Don’t expect oilpatch investment to flood in overnight after Ottawa-Alberta ‘grand bargain,’ experts say

A long-awaited trade is go under to be unveiled th that reportedly will include support for a new oil pipeline to the B.C. Coast, as well as exemptions for Alberta from federal environmental laws.

Those moves will likely be received with open arms amongst industry leaders in the oil and gas sector. The argument has often been made that uncertainty over regulations, paired with challenges in getting products to market, is chasing away new investment.

But even if this agreement reduces some of that friction, experts say it won’t necessarily trigger a sudden flood in spending.

A major reason is oil prices, said Andrew Leach, who teaches economics and law at the University of Alberta. 

The benchmark North American crude blend known as West Texas Intermediate, or WTI, is currently priced below $60 US, and the U.S. Energy Information Administration projects prices will decline to an average of $55 US in 2026. Projections vary, but others see prices headed even lower in 2027.

“If that’s the environment we’re headed to … all you have to look at is the operating costs and operating profits of these facilities,” Leach said. €œYou’ll get a sense that that’s going to disrupt things at a scale no federal policy exemption could correct.”

In 2014, oil and gas investment in Canada ranged around $80 billion. 

In 2025, it’s closer to approximately $35 billion, according to the latest numbers from the ARC Energy Research Institute, which models the entire Western Canadian Sedimentary Basin. 

For years, growth was underpinned by visions of “$100 oil, $200 oil, $300 oil,” but those days are gone, Leach said.

“The world is awash in cheap energy, which has a whole bunch of positives,” he said. €œBut when you’re sitting on a trillion barrels of oil, the fact that the world’s awash in cheap energy is generally bad news.”

Alberta’s oilsands hit a record production high in 2025 as companies invested in smaller expansions. 

But the last major oilsands facility was Suncor’s Fort Hills mine, which opened in 2018. Even with a new pipeline, building a new oilsands facility would require a massive investment to the tune of billions of dollars.

Leach said he doesn’t see that happening, unless there’s a massive rebound in long-term price expectations.

Richard Masson, an executive fellow at the University of Calgary's School of Public Policy and the former CEO of the Alberta Petroleum Marketing Commission, agreed there’s unlikely to be a new mine from a new operator.

“The existing players have all the best leases and have economies of scale and experience, so will focus on mine pit replacements and incremental expansions,” he said.

Masson said companies have started to invest more in growth, with Canadian Natural Resources, Suncor and Cenovus among those pursuing projects.

But in his view, the big barrier to more of that happening has been market access.

“We had grown production really quickly, and then we didn’t have enough pipelines, and then the differential widened a lot,” he said, referring to the price gap between WTI and the Canadian price of oil, Western Canada Select.

“Companies said, 'I’m not going to spend hundreds of millions or billions of dollars, if I can’t get my product to market at a good price.' And so growth really slowed down.”

Masson said he thinks it's necessary to amend the federal regulations to provide more clarity. Once that happens, growth can speed up to the extent that market access is available.

But he stressed that a new pipeline isn’t a simple proposition.

Canada has embarked on a variety of pipeline misadventures over the past decade, including Keystone XL, which had a winding history of approvals and rejections. 

“We messed up so many things on building pipelines in the last decade. It’s going to be super difficult to overcome,” he said. €œHow are we going to do that? And who’s going to take the lead?”

Analysts say it’s often overlooked whether pipeline companies themselves want to take on a megaproject. 

Aaron MacNeil, a research analyst with TD Cowen, said the industry is still grappling with the fallout of recent megaprojects that ran far over budget.

“We have two clearly documented examples of projects that have recently been completed and were significantly above initial budget expectations,” he said, referring to Coastal GasLink and the Trans Mountain expansion project.

Today’s midstream companies have plenty of short-cycle, low-risk, high-return options to invest in, MacNeil said. 

They also have constraints, including limited capital and limited teams. That makes them less inclined to pursue a pipeline project when other opportunities deliver better and faster returns, he said.

MacNeil classifies a new West Coast pipeline as a “blue sky” scenario: possible, but low-probability without incentives. To make it viable, he said it could potentially include a government backstop if costs soared for reasons beyond the company's control.

A TD Cowen report released Nov. 11 suggests there’s currently a “major point of debate” amongst investors and the industry centred around when the Western Canadian Sedimentary Basin might again face constraints on the amount of crude oil that can be transported, otherwise known as takeaway capacity.

The investment bank pointed out that in 2018, when there wasn't enough capacity to transport oil out of the region, the price for Canadian heavy crude oil dropped significantly. 

It was sold for more than $45 US less per barrel compared to the main U.S. Oil price. Such sharp drops can cause major financial harm to oil producers, and results in major impacts to government budgets.

"I think that we have very good visibility to brownfield expansions in the near- and medium-term, which will bring on market access in a just-in-time manner," MacNeil said. "Obviously, longer term, we don't have as clear visibility on that."

Leach said he won't dispute that some federal policies were going to change the viability of resource investment. 

Those policies could have imposed costs on projects and uncertainty into the regulatory process, he said.

But there’s a much bigger challenge at hand given falling oil prices, he said.

“Now, we’re in this world where suddenly we’re going to ignore all these price changes, and say it’s just the federal policies that matter,” he said. €œI think that’s the wrong approach.”

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