Welcome to Economic Insights, your twice-weekly deep dive into the major projects and policy shifts shaping the Canadian economy.

Stories we are following:

• Ontario has officially passed legislation allowing it to seize control of the land beneath Billy Bishop Toronto City Airport, setting the stage to designate the site as a “special economic zone” to fast-track a multi-billion-dollar jet-capable expansion.
• Canada’s South Bow will decide whether to proceed with its proposed partial revival of the Keystone XL oil pipeline by mid-2027, the company said on Friday, as it announced it has secured the shipper commitments it was seeking ​to advance the project.

Toronto Island airport to be designated special economic zone after provincial takeover (CP)

The Ford government passed legislation this week to officially take over Billy Bishop airport. The Bill officially removes the City of Toronto from the tripartite agreement. 

• Not happy: While Premier Doug Ford has touted the island airport as a “crown jewel” ripe for nation-building, Toronto Mayor Olivia Chow slammed the move as “provincial overreach” that leaves Torontonians entirely in the dark.
• The vision: Backed by the Toronto Port Authority, the expansion aims to lengthen runways to accommodate commercial jets, with the goal of increasing annual passenger traffic from two million to 10 million over the next 25 years. 
• The price tag: Port Authority CEO RJ Steenstra confirmed the $4-to-$5 billion estimated cost will be paid for by airlines and passenger fees, as with other airports throughout the country.
• Lawless: This marks the first time the Ford government will use its Special Economic Zones legislation, which gives the provincial cabinet power to suspend municipal and provincial laws, including environmental assessments and local zoning bylaws. Green Party Leader Mike Schreiner went so far as to call it an attempt to turn the island airport into a “lawless zone” that bypasses basic democratic process.

South Bow targets 2027 decision on Keystone XL partial revival (Reuters)

Calgary-based South Bow Corp. has secured the 20-year shipper commitments needed to advance its “Prairie Connector” pipeline, a partial revival of the cancelled Keystone XL project.

• Refresher: The proposed 550,000-barrel-per-day Alberta-to-Wyoming line, being developed alongside U.S. partner Bridger Pipeline, successfully concluded its open season by locking in long-term contracts from oil companies for roughly 80% of its initial capacity. If greenlit, the project would boost Canadian crude export capacity to the U.S. by 12 percent, keeping pace with domestic production that is forecasted to hit 6.1 million barrels per day by 2030.
• The recycling strategy: South Bow, which spun off from TC Energy in 2024 to manage its oil pipeline assets, isn’t proposing an exact copy of the ill-fated mega-project. While the Prairie Connector will chart a different path through the U.S. to connect into Wyoming, it is designed to utilize portions of the steel pipeline that were already assembled and laid on the Canadian side of the border before the project was halted in 2021.
• Permit hurdle: While U.S. President Donald Trump has already signed an order granting the project its cross-border permit, South Bow CEO Bevin Wirzba wants more assurances. Wirzba stated that the company will not make a final investment decision without proof that the U.S. permit is “durable” enough to survive a potential change in the White House in 2029—alluding to when Joe Biden revoked the original Keystone XL permit on his first day in office. 
• The timeline and cost: Capital markets estimate the Prairie Connector will carry a price tag of roughly $3 billion. South Bow has set a target for mid-2027 to make its final investment decision. If the company achieves the regulatory and political certainty it is looking for, construction is expected to take two to three years.
  

By the numbers:

–0.1 per cent: The annualized contraction of Canada’s real GDP in the first quarter of 2026, according to Statistics Canada. Coming right after a revised 1.0% annualized decline in Q4 2025, the back-to-back negative quarters plunge Canada into a technical recession by the most common economic definition.

1.5 per cent: The positive quarterly rebound consensus economists had predicted for Q1. The massive miss came as a major surprise to Bay Street, driven heavily by a collapse in government spending and deep pullbacks in residential and business investments.

5: The number of consecutive quarterly drops in Canadian business investment. Economists from CIBC and BMO note that domestic corporate spending has completely stalled as the ongoing trade war and punitive U.S. tariffs trigger severe industrial anxiety.

Major projects watch:

– Speaking on The Hub’s Alberta Edge podcast, metals industry veteran Lyle Trytten takes a closer look at the mining developments linked to the Major Projects Office. He questions the strategic value of Ontario’s Ring of Fire (originally staked for chrome, which is not currently in high demand) and voiced caution over the massive Crawford nickel project near Timmins due to its low-grade ore. He points to projects like Saskatchewan’s McIlvenna Bay copper-zinc development, B.C.’s Red Chris copper-gold expansion, and Quebec’s Nouveau Monde Graphite as more “ready for prime time.”

– B.C.’s offshore wind ambitions are drawing global attention to the West Coast, with Vancouver-based Oceanic Wind Energy and global clean-tech giant Ming Yang Smart Energy Group partnering to advance a 2-gigawatt project in the wind-rich Hecate Strait. The area boasts premier Class 7 marine winds, promising a 65 per cent capacity factor during crucial winter months when BC Hydro’s grid faces peak demand. Ming Yang is looking into financing options.

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