In this week’s The Seven…

• West Coast pipeline - More details announced
• Powering AI - New power plant proceeding
• CUSMA review - More of the same on tariffs
• Top gun - Cold Lake takes flight
• Weather check - Excess moisture on the Alberta prairies
• Macklem’s warning - Global imbalances
• Interesting Fact - Major crops in Canada
• Chart of the Week - Stampeding to the Stampede - Calgary airport visits

So much for a summer lull. Hold onto your hats, as this has already been a wild summer of economic news as Stampede kicks off. We’re here to help you make sense of it all.

Just this week, CUSMA was not renewed and a new pipeline route was proposed.

This year, the Iran War and the blocking of the Strait of Hormuz have reinforced Canada’s role as a safe, reliable and responsible producer of resources. So far it’s been more promises than shovels, but Canada is moving one step closer. Will Canada lasso the moment?

We’re still a little gun shy in upgrading our forecast (the Canadian economy has had a wobbly start to the year), but remain locked and loaded if we see progress on some of these big projects.

At the Ponoka Stampede on Canada Day, I wondered if the grit and determination I witnessed in the rodeo arena was symbolic of new economic ambition in Canada. We’re about to find out. With the West Coast pipeline project submitted, the federal government will determine if it is in the national interest by October 1.

Heading West - Pipeline proposal unveiled

Yesterday, we discussed the economic impacts. Today we have more details after the Alberta government announced the route and partners involved. The announcement comes after the federal and B.C. government inked an MOU early Thursday, which included retaining the federal North Coast tanker ban. This effectively killed any chance of a northern oil pipeline route, with Alberta later announcing that it was submitting a southern pipeline proposal.

Here’s what we know. 

• The Government of Alberta has submitted a West Coast Oil Pipeline Project to the federal Major Projects Office for listing as a project of national interest under the Building Canada Act.
• The Project proposes the construction of a new pipeline system (a receipt terminal in Bruderheim, Alberta, a long-distance transmission pipeline, a series of pump stations along the route and a delivery terminal with a marine loading facility on the west coast) connecting the Edmonton region to a deepwater marine export terminal located at Roberts Bank in B.C., largely following the existing Trans Mountain pipeline corridor.
• The pipeline would transport one million barrels per day of heavy crude oil.
• The Project is estimated to cost between $35.2 to $43.7 billion, which includes contingency. 
• Estimated construction start (early works) between 2027 and 2029. Construction completion is forecast for 2032-2034.
• The Project is intended to involve collaboration between Alberta, Ottawa, the Crown-owned Trans Mountain Corporation, Pembina Pipeline, and Indigenous partners.
• If the Project is deemed to be in the national interest by the federal government, it will then go through a more detailed regulatory review.
• Trans Mountain will serve as the lead proponent.
• An agreement between the Government of Canada, Government of Alberta, and Oilsands Alliance to “advance construction” of the Pathways Carbon Capture and Storage is being finalized.
• How the Project will be funded is still to be determined, but the announcement noted that “Canada and Alberta will each share equal partnership in the project, and there will be a meaningful equity stake reserved for Indigenous Peoples”; Pembina would have a 10% stake and the opportunity to add another 10% once the pipeline is operational.

We don’t know the exact costs, but our economic impacts from March remain a useful, ‘order of magnitude’ guide. In fact, the proposed pipeline cost is in line with our $35 billion working assumption. We estimated the impacts of 1.5 million barrels per day of new capacity. This project is just over 1 million barrels a day, but also includes the bulk of the pipeline spend and the Pathways project. We estimate that the West Coast pipeline and Pathways project alone would lift annual Canadian real GDP by roughly $25 billion and add about 90K to employment, on average, between 2027 and 2035. This represents about 80% of the total impacts estimated in our report.  We will fine tune once more details on spending and timing become available.

To be clear, this is not a done deal. It goes to the federal government’s Major Projects Office, and they have until October 1 to declare it a project in the national interest. Financing, feasibility work, regulatory review and Indigenous partnerships need to be completed before there is a final investment decision. But it’s one step closer.

Powering AI - New power plant reaches final investment decision

Another major energy project was announced yesterday. This one has reached a final investment decision and will see the construction of a $4.6-billion natural gas-powered electricity facility approved to supply 932 megawatts to a potential new data centre in Sturgeon County. Called the Greenlight Electricity Centre, the project is a partnership between Pembina Pipeline, Kineticor Asset Management and Morgan Stanley Infrastructure.

Waiting to dry - Farmers looking for sunshine

The latest Alberta Crop Report reveals that after years of managing drought, the major challenge has flipped to managing excessive moisture from heavy June rains. This report is dated June 23, and since then there’s been even more rain.

As always, conditions vary across the province, with the North West experiencing severe moisture (53% excess surface soil moisture in the North West region). The South region is reporting 69% good or excellent surface soil moisture.

It’s too early to make a call on yields, but many farmers are now looking for some sunshine to dry out the fields. It was a later start to seeding this year for many farmers due to unseasonably cool and snowy conditions. Statistics Canada reported this week that the seeded area in Alberta increased for barley and canola this year, but decreased for wheat, peas, oats, and lentils.

CUSMA remains in place - But annual review keeps things uncertain

On July 1, the U.S. did not extend CUSMA to 2042. This means a series of annual reviews kicks off until it expires in 2036. Not great news, but exactly as we expected in our latest quarterly outlook, and avoiding the worst case scenario of the U.S. withdrawing altogether.

It’s a continuation of the status quo—sector tariffs remain in place and exemptions from tariffs for CUSMA-compliant goods remain.

The trade uncertainty continues, but there’s another way to look at it. Companies are adjusting to the new normal, and believe it or not, we have more certainty than this time last year. Not great, but still better than a year ago. That means that tariffs will continue to weigh, but have less drag on our forecast this year and next than in 2025.

Global imbalances - Macklem’s warning shot

Bank of Canada Governor Tiff Macklem fired a warning shot at global imbalances during his speech at the Chambre de commerce France-Canada in Paris. Macklem warned that widening global trade imbalances—which occur when some countries consistently export far more than they import, while others consistently import far more than they export—are creating risks for financial stability. While trade deficits and surpluses are an essential part of the global system of open trade, when imbalances become too large and one-sided, they can impact not only our economies but relations between countries.

Macklem noted two clear risks of this imbalance: 1) large capital flows into the United States could be misallocated—stretching valuations in equity and credit and setting the stage for a painful correction; or 2) these flows could reverse suddenly.

Poised for another takeoff - Cold Lake

I was getting Top Gun vibes in Cold Lake, Alberta last week. After speaking at the local chamber event, I received a tour. This city of around 18,000 has a fascinating combo of fighter jets, heavy oil industry, and a stunning beach and lake. It’s very young, with a median age of only 33.9 (vs. the Alberta median of 39).

And it’s poised for even more growth.

Canadian Forces Base (CFB) Cold Lake—home to 4 Wing Cold Lake—is Canada’s largest and busiest fighter base. Driven by Canada's acquisition of new fifth-generation stealth fighter jets, the base is undergoing a massive modernization that includes a 19,000-square-metre squadron facility, new hangars, and extensive airfield expansions to support the future aircraft.

If that’s not enough, the city would be one of the key focal points for the proposed Pathways Carbon Capture and Storage Project, which we assume in our impact report would cost $20 billion.

Interesting Fact: A sea of grain (and canola, hay and soybeans)

Five crops account for 79% of the seeded area* in Canada this year: wheat (27%), canola (25%), tame hay** (13%), barley (7%), and soybeans (6%). This works out to almost 30 million hectares of seeded area or about 37 million Canadian Football League fields (including the end zones).

*The seeded area includes the principal field crops tracked by Statistics Canada.

**Tame hay is hay cut from cultivated crops.

Chart of the Week: Calgary airport visits during Stampede

Are you going to the Calgary Stampede? I’m heading there this evening—and we won’t be alone.

Economists are careful (or should be careful) not to attribute spending that would have happened anyway—that is, recycling of money that would have been spent by locals reallocating their limited dollars to Stampede events instead of something else.

What I’m interested in is new money injected, and that typically comes from out-of-province and international visitors. To help us gauge the effect, we look at daily airport visits to the Calgary International Airport by international visitors. Arrivals spike in the lead up to, and during Stampede.

So do the Calgary and Alberta economies get an injection of new spending during Stampede? Yes.

Answer to the previous trivia question: Chargex (later Visa) was first introduced to Canadians in 1968.

Today’s trivia question: How many seasonal jobs are created for the Calgary Stampede each year?