The U.S. accounted for a whopping 82 per cent of Alberta exports last year, and energy remains Canada’s top export
With Donald Trump set to become the next U.S. president, will Keystone XL will be back on the table?
Will the incoming president’s pledge to impose a global tariff on all imports hammer Alberta’s largest exports, energy and agriculture?
“Their policies on energy and climate are fairly clear, in terms of obviously being in favour of traditional energy sources like oil and natural gas,” James Rajotte, Alberta’s senior representative to the United States, said in an interview Wednesday.
“The biggest question facing Canada is in terms of what President Trump and the next Congress does on the tariff side … It’s a concern we have to take very seriously.”
The U.S. accounted for a whopping 82 per cent of Alberta exports last year, and energy remains Canada’s top export.
In 2023, oil and natural gas made up $133 billion of Alberta products heading into the U.S., with agricultural items in second spot, followed by chemicals, a recent report by ATB Financial noted.
In July, Canadian oil exports to our southern neighbours hit a record 4.3 million barrels per day, more than double the levels seen in 2012, according to the U.S. Energy Information Administration.
Canadian heavy crude is used by refiners in the U.S. Gulf Coast and Midwest, such as in Ohio, the home state of Vice-President-elect JD Vance.
As Rajotte points out, the two countries have a deeply integrated energy market. There are 70 operating pipelines carrying energy across the border. Canada is the largest oil and natural gas supplier to the United States, while the Americans are the largest supplier to Canada, although at much smaller levels.
Trump vowed during the campaign to place a 10 per cent tariff on all imported products, and it could sideswipe an export-driven economy if Canada doesn’t manage to get an exemption.
A recent study by University of Calgary economist Trevor Tombe calculated the proposed tariff would reduce real incomes in Canada by 0.9 per cent, growing to 1.5 per cent if it prompted a commensurate retaliation by Ottawa.
“The addition of a 10 per cent tariff on energy exports would cost us $16 billion, that’s the value. And then, add on the value of what the impact of the (federal) emissions cap would be,” Yedlin said.
“This is a huge problem for Alberta.”
However, some experts believe a tariff on energy products is unlikely, as it might push gasoline prices higher and cause inflation.
“Presidents need oil to be in a range. If it’s too low, then nobody is going to drill. If it’s too high, then prices at the pumps are a problem for a president,” said Canada West Foundation CEO Gary Mar, a former Alberta trade representative to the U.S.
It is unclear who will be in charge of key trade files in the new Trump administration and how the new tariff policy could evolve, said Kevin Book, managing director of research firm ClearView Energy Partners in Washington, D.C.
The existing free trade agreement between Canada, the U.S. and Mexico is due for a mandatory review in 2026.
“I don’t think I would expect a radical rethinking of the existing and substantial energy security relationship to North America,” Book said in an interview.
“What they’ve said is that they see the tariffs as a negotiating tool to achieve better trade relationships, a better, more fair environment for U.S. commercial activity.”
There’s also the outstanding question of what a Trump term would mean for energy infrastructure, such as new pipelines. Four years ago, the Biden administration killed the Keystone XL cross-border pipeline, reversing the green light given to the project a few years earlier by Trump.
Now, with the 45th U.S. president winning Tuesday’s election and set to return to the White House, it leads to speculation that the project — or other oil and gas pipelines — could be revived.
Former Alberta premier Jason Kenney, whose UCP government invested and lost $1.3 billion in KXL, suggested recently more oil egress will be needed out of Canada as production expands, “and the likeliest customers are the United States through some version of Keystone XL.”
“I think Keystone XL might be back on the table. It’s all about providing cost-effective energy,” said Bob Geddes, president of Calgary-based Ensign Energy Services, a driller in Canada and the United States.
“I don’t think they will hit Canadian oil and gas (with a tariff) … He won’t want to increase the cost of energy coming into the U.S.”
The KXL project, initially proposed more than a decade ago by TC Energy, aimed to transport 830,000 barrels of oil from Canada to the Gulf Coast, but it soon became a political lightning rod in the U.S. Trump mentioned the development during his debate with Vice-President Kamala Harris in September.
“There is an opportunity for dialogue on energy infrastructure,” said Rajotte.
“My sense is there would be interest in having a conversation about oil pipelines, even natural gas pipelines, perhaps even other types of pipelines, because obviously they do want to lower energy costs.”
“The bulk of the demand still resides in the United States, and the bulk of the infrastructure still connects Canada inextricably to the U.S.,” he said.
“Our futures are undeniably linked, as they always have been.”
Chris Varcoe is a Calgary Herald columnist.