Editorials

Editorial

Authors:  and | September 2026 – Volume 14, Issue 3, 2026

“IT’S DÉJÀ VU ALL OVER AGAIN”[1]

Coined by American baseball icon Yogi Berra, “It’s déjà vu all over again” best describes the continued geopolitical instability that is shaping Canadian economic and energy initiatives since the publication of ERQ Issue 2.

Round and round we go

Since the commencement of American and Israeli air-strikes on Iran on February 28, 2026, the United States and Iran have traversed a serpentine path[2] of negotiations, ceasefires, and the short-lived Islamabad Memorandum[3] aimed at ending the war, and the exchange of air-strikes on regional land-based civilian and military targets and marine targets in the Strait of Hormuz, effectively closing one of the world’s busiest oil shipping channels. Approximately 20 per cent of the world’s oil and liquefied natural gas (LNG) move through the Strait.[4] The on-again off-again conflict has roiled financial markets and the price of crude oil,[5] with the attendant increase in domestic retail gasoline prices.

While there are many observations that could be made about the war between Iran and the United States, two stand out as being most relevant to the Canadian energy file and future actions that could be taken by the Canadian federal and provincial governments.

First, Iran’s ability to disrupt commercial maritime traffic through the Strait of Hormuz appears to be a more strategically important deterrent against hostile attack than its nuclear strategy, regional proxies, and ballistic missile capabilities. As if to further illustrate this point, on July 20 the Iran-backed Houthis announced a blockade on Saudi Arabia in the Red Sea.[6] The key takeaway appears to be that the current Iranian regime is likely to remain a factor in whatever new regional order emerges in the Gulf[7] after the present hostilities abate, reinforcing the need in Canada for greater market access, both domestically and internationally, for Canada’s oil, gas and LNG production.

Second, the core foreign policy tool of the Trump administration appears to be coercion — economic and/or military. However, as explained by Reid Pauly and Matthew Cebul in their article “The Lost Art of Coercion: Why Trump’s Belligerence Is a Sign of Weakness”,[8] the U.S. President’s “conflation of coercion — a nuanced foreign policy strategy — with belligerence and raw demonstrations of strength…makes opponents less likely to comply with his demands, both by revealing the limits of U.S. capabilities and resolve and by undermining the credibility of U.S. assurances that targets will be left alone if they acquiesce”.[9]

For example, on July 15, U.S. Trade Representative Jamieson Greer acknowledged that Canada had rolled back two major trade irritants — the digital services tax and a separate tax hike on online streaming services — but with the caveat that “they don’t really get credit for doing something bad and then undoing it”.[10] Similarly, U.S. Ambassador to Canada Pete Hoekstra has previously stated that provincial acquiescence on the ban on U.S. alcohol would not lead to a loosening of Section 232 tariffs on steel and aluminum,[11] despite the former being merely a “trade irritant” and the latter being a direct violation of the Canada-United States-Mexico Agreement (CUSMA).

Finally, following the July 1, 2026 confirmation by the United States that it declined to renew CUSMA, on July 20 the U.S. President invoked the never-before-used Section 338 of the Tariff Act of 1930[12] to impose a 50 per cent tariff on a list of Canadian goods representing approximately US$20 billion or 5 per cent of Canada’s exports to the United States. The proposed tariffs include items covered regardless of whether a good originates under the CUSMA, but will not apply to energy, potash, products subject to tariffs under Section 232, and certain other goods like fish or critical minerals.[13] It is interesting to note that oil and gas are the main source of the U.S.’s trade deficit with Canada, which Mr. Trump has said he wants to eliminate.[14] The tariffs were scheduled to take effect August 19 and designed to punish Canada for imposing retaliatory tariffs on U.S. automobiles, excluding U.S. alcohol from retail sales by most Canadian provinces, and refusing to abandon supply management in dairy. These tariffs also came at the same time as the U.S. announced tariffs on many other countries, including many that were assured that they would not be subject to such tariffs.[15] As expected, these new tariffs also attracted fresh lawsuits spearheaded by the same legal organization that challenged the last round of Trump tariffs.[16]

These announcements all took place against the backdrop of the drama surrounding the opening of the Gordie Howe International Bridge linking Ontario and Michigan.[17] Although Canada paid the cost of building the bridge, estimated at $6.4 billion, President Trump threatened to block the opening of the bridge until a new revenue sharing deal was worked out despite the existence of an earlier deal between the two countries.[18]

At 12:01 a.m. on August 22, the new Section 338 tariffs took effect, following unsuccessful, last-minute negotiations. Canada has promised to “match those tariffs dollar for dollar to protect our workers and businesses”[19]. What specific actions will be taken are not yet known. The tariffs came after the talks between the two countries broke down over demands made by the United States regarding subsidies for French culture and other bilingual requirements.[20] As well, differential tariff exemption treatment of trucks versus cars with no real clear rationale also broke the talks down. While Prime Minister Carney was the one explaining the breakdown in the talks to the press, the provinces’ premiers were most supportive of the decision to end the talks.[21] Only Alberta Premier Danielle Smith urged the federal government to return to the negotiating table and was cautious about retaliation with tariffs.[22] So far, the public seems supportive of the Prime Minister’s moves but many are apprehensive about the impact the stalled talks and resulting tariffs will have on their jobs.[23] On August 23, President Trump issued his statement on the matter claiming that Canada wanted the benefit of being a U.S. state without being one while imposing massive tariffs on U.S. agriculture.[24]

This latest salvo of tariffs and other trade impediments highlights the need for Canada’s first ministers to complete the long-overdue removal of interprovincial trade barriers, “accelerate approvals for nation-building infrastructure, help businesses diversify export markets and create the conditions for businesses to invest and innovate, to stay here and scale here”.[25]

Both observations together highlight the significance of the more than 20 new economic and security partnerships signed[26] by Prime Minister Carney since being sworn into office in March 2025 that are expected to result in “the second-fastest growth in the G7 over the next two years”, job growth that is now four times the rate in the United States, doubling of exports to non-U.S. markets over the next decade, and foreign direct investment in Canada that is at its highest level in two decades.[27] There also continues to be the need for a unified front in these next ten weeks prior to the U.S. mid-term elections and the possibility of more dialogue on trade with the Americans, including comprehensive CUSMA negotiations.

Breaking the cycle and moving ahead

The integration of energy and industrial policy as a driver of Canadian economic growth and sovereignty has been embedded in the large number of important announcements and agreements since our last edition of ERQ and is likely to be a continuing trend over the coming months.

A sample of these major announcements includes:

  • May 14, 2026 announcement by the government of Canada of the “Powering Canada Strong: A National Strategy for an Electrified Canadian Economy”,[28] a plan to expand the electricity system and related infrastructure, make federal financing support available for projects of national interest, strengthen interprovincial interties, enhance regulatory frameworks, advance energy security in Canada’s north, support future nuclear development, and continue to support identified projects in the national interest.[29]
  • May 15, 2026 announcement by the Governments of Canada and Alberta that they have reached an Implementation Agreement that sets out the framework to implement the November 27, 2025, Memorandum of Understanding, and includes commitments relating to carbon markets, electricity, the Pathways Project, an oil pipeline to global markets, and continuing cooperation.[30]
  • July 2, 2026 announcement that Canada, Alberta and the Oil Sands Alliance (comprising Canadian Natural Resources Limited, Cenovus Energy Inc., ConocoPhillips Canada Resources Corp., Imperial Oil Resources Limited, and Suncor Energy Inc.) entered into a Memorandum of Understanding (Pathways MOU) establishing a framework for cooperation on large-scale emissions reduction projects, oil sands production growth and expanded export infrastructure.[31]
  • On July 2, 2026, the Government of Canada referred the Government of Alberta’s proposal for a west coast pipeline project to the Major Projects Office. The pipeline would transport more than 1 million barrels per day to global markets and the proposed route will largely follow the existing Trans Mountain corridor, fully respecting the Oil Tanker Moratorium Act.[32] The new pipeline will be owned by Trans Mountain Corporation (TMC, 100 per cent Government of Canada), Alberta Petroleum Marketing Commission (APMC, 100 per cent Government of Alberta), Pembina Pipeline Corporation (10 per cent economic interest with an option to acquire an additional 10 per cent at commercial in-service), and includes a real and meaningful opportunity for Indigenous equity participation.[33]
  • July 14, 2026 announcement by LNG Canada that it has reached an agreement with five neighbouring First Nations in northern B.C. that would provide them with an option to invest up to $1 billion in LNG Canada’s second phase. MNT Investments LP (development organizations from Gitga’at, Gitxaała, Haisla, Kitselas, and Kitsumkalum) would purchase a majority interest in a special purpose entity that would, in turn, buy a storage tank built in the second phase. The tank would be leased back to LNG Canada for as long as the project in Kitimat operates.[34]
  • July 20, 2026 announcement that construction of the Enbridge Sunrise Expansion Program has begun. The Sunrise Expansion is a $4 billion investment that will increase the transportation capacity on the Enbridge Westcoast natural gas pipeline system by up to 300 MMcf/d. The project will maximize Canadian industrial participation and use domestically produced materials, including 100 per cent Canadian melted and poured steel from Saskatchewan. Enbridge has spent more than $52 million on the hiring and procuring of services from Indigenous businesses. The Westcoast natural gas pipeline system is 12.5 per cent owned by 38 Indigenous communities in British Columbia.[35]
  • August 17, 2026 announcement by Quebec, Newfoundland and Labrador, and the federal government that the 1969 Churchill Falls Power Contract and the December 2024 Memorandum of Understanding (MOU) between the provinces will be replaced by a new deal.[36] The deal will see that Quebec will have continued access to renewable energy, while Newfoundland and Labrador will have control over its resources. The federal government will also commit to invest $10 billion to upgrade Churchill Falls Generating station, develop the Gull Island hydroelectric project, build more transmission lines, as well as developing onshore and offshore wind power.[37]

The rush of announcements clearly reflects the imperative of the moment, and a wary eye has been cast to October 19, 2026, when Albertans will go to the polls and vote on five questions relating to immigration, four related to various constitutional issues, and a question on separation.[38] The outcome of the Alberta referendum will not be resolved until after the publication of this Issue and will therefore be an ongoing point of discussion.

At the same time across Canada, the question of data centres is becoming more relevant and critical to provincial and federal policy-makers alike.[39] In Alberta, during the Calgary Stampede, Premier Smith announced that Meta had chosen Alberta as the location for its latest data centre with an investment of over $13 billion.[40] The project is a 1 GW data centre that will build its own power through a partnership with various local energy companies.[41] The data centre is paired with the construction of a $4.6 billion, 970 MW natural gas fired electricity generation facility (Project Greenlight) that, according to the Government of Alberta, should lower the transmission portion of Alberta ratepayers’ electricity bills by up to 6 per cent.[42] But of course, data centres are controversial on both sides of the border. In the U.S., opposition to data centres is growing,[43] while Manitoba Premier Wab Kinew has announced that he will not allow a proposed data centre to be built south of Winnipeg.[44] The City of Hamilton also discussed and decided against banning data centres from being located in the city.[45] Concerns over energy consumption, water usage, noise, and general social media policies seem to be the driving factors behind much of the opposition. For readers of the ERQ, the energy and water issues are the ones to keep an eye on for the next few years, as careful design of grid policies for data centres will become increasingly controversial at the various regulatory hearings.

THIS EDITION

We begin this issue with “Reliability across the whole energy system: Lessons from CERC’s May summit” by David Morton, former Chair and CEO of the British Columbia Utilities Commission and Advisory Board Member of the Canadian Energy Reliability Council. Morton discusses the four key takeaways from the inaugural Canadian Energy Reliability Summit, namely the need to: address reliability from a “whole energy system” perspective; invest before a crisis occurs; place the appropriate weight on reliability in public policy; and improve public engagement, before concluding with possible next steps to advance the energy system reliability conversation.

In “Before Alberta can leave: Treaty rights and the separation referendum”, Kyle Paziuk, Student-at-Law at Alberta Counsel and BA – Political Science, MA – Policy Studies and Juris Doctor, University of Alberta, explores how two recent decisions of the Alberta Court of King’s Bench, Athabasca Chipewyan First Nation v Alberta (Chief Electoral Officer) (ACFN),[46] and Sturgeon Lake Cree Nation v Alberta (Sturgeon Lake)[47], both establish important parameters for any future separation process by clarifying that any attempt to advance a referendum on Alberta’s independence must consider the impact on Treaty Rights from a number of important dimensions. Paziuk identifies three implications for energy counsel to consider when monitoring this ongoing process and concludes that while the two cases may reach different results on different applications, they tell a consistent doctrinal story regarding the legal relationship between the duty to consult and potential Alberta separation.

Following on his remarks at the 2026 ERQ Energy Law Forum, Gerard Kennedy, Associate Professor and Associate Dean of Graduate Studies, Faculty of Law at the University of Alberta, contributes the article “The Act is constitutional, but the application may not be”. Kennedy addresses how the phenomenon of statutes being constitutional, but applications of them being unconstitutional, works in practice by examining the “national concern” branch of the “peace, order and good government” power, considering case law that interprets the statutory term “national interest”, and providing a reminder of how all exercises of statutory discretion may be challenged for being unconstitutional, even if the statute itself remains constitutional.

In “Enbridge v Nessel: Pitfalls of the American judicial system”, Moin Yahya, Professor of Law at the University of Alberta and Managing Co-editor of the ERQ, briefly describes the latest court decision in the long-standing dispute between the State of Michigan and Enbridge,[48] provides a high-level overview of the American state and federal court system, and concludes with a discussion about the need for Canadian companies to pay greater attention to removal deadlines and the venue for litigation in the United States.

Also following on his remarks at the 2026 ERQ Energy Law Forum, Thompson Rivers University Faculty of Law Professor Mark Mancini contributes “Democracy Watch: A post-mortem and the next frontier”, in which he comments on the implications of the very recent Supreme Court of Canada case Democracy Watch v Canada (Attorney General).[49] The case addresses whether Parliament can insulate certain agencies from judicial review. Although the narrow question in the case deals with the Conflict of Interest Act[50] and the Conflict of Interest and Ethics Commissioner, the case has broad implications for all administrative agencies, as Professor Mancini explains.

Benjamin Dachis, Vice President, Research and Outreach, and Chloe McElhone, Research Manager, both of Clean Prosperity, with oil sands facility-level operational modelling by Rory Johnston, Founder of Commodity Context, contribute “How the federal-Alberta grand bargain can increase oil sands profitability”. The article, an abridged version of a longer study published by Clean Prosperity, examines the impact of raising the minimum effective carbon credit price to C$130 per tonne and adding new bitumen pipeline capacity by assessing the effect of higher carbon costs and the future value of increased export capacity on four representative oil sands projects. The article concludes with three key findings that support the trade-offs in the federal-Alberta “grand bargain”.

Marc Brouillette, Principal Consultant and Founder of Strategic Policy Economics, in the article “Canada’s clean electricity supply crisis” explores the apparent discontinuity between federal and provincial policies for an electrified economy and the planning assumptions used by various provincial electricity system planning organizations. Brouillette examines the strategic imperative surrounding electrification and compares the province of Ontario’s recent Energy for Generations initiative with the electricity planning assumptions used by Ontario’s Independent Electricity System Operator, before concluding that a call to action for informed demand forecasting is needed, if aspirational goals relating to electrification are to be met.

Issue 3 concludes with the article “Tail risks and wholesale electricity prices” by Michele (Mike) Campolieti, Professor of Economics at the Department of Management, University of Toronto. Campolieti uses extreme value theory and data from seven trading hubs in the United States to estimate the shape of the distribution of wholesale prices in these markets, for the purpose of determining whether the distributions are consistent with fat-tailed Pareto distributions. Campolieti also considers whether the shape of the distributions changes based on the season. The analysis and findings have implications for wholesale electricity risk planning, as extreme pricing is more common in distributions with fat tails.

 

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