Quebec report shows resistance to pipelines cost $38 billion in trade war with US

Call it an opportunity cost on the order of $32 million per day, or $38 billion per year.

That’s how much Ottawa’s — and Quebec’s — footdragging on a pair of oil and natural gas pipelines to the East Coast have cost Canada in its trade war with the US, according to a new study from the Montreal Economic Insitute.

That only includes the Energy East and GNL Québec LNG pipes cancelled in 2017 and 2021, respectively; it would have surely been higher if the Northern Gateway to Kitimat had been factored in. 

The irony is that the report was produced by the Montreal-based MEI which aims to promote “economic liberalism” as per its web site, although it has been charactierized as ‘Quebec’s Fraser Insitute’.

The study highlights a sobering reality: the economic crisis triggered by US tariffs could have been significantly mitigated — or avoided — if only past governments had greenlit key energy infrastructure projects.

The study argues that the two pipelines crossing Quebec could have redirected over $38 billion worth of Canadian energy exports per year away from the United States to other markets, reducing the country’s reliance on an increasingly unpredictable trade partner.

Instead, Canada remains locked into a position of near-total dependence, with 97% of its crude oil and 100% of its natural gas exports still going south of the border.

“Canada’s high level of dependence on US trade is not an inevitability — it’s the result of political choices,” said Gabriel Giguère, a senior policy analyst at MEI and author of the report. “If Energy East had been built, Canada could have been exporting nearly 28% of its oil to Europe by now, instead of watching the US slap tariffs on its products.”

Energy East, a $15-billion, 4,500-km pipeline proposed by TransCanada (now TC Energy) in 2013, would have transported 1.1 million barrels of crude oil per day from Alberta to New Brunswick, where it could be refined and shipped to international markets. 

Similarly, the GNL Québec LNG project, which could have supplied 46 million cubic meters of natural gas per day to Europe, was blocked by the Quebec government in 2021 over environmental concerns. 

The MEI study estimates that this project alone could have diverted 19% of Canada’s natural gas exports from the US, generating an additional $1.7 billion in revenue annually.

The cancellation of these projects was largely driven by resistance from Quebec and other parts of Eastern Canada, where provincial governments and environmental activists campaigned against new fossil fuel infrastructure.

Even now, Quebec Premier François Legault has dismissed oil pipelines as “socially unacceptable.”

However, public sentiment has shifted dramatically. A recent poll cited in the MEI report indicates that a majority of Quebecers now support pipeline construction in light of escalating US tariffs. 

Former Prime Minister Stephen Harper recently spoke at the Raisina Dialogue, India’s largest geopolitical conference, calling for Canada to immediately revive an eastern pipeline. “We need to build a pipeline in the east so we can supply our own country with energy,” Harper said.

Canada’s failure to develop eastward energy infrastructure has left it uniquely vulnerable to trade retaliation. While countries like Norway and Qatar have expanded their global energy markets, Canada remains tethered to the US, even as American trade policy grows more protectionist.

The MEI study concludes that Ottawa must make energy diversification a top priority, including simplifying regulatory hurdles, repealing the Impact Assessment Act and sending a clear message to investors that major infrastructure projects will not be blocked.

“The consequences of past decisions are now hitting us with full force,” Giguère said. “We can’t change what happened, but we can make sure Canada never finds itself in this position again.”