$34B gain shows markets like pipeline option, but investment decision should wait: ISF research

Authors stress that the opportunity to invest is valuable today but a final investment decision should be delayed until risks are assessed, future market conditions are clearer and private financing materializes.

KINGSTON, Ont./Oct. 1, 2026.

A proposed West Coast oil pipeline is expected to pass another milestone with an announcement today that the project is of national interest under the Building Canada Act. ISF researchers have analysed market responses each step of the way. 

Professors Yrjö Koskinen and Nga Nguyen have found that market responses were initially muted when an MOU on the pipeline was signed by Prime Minister Mark Carney and Alberta Premier Danielle Smith in November 2025. But there was a significant market response to the May 15, 2026 implementation agreement, which included clear milestones for the project and was associated with C$34 billion in abnormal shareholder gains (a 3.79% increase) for Alberta-based energy companies. More recent announcements in July didn’t have any noticeable effect on the stock markets.

What does this mean? The option to build a pipeline has real value. And that’s how investors saw the May 15 announcement, as an option to keep open rather than a final commitment to build. The authors’ interpretation of the findings is that the value of the final investment decision is still undetermined and uncertain.

“The option to build a pipeline has value precisely because it lets us wait,” said Dr. Koskinen, who is Director of Research at the Institute for Sustainable Finance at Smith School of Business, Queen's University and BMO Professor in Sustainable and Transition Finance Haskayne School of Business, University of Calgary. “Once construction begins and proceeds, much of that investment cannot be recovered. Let’s keep the option open and prudently make the final investment decision only when we know more about the speed of the energy transition, oil demand in Asia, construction costs and shipper commitments.”

About the study

These initial findings are from a forthcoming ISF paper titled “What Did Stock Markets Think of the Proposed West Coast Bitumen Pipeline? Evidence from Four Event Studies”. Download and read the two-page summary on ISF’s website.

“The market’s initial reaction was striking. We would love to know whether these stock gains will last, but we do not yet have enough data for a long-term study. For now, all we can say is that investors responded strongly and positively to the May 15 announcement, not that the effect will persist,” said Dr. Nguyen, Associate Professor of Finance at Université du Québec à Montréal (UQÀM).

A real option preserves the choice to invest when conditions are favourable without requiring an immediate commitment, the authors write. Here, it means maintaining the approvals, route access and commercial arrangements needed for potential pipeline construction. Final investment decision criteria should include estimates about post-2035 Asian demand for Canadian heavy oil, the impact of electrification on global oil prices, and how U.S.-Canada relations affect existing export markets and the value of diversification.