Center of Power: Midwest’s Role in U.S.-Canada Energy Trade

Tens of billions of dollars in energy trade occurs every year between the United States and Canada. According to the U.S. Energy Information Administration, the total exceeded $151 billion in 2024 (U.S. dollars). For the year prior, 2023, the Government of Canada pegged the total value of binational energy trade at more than $200 billion (CDN)

At the center of much of this activity on energy trade are the 11 states and four Canadian provinces that make up CSG’s Midwestern Legislative Conference. Here are examples.

Oil and gas

• Seventy energy pipelines cross the border between the United States and Canada, 31 carrying oil and 39 transporting natural gas. Many of these cross-border energy pipelines run through the Midwest. That includes the shipment of crude oil to refineries in states such as Illinois, Indiana, Kansas, Michigan, Minnesota, North Dakota and Ohio. Illinois, whose energy trade with Canada was an estimated $50 billion in 2024, is home to four major oil refineries that process Canadian heavy crude oil and deliver it to markets across the Midwest. Another major refinery lies just over the state line, in the northwest Indiana town of Whiting.
• North Dakota exported about $2 billion in fuel oil and crude petroleum to Canada in 2024. Overall, energy products accounted for more than one-half of North Dakota’s total exports to Canada. And Canada is by far North Dakota’s largest export market: The country was the destination for 70 percent of all the state’s exported goods, energy and otherwise.
• A CSG Midwest analysis of U.S. federal data shows that of all the goods traded with Canada, energy-related products sometimes rank as the top export or import. Fuel oil is the top export to Canada for two Midwestern states: Minnesota and North Dakota. Crude petroleum is the top import from Canada into Illinois, Minnesota, North Dakota and Ohio.

Electricity

• Electricity flows back and forth between the two countries via 35 major cross-border transmission lines. In all, the Government of Canada says it regulates a total of 86 international power lines, of varying length and capacity. This includes high-voltage lines in the Midwest allowing for large-scale, international grid connections between Saskatchewan and North Dakota (one line), Manitoba and North Dakota (two), Manitoba and Minnesota (three), and Ontario and Michigan (four).
• In 2024, 6.3 terawatt-hours (TWh) of Canadian electricity was exported to Minnesota, 5.0 TWh to Michigan, and 0.5 TWh to North Dakota, according to a 2025 Royal Bank of Canada analysis of Statistics Canada data. (For perspective, 1 terawatt-hour is able to power 100 million homes for an hour.) Minnesota and Michigan rank second and third, respectively, among U.S. states in the amount of power imported from Canadian provinces.
• Canada also imports electricity from the U.S. states, and those numbers increased significantly in 2023 — up 70 percent from the year prior. The change was due to a combination of drought conditions in Canada, which limited hydropower generation, and lower, more competitive natural gas prices in the United States, according to the U.S. Energy Information Administration. (Canada remains a net exporter of electricity to the United States.) Over time, the EIA notes, the two countries have developed a “complex and highly interconnected system” that helps balance electric grids on both sides on the border. Power flows back and forth based on changing consumption needs and production capacity, helping ensure system reliability and affordability.

Nuclear power

• In 2023, nuclear power was a source of electricity generation in seven of the 11 Midwestern states: Illinois, Kansas, Minnesota, Nebraska, North Dakota, Ohio and Wisconsin. It makes up more than half of generation in Illinois and more than one-fifth of it in Michigan and Minnesota. Across the United States, the owners and operators of civilian nuclear power plants purchase most of the uranium to made nuclear fuel from other countries. Topping that list of foreign suppliers is Canada. In 2024, uranium ore from the province of Saskatchewan accounted for 33.3 percent of all the uranium purchased by these U.S. plants and 36 percent of their foreign uranium purchases, according to EIA data.

Trade agreements between the two countries have long supported the free flow of energy products and electricity. This includes provisions in the existing United States-Mexico-Canada Agreement (USMCA) as well as in its predecessor, the North American Free Trade Agreement, which first took effect in 1994.

But this year has been marked by some volatility and strain in the two countries’ overall trade relationship. Recent developments also have underscored the importance of U.S.-Canada energy trade.

The Year of Tariffs

The USMCA runs through 2036 and calls for a joint review process every six years (the first review is due in 2026). When leaders of Canada, Mexico and the United States ratified the agreement in 2020, they continued the three countries’ commitment to zero-tariff energy trade in North America.

Tariffs generally, though, became a major point of contention in the U.S.-Canada relationship starting in early 2025.

In February 2025, President Donald Trump declared a national emergency and invoked the International Emergency Economic Powers Act, a 1977 law allowing the president to regulate international trade in a national emergency or wartime.

Trump announced plans to impose 25 percent tariffs on goods from Canada and Mexico. In a nod to the significance of cross-border energy trade to the broader economy, the president made an exception for energy resources from Canada: they would face a lower tariff of 10 percent.

Canada and Mexico soon called for retaliatory tariffs of their own. Following those February announcements, all three countries subsequently announced a 30-day pause to allow for negotiations.

U.S. and Canadian tariffs took effect on March 4, but two days later, the Trump administration announced that USMCA-compliant products would be exempt. Compliance is based on the origin of the product and/or its component parts. Products with all or mostly North American origins are deemed USMCA-compliant.

Canadian energy products were generally covered under this exception and, as a result, not subject to the new U.S. tariffs. Additionally, Canada’s counter tariffs never covered goods in the energy sector.

However, one Canadian province threatened an energy-related tariff of its own in March 2025, when Ontario Premier Doug Ford announced the imposition of a 25 percent surcharge on electricity exports.

Ontario’s electric grid connects to the United States in Michigan, Minnesota and New York. When he announced the 25-cent surcharge on electricity, Ford said it would impact 1.5 million homes and businesses in those three U.S. states, costing up to $400,000 a day.

But he soon suspended this planned electricity tariff.

As of fall 2025, products in most sectors, including energy, were moving tariff-free between the United States and Canada.

The Yale Budget Lab reported in late September 2025 that the effective U.S. tariff rate on Canadian goods was 6.7 percent. That compares to a tariff rate of 7.4 percent for Mexico, 28.4 percent for China, and 16.4 percent for the rest of the world.

And effective Sept. 1, Canada had removed its retaliatory tariffs on most U.S. goods.

In both countries, the imposition of tariffs has been concentrated in industry sectors such as steel, aluminum, machinery and automobiles.

According to a September 2025 analysis from the Royal Bank of Canada, 88 percent of U.S. imports from Canada were duty-free. This includes the many energy resources and products covered under the USMCA.

Electrification in the North American Economy

Today, crude oil imports and exports account for most of the tens of billions of dollars in annual binational energy trade. The transport and trade of other hydrocarbons, such as petroleum products and natural gas, also play a prominent role.

Electricity is a much smaller part of the relationship — at least when measured by sheer dollar value — but its importance only will rise with a continued shift toward electrification in the transportation, buildings and industrial sectors of the U.S. and Canadian economies.

Demand for electricity also is rising due to the proliferation of data centers, which store, process and distribute the data used for artificial intelligence and other computing needs.

“U.S.-Canada electricity trade … is no longer just a solution for reliability and resilience, but critical to provide the increased generation capacity and grid diversification for the United States and Canada to win this global race on artificial intelligence,” Reed Blakemore, director of research and programs with the Atlantic Council Global Energy Center, said during a presentation in July at The Council of State Governments’ Midwestern Legislative Conference Annual Meeting. That 2025 MLC meeting featured a series of sessions in support of the MLC Chair’s Initiative of Saskatchewan Minister Lori Carr — “North American Energy Security: Powering Our Future.”

The remaining sections of this Issue Brief examine important aspects of the current energy relationship between the United States and Canada, and why its future may be increasingly shaped by the need for more electricity and an increased interest among states and provinces in nuclear power.

Cross-Border Pipelines

U.S. states fall into one of five U.S. Department of Energy PADD regions. (PADD stands for Petroleum Administration for Defense Districts.) PADD 2 — which covers the entire Midwest, plus Kentucky, Missouri, Oklahoma and Tennessee — is home to 27 petroleum refineries, representing 19 percent of U.S. national refining capacity, according to the U.S. Department of Energy. Within this region, there are 19,525 miles of crude oil pipelines, 40 percent of the U.S. total.

And PADD 2 is the nation’s top destination for Canadian crude oil, which flows from Alberta and Saskatchewan through pipelines that traverse all Midwestern states to refineries across the region. This crude oil is processed into gasoline, diesel and other fuels, as well as other petroleum-based products. Examples of these products include asphalt, paraffin wax, fuel oil, and gases like butane and propane.

These pipelines are often out of sight, out of mind. But there are exceptions. In July 2010, a ruptured pipeline in Michigan caused hundreds of thousands of gallons of crude oil to spill into and contaminate the Kalamazoo River and a tributary.

Environmental concerns also have been raised about Line 5, an Enbridge-owned pipeline that runs 645 miles from Superior, Wis., to Sarnia, Ontario. It traverses parts of Wisconsin, Michigan and the Straits of Mackinac, where lakes Huron and Michigan meet.

Completed in 1953, the pipeline moves up to 540,000 barrels per day of Canadian crude oil and natural gas liquids (which are refined into propane). But because the pipeline (consisting of two parallel pipes) sits on the 4.5 miles of lakebed at the bottom of the Straits, it’s been identified as a potential environmental nightmare since any major rupture could contaminate both lakes.

Enbridge says the Line 5 crossing was specifically built in an area where cold water temperature and a lack of oxygen at that depth minimize potential corrosion of the pipes, whose walls are three times as thick as those of typical pipelines and were given an exceptionally durable enamel coating.

Enbridge notes, too, that it monitors the Line 5 Straits crossing “24/7, using both specially trained staff and sophisticated computer monitoring systems,” and that it also carries out regular inspections which go “above and beyond regulatory requirements.”

In recent years, the future of Line 5 has been the subject of considerable debate in Michigan. Legislation signed into law in late 2018 (SB 1197) created the Mackinac Straits Corridor Authority, which subsequently approved Enbridge’s proposal to replace Line 5 in the Straits with a new segment of pipeline that would be built in a proposed tunnel through bedrock up to 100 feet under the lakebed. The plan, though, has been opposed by some tribal and state leaders because of the consequences of potential ruptures in the Straits.

As of October 2025, Line 5 remained the subject of separate lawsuits involving Enbridge, Michigan Attorney General Dana Nessel and Michigan Gov. Gretchen Whitmer. Legal action also has been brought by the Bad River Band of Lake Superior Chippewa in Wisconsin to block a proposed reroute of Line 5 around their land. In late October, the U.S. Army Corps of Engineers approved construction permits for that project.

Meanwhile, another high-profile pipeline proposal, Keystone XL, may be returning from the dead.

The first Trump administration approved XL in 2017, but President Joe Biden revoked the permit upon taking office in January 2021. TC Energy Corp. formally abandoned the proposal in June of that year.

But in October 2025, Canada Prime Minister Mark Carney reportedly raised the idea of reviving the proposed Keystone XL pipeline project during a visit to the White House.

There was considerable opposition to Keystone XL when it was first proposed, including among some landowners in Nebraska and South Dakota.

The pipeline would have been the fourth segment of the Keystone pipeline system that runs from Hardisty, Alberta, to refineries in Illinois, Oklahoma and Texas. Keystone XL would have had a capacity of 510,000 barrels per day and gone through parts of South Dakota and Nebraska to Steele City, Neb., where it would have connected to the other existing segments of the Keystone system.

Trade in Biofuels

The United States’ top ethanol-producing states are all in the Midwest, led by Iowa and Nebraska, which rank first and second in the nation, respectively.

Together, the 15 states of the PADD 2 region account for 93 percent of U.S. ethanol plants and 95 percent of production, according to the U.S. Energy Information Administration.

Canada is one of the strongest foreign markets for the ethanol produced at these plants, with demand for biofuels on the rise as the result of the country’s clean-fuel regulations and mandates.

In recent years, in fact, Canada has supplanted Brazil as the top destination for U.S. ethanol exports.

According to the U.S. Department of Agriculture, more than one-third of the nation’s $4.32 billion in ethanol exports went to Canada in 2024. Between 2020 and 2024, the value of U.S. ethanol exports going to Canada jumped from $594 million to $1.5 billion. (Ethanol imports from Canada to the United States totaled $72 million in 2024.)

Additionally, about 92 percent of U.S. exports of biodiesel go to Canada. The Canadian market for U.S. biodiesel more than doubled between 2020 and 2024, from $357 million to $746 million.

Electricity Flows

The U.S. and Canada have shared a fully integrated power grid for more than a century, with electricity currently flowing back and forth between the countries via 35 major transmission lines. (The Canada Energy Regulator says it regulates a total of 86 international power lines; some are quite small and only deliver electricity to customers very close to the border.)

In 2023, the United States bought $3.2 billion worth of electricity from Canada and sold $1.2 billion to Canada, according to the U.S. Energy Information Administration. For that same year, the Government of Canada pegged the total value of electricity between the countries at $5.9 billion (CDN).

Canadian provinces bordering the U.S. work with or are members of U.S. regional transmission operators such as PJM, the Midcontinent Independent System Operator (MISO) and Southwest Power Pool — whose service territories include the Midwest.

For example, in the MISO region, a net total of 8,170 gigawatts (GWh) of Canada-based power was imported to the United States in 2024, according to the Center for Strategic and International Studies.

Compared to the United States, Canada relies much more on hydropower as an electricity source, accounting for 60 percent of all generation. U.S.-generated electricity can help Canada’s hydropower-dependent provinces such as British Columbia, Manitoba and Québec during periods of drought. In turn, carbon-free hydroelectric generation facilities in Canada can help U.S. states and/or electric utilities meet carbon-reduction goals.

One of the more recent cross-border projects involved the opening of a 224-mile international transmission line that delivers hydropower from Manitoba to customers in northern and central Minnesota. The Great Northern Transmission Line is a project of Duluth-based Minnesota Power, which told Minnesota Public Radio in March 2025 that 11 percent of its electricity comes from hydroelectricity generation in Manitoba.

U.S. demand for electricity will rise at a 2.5 percent compound annual growth rate through 2035, thanks mainly to three factors: 1) the proliferation of data centers and electric vehicles; 2) the electrification of buildings; and 3) increased industrial demand, according to a July 2025 Bank of America Institute report. While that might not sound like much, the compound annual growth rate from 2014 to 2024 was 0.5 percent.

Canadian electricity demand is expected to double by 2050, according to Natural Resources Canada’s 2024 report, “Powering Canada: A Blueprint for Success.”

And this uptick in consumption already is occurring. The U.S. Energy Information Administration (EIA) forecast in May 2025 that electricity consumption would rise at an average annual rate of 1.7 percent from 2020 to 2026. In the 15 years prior, the annual increase averaged only 0.1 percent.

According to the EIA, the recent increase in demand is driven mainly by the commercial and industrial sectors, whose average annual growth rates between 2020 and 2026 are predicted to be 2.6 percent and 2.1 percent, respectively. (Residential growth is predicted to be 0.7 percent.) Growth in the commercial sector is due to the rapid rise of data centers and proliferation of artificial intelligence technology, the report said.

A June 2024 report by S&P Global also noted the rise in data centers and estimated how the numbers and power capacity of data centers in four Midwestern metropolitan regions will grow by 2028.

• In Chicago, an increase in the number of data centers from 66 to 122, and from 997 megawatts (MW) of capacity to 1,839 MW.
• In Columbus, Ohio, an increase in the number of data centers from 40 to 85, and from 914 MW of capacity to 1,627 MW.
• In Des Moines, Iowa, an increase in the number of data centers from 27 to 48, and from 712 MW of capacity to 1,286 MW.
• In Omaha, Neb., an increase in the number of data centers from 38 to 46, and from 1,233 MW of capacity to 1,798 MW.

A continued, and perhaps even deeper, cross-border relationship on energy is among the ways to meet increased electricity demand while ensuring grid reliability. This relationship includes the cross-border flow of electricity as well as trade in the raw materials used for power generation.

Canada currently is the main source for imported uranium concentrate extracted from uranium ore — the fuel needed by all civilian nuclear reactors.

In 2024, the owners and operators of U.S. civilian nuclear power reactors purchased a total of 55.9 million pounds of uranium, with only 4.3 million coming from domestically produced concentrate, according to U.S. Energy Information Administration data.

Canada supplied 36 percent of the U.S.-imported uranium concentrate in 2024, followed by Kazakhstan (24 percent), Australia (17 percent), Uzbekistan (9 percent), Namibia and Russia (each at 4 percent).

Canadian uranium ore is sourced almost exclusively from mines in Saskatchewan and, as Canada’s U.S. Embassy notes, currently provides the fuel to power about one in every 21 U.S. homes.

And Canadian uranium could become a more integral part of the Midwest’s electricity portfolio for at least two reasons.

First, Russia, once the top foreign supplier of uranium to U.S. nuclear power plants, plays a minimal role today. That change was punctuated in 2024 with the passage of a federal law banning (with some exceptions) the import of low-enriched uranium from Russia.

Second, nuclear power has drawn renewed interest from policymakers as a source of non-carbon electricity generation.

At the state level, legislatures in states such as Illinois, Indiana, Michigan, Minnesota, Nebraska, North Dakota, Ohio and Wisconsin have introduced bills and/or enacted new laws in recent years on nuclear energy. Several of these measures look to enable or entice development of small modular reactors. SMRs are individual reactors that are typically designed to generate 300 MW or less of power and connect to other modules to boost overall output as needed. Here is an overview of recent actions in the Midwest, on nuclear development in general or SMRs in particular.

Illinois, which gets 54 percent of its electricity from nuclear power, partially lifted its moratorium on new nuclear plants with the passage in 2023 of HB 2473, which allows for the development of SMRs starting in January 2026. By that date, the state’s Emergency Management Agency and Office of Homeland Security must develop a regulatory framework for these types of nuclear reactors. Legislators lifted the remaining moratorium as part of an omnibus energy bill (SB 25) sent to the governor in late October 2025.

Indiana legislators have taken a series of policy steps, first defining SMRs as “clean energy projects” and making them eligible for financial incentives (SB 271 of 2022) and then raising the power rating definition for SMRs from 350 MW to 470 MW (SB 176 from 2023). In 2025, they approved a 20 percent tax credit for SMRs manufactured within Indiana (HB 1007) and established a pilot program allowing eligible electric utilities to partner in developing SMRs (SB 423) within Indiana.

In early November, the state and First American Nuclear announced the company would make a major investment in Indiana, including moving its headquarters to Indianapolis, building facilities to manufacture SMRs, and building an “energy park” to reprocess and reuse spent nuclear fuel.

Ohio in its most recent biennial budget (HB 33) created the Nuclear Development Authority. This nine-member, governor-appointed group is responsible for improving nuclear research and development in Ohio and making the state a “leader in the development and construction of new-type advanced nuclear-research reactors.”

In Michigan, legislation introduced a five-bill package in 2025 to encourage development of nuclear power; among them, HB 4128 would create a corporate income tax credit of $1 per kilowatt hour (KWh) of electricity generated by an SMR sited at a qualified facility — meaning one put into operation by June 1, 2030 — through the reactor’s first 10 years or 10,000 MW generated.

Bills were passed in 2025 in North Dakota and Wisconsin to conduct studies on the feasibility of new and/or advanced nuclear energy generation, including the identification of potential sites. North Dakota’s HB 1025 calls for a legislative management study and provides $300,000. Wisconsin’s SB 125 requires the state’s Public Service Commission to conduct the study and set aside $2 million for it.

In October 2025, Wisconsin legislators introduced SB 502, which calls for an income tax credit for nuclear energy generation beginning in 2030. Under the proposal, nuclear energy facilities would be eligible for an annual credit of $10,000 annually for 10 years and then $1,000 annually for another 10 years. The bill also specifies nuclear power as a “high-priority option, second only to energy efficiency and conservation” and ahead of renewable energy options.

In Canada, Ontario and Saskatchewan plan to bring SMRs online within the next five to 10 years.

The provincial power company Ontario Power Generation is preparing to build four 300 MW small modular reactors. Provincial approval was secured in May 2025, and construction is scheduled to begin in 2026 with the goal of bringing the first reactor online in 2030.

Saskatchewan’s provincial power company, SaskPower, has chosen two potential SMR sites for final evaluation and is aiming toward a decision in 2029 on whether to proceed. If the final decision is to “build,” the goal is for the SMRs to be online by 2035.

Reactivation Plans

Another trend of note: the reactivation of closed traditional nuclear plants. Such plans are proceeding in Michigan, Iowa and, possibly, Wisconsin.

In August 2025, the Palisades Nuclear Plant along Lake Michigan’s southeastern shore in Michigan became the f irst U.S. nuclear facility to be restored to operating status, meaning it can receive nuclear fuel when reassembly and inspections are complete. The plant’s owner, Holtec International, has also proposed building two SMRs at Palisades and for them to be online by 2030.

That same month, the Federal Energy Regulatory Commission approved a request to reconnect Iowa’s Duane Arnold Energy Center to the grid. The plant was decommissioned in 2020; its owner, NextEra Energy, said in FERC filings that it anticipates operations restarting by late 2028.

EnergySolutions, which bought the shuttered Kewaunee Power Station in Wisconsin in 2022, announced plans in May 2025 to explore reactivating it.