applying tariffs to Canadian oil would likely be spread across Canada and the United States, they wrote: higher pump prices for U.S. consumers, weaker business for U.S. refiners and reduced returns for Canadian producers.
“It is vitally important for Canada to underline that it is not just another trade partner, but rather an indispensable part of the economic and security apparatus of the United States,” Johnston and Calnan wrote.
Alberta
Open letter to Ottawa from Alberta strongly urging National Economic Corridor
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Canada’s wealth is based on its success as a trading nation. Canada is blessed with immense resources spread across a vast country. It has succeeded as a small, open economy with an enviable standard of living that has been able to provide what the world needs.
Canada has been stuck in a situation where it cannot complete nation‑building projects like the Canadian Pacific Railway that was completed in 1885, or the Trans Canada Highway that was completed in the 1960s. With the uncertainty of U.S. tariffs looming over our country and province, Canada needs to take bold action to revitalize the productivity and competitiveness of its economy – going east to west and not always relying on north-south trade. There’s no better time than right now to politically de-risk these projects.
A lack of leadership from the federal government has led to the following:
- Inadequate federal funding for trade infrastructure.
- A lack of investment is stifling the infrastructure capacity we need to diversify our exports. This is despite federally commissioned reports like the 2022 report by the National Supply Chain Task Force indicating the investment need will be trillions over the next 50 years.
- Federal red tape, like the Impact Assessment Act.
- Burdensome regulation has added major costs and significant delays to projects, like the Roberts Bank Terminal 2 project, a proposed container facility at Vancouver, which spent more than a decade under federal review.
- Opaque funding programs, like the National Trade Corridors Fund (NTCF).
- Which offers a pattern of unclear criteria for decisions and lack of response. This program has not funded any provincial highway projects in Alberta, despite the many applications put forward by the Government of Alberta. In fact, we’ve gone nearly 3 years without decisions on some project applications.
- Ineffective policies that limit economic activity.
- Measures that pit environmental and economic objectives in stark opposition to one another instead of seeking innovative win-win solutions hinder Canada’s overall productivity and investment climate. One example is the moratorium on shipping crude through northern B.C. waters, which effectively ended Enbridge’s Northern Gateway proposal and has limited Alberta’s ability to ship its oil to Asian markets.
In a federal leadership vacuum, Alberta has worked to advance economic corridors across Canada. In April 2023, Alberta, Saskatchewan and Manitoba signed an agreement to collaborate on joint infrastructure networks meant to boost trade and economic growth across the Prairies. Alberta also signed a similar economic corridor agreement with the Northwest Territories in July 2024. Additionally, Alberta would like to see an agreement among all 7 western provinces and territories, and eventually the entire country, to collaborate on economic corridors.
Through our collaboration with neighbouring jurisdictions, we will spur the development of economic corridors by reducing regulatory delays and attracting investment. We recognize the importance of working with Indigenous communities on the development of major infrastructure projects, which will be key to our success in these endeavours.
However, provinces and territories cannot do this alone. The federal government must play its part to advance our country’s economic corridors that we need from coast to coast to coast to support our economic future. It is time for immediate action.
Alberta recommends the federal government take the following steps to strengthen Canada’s economic corridors and supply chains by:
- Creating an Economic Corridor Agency to identify and maintain economic corridors across provincial boundaries, with meaningful consultation with both Indigenous groups and industry.
- Increasing federal funding for trade-enabling infrastructure, such as roads, rail, ports, in-land ports, airports and more.
- Streamlining regulations regarding trade-related infrastructure and interprovincial trade, especially within economic corridors. This would include repealing or amending the Impact Assessment Act and other legislation to remove the uncertainty and ensure regulatory provisions are proportionate to the specific risk of the project.
- Adjusting the policy levers that that support productivity and competitiveness. This would include revisiting how the federal government supports airports, especially in the less-populated regions of Canada.
To move forward expeditiously on the items above, I propose the establishment of a federal/provincial/territorial working group. This working group would be tasked with creating a common position on addressing the economic threats facing Canada, and the need for mitigating trade and trade-enabling infrastructure. The group should identify appropriate governance to ensure these items are presented in a timely fashion by relative priority and urgency.
Alberta will continue to be proactive and tackle trade issues within its own jurisdiction. From collaborative memorandums of understanding with the Prairies and the North, to reducing interprovincial trade barriers, to fostering innovative partnerships with Indigenous groups, Alberta is working within its jurisdiction, much like its provincial and territorial colleagues.
We ask the federal government to join us in a new approach to infrastructure development that ensures Canada is productive and competitive for generations to come and generates the wealth that ensures our quality of life is second to none.
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Devin Dreeshen
Devin Dreeshen was sworn in as Minister of Transportation and Economic Corridors on October 24, 2022.
Alberta
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