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By Julio Mejía and Tegan Hill
The Carney government recently unveiled the second round of “nation building” projects slated for fast-track assessment and approval. Of the 12 projects now deemed to be in the “national interest” and prioritized for development, there’s not a single oil pipeline.
The new list includes the Northwest Critical Conservation Corridor in northwest British Columbia and the Yukon; the Ksi Lisims liquefied natural gas project and the North Coast Transmission Line in B.C.; Ontario’s Crawford nickel project; the Sisson Mine in New Brunswick; the Nouveau Monde Graphite Mine in Quebec; and a hydroelectric development in Nunavut.
While the government insists the absence of a new pipeline is simply because it is a “hypothetical project” without private-sector interest, it continues to maintain Trudeau-era regulations that discourage investment in the sector and exacerbate uncertainty more generally. If the Carney government is serious about attracting private proponents to build new oil pipelines, it must first remove the regulatory hurdles holding back the sector.
Connecting the Prairies—where most of Canada’s oil and gas is located—to coastal terminals through pipelines is crucial for increasing access to global markets and reducing the country’s dependence on the United States. Without this infrastructure, Canada will remain overwhelmingly tied to our southern neighbour, which in 2024 took more than 95 per cent of Canada’s oil and natural gas exports.
Unfortunately, Canada’s regulatory regime is a major barrier to attract investment into energy projects. According to a 2023 survey of senior executives of the oil and gas industry, investors identified uncertainty over environmental regulations, the cost of regulatory compliance and the uncertainty regarding the enforcement of existing rules as the three main policy factors deterring investment in Canada’s oil and gas industry.
This growing reputation for an unwelcoming regulatory regime has coincided with a sharp decline in investment in the sector. From 2014 to 2023, investment in Canadian oil and gas plummeted from $84.0 billion to $37.2 billion (inflation-adjusted), a 56 per cent decrease. The continued decline in investment, amid record global oil and gas demand and despite Canada’s immense energy reserves, is a sign that a better regulatory approach would more than likely result in greater private sector investment.
Earlier this year Prime Minister Carney pledged to cut red tape and make Canada an energy superpower. However, to this day, regulations that create uncertainty, raise compliance costs and deter investment in the oil and gas sector remain in place.
In fact, rather than reducing regulations, the Carney government introduced Bill C-5, granting cabinet the power to decide which projects can bypass regulations, provided they are deemed to serve the “national interest.” In other words, instead of setting transparent and predictable rules that apply to everyone, the government created a murky system where companies must convince cabinet that their projects satisfy its subjective standards. This only adds more uncertainty to investors.
Meanwhile, the Trudeau-era regulatory regime continues to hinder investment. Consider Bill C-69, commonly known as the “no-more pipelines act,” which goes well beyond assessing the environmental impact of projects and requires proponents to address highly subjective criteria including the effects on the “intersection of sex and gender with other identity factors.”
Or Bill C-48, which bans Canadian large oil tankers from B.C.’s northern coast and significantly weakens the case for building pipelines to Pacific ports. Notably, the bill does not (and cannot) apply to U.S. or international oil tankers along B.C.’s coast, meaning it exclusively hinders Canada’s ability to export oil.
Other regulations are similarly designed to reduce the demand for new pipelines by forcing a curtailment of oil and gas production. For instance, the federal government expects the 2023 regulations on methane emissions for the oil and gas sector to costs the industry more than $100 million, likely resulting in lower production. And the cap on greenhouse gas (GHG) emissions for the oil and gas sector, which comes into effect next year, is projected by multiple studies to result in a reduction in oil and gas production, consequently undermining the case for private investment in more pipelines. Simply put, if you produce less oil and natural gas, there’s no need for new pipelines.
If the Carney government is serious about attracting private investors for new pipelines, it shouldn’t rely on an opaque process that leaves investors wondering whether they’ll win cabinet’s favour. Instead, it should remove the regulations that stand in the way of a competitive environment and ensure clear rules for investors.
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