Energy Infrastructure Investment: Why the U.S. Outpaces Canada in Pipeline Development and Returns

The energy infrastructure landscape in North America is a tale of two countries. The United States has surged ahead in pipeline development and returns on investment, while Canada, despite its vast energy resources, lags due to regulatory inertia and geopolitical vulnerabilities. This divergence isn't accidental—it's the result of strategic capital allocation, policy frameworks, and market dynamics that favor the U.S. as a prime destination for energy infrastructure investment.

The U.S. Edge: Policy-Driven Momentum and Capital Flow

From 2020 to 2025, the U.S. has leveraged aggressive policy initiatives to supercharge energy infrastructure. The Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) injected $73 billion into grid modernization and $386 billion into climate and energy spending. These programs created a tailwind for utilities and energy firms, with U.S. companies investing $27.7 billion in transmission and $50.9 billion in distribution in 2023 alone. The result? A grid poised to support the surging demand from AI, data centers, and EVs—sectors that require reliable, scalable power.

The U.S. regulatory framework also plays a pivotal role. The Pipeline and Hazardous Materials Safety Administration (PHMSA)'s Gas Mega Rule, implemented in 2020, imposed strict safety and compliance standards, but in a way that streamlined operations. Operators now use advanced data management systems to track pipeline integrity, ensuring compliance while minimizing disruptions. This performance-based approach has made U.S. energy infrastructure more resilient and investor-friendly.

Meanwhile, the U.S. is capitalizing on its LNG export potential. With 18 proposed terminals and eight operational as of January 2025, the U.S. is positioning itself as a global energy leader. This isn't just about pipelines—it's about capturing a share of the $75 billion in global LNG markets, which are expanding as Europe and Asia seek alternatives to Russian gas.

Canada's Conundrum: Regulatory Hurdles and Market Vulnerability

Canada's energy infrastructure, while robust in certain areas, faces headwinds. The Canadian Standards Association's Z662 standard, while rigorous, is often slow to adapt to market needs. Regulatory delays—exemplified by the cancellation of projects like Energy East and Northern Gateway—have stifled private investment. TC Energy, a key player in North American energy, has openly stated that U.S. projects offer better risk-adjusted returns, citing Canada's complex approval processes and environmental scrutiny.

Canada's overreliance on the U.S. market compounds its challenges. In 2023, 97% of Canadian crude oil exports and all natural gas exports went to the U.S. This dependency leaves Canada exposed to U.S. policy shifts, such as tariffs on steel and aluminum, which increase project costs. Additionally, Canada's limited LNG export infrastructure—only two terminals are operational—means it's missing out on the global energy boom.

Despite government incentives, such as the Canada Growth Fund and provincial clean energy programs, Canada's energy sector remains a secondary choice for investors. The 2024 M&A activity (39 deals) and 2025 projections (54 transactions) highlight some momentum, but deal values and returns still lag behind the U.S. The Neoen acquisition by Brookfield and Temasek ($14 billion) and CDPQ's Innergex buy ($10 billion) are exceptions, not the rule.

Strategic Capital Allocation: Where to Invest in 2025

For investors, the U.S. energy infrastructure sector offers a clear edge. The IIJA and IRA have created a “golden era” for grid modernization, with utilities planning $121 billion in transmission spending from 2023 to 2026. Companies like TC Energy, which are expanding their U.S. pipeline networks, are well-positioned to benefit. Natural gas, often overlooked in the clean energy transition, remains a critical bridge fuel—especially for data centers and AI hubs that require baseload power.

Meanwhile, U.S. LNG exporters are in a sweet spot. With global demand for energy security rising, the U.S. is outpacing Canada in capturing market share. Investors should also keep an eye on renewable transmission projects, such as the Southline Transmission Project, which are essential for integrating solar and wind into the grid.

Canada isn't without opportunities. Provinces like British Columbia and Quebec are investing in hydro and nuclear projects, but these require patience. For now, the U.S. remains the more attractive bet for capital seeking high returns and regulatory clarity.

Conclusion: Follow the Policy, Follow the Money

The U.S. and Canada both have the resources to lead in energy infrastructure, but only one has the policy and regulatory frameworks to turn that potential into profit. Investors who allocate capital to the U.S. energy sector are betting on a country that's not just building pipelines but building a future. Canada, while making strides, must address its regulatory bottlenecks and geopolitical exposure to close the gap. For now, the message is clear: when it comes to energy infrastructure, the U.S. is the gold standard.