“To Have and to Have Not”

North American Strategic Resources:
Energy and Rare Earth Elements

  • “Canada as the 51st state” remains an important component of American political rhetoric.
  • The United States sees Canada as an important potential source of strategic resources, particularly energy, rare earth elements, and water (which will be addressed in a forthcoming CIB).
  • American “grand strategy” vis-à-vis Canada may focus increasingly on securing exclusivity over Canadian resources.
  • This may be accomplished through the deployment of crippling tariffs, hostile mergers and acquisitions, pulling out of key treaties and bilateral agreements, or even sovereignty violations.

Energy Independence and Keystone XL

Prime Minister Carney’s meeting with US President Donald Trump in Washington last week yielded relatively few concrete outcomes. However, both leaders identified “priority files,” steel, aluminum, and energy, in particular.  There were strong indications that the Keystone XL pipeline may be back on the table as a component of the energy file. 

KXL, as it is known, was cancelled under the Biden administration. It was envisioned as an expanded and streamlined version of the existing Keystone pipeline, which carries Canadian crude oil from Alberta, through the American west, to refineries on the Texas Gulf coast. In its original conception, KXL, which has been assessed as an important factor in US energy security, would have increased Keystone delivery capacity from 591,000 barrels per day to 830,000. All this increase would be for domestic US consumption rather than export. 

Restarting KXL is a daunting prospect, especially given the financial impact of its last cancellation: the government of Alberta had over $1.5 billion invested in the project. But opening it up for discussion, even negotiation, is another indicator that Canada has what the United States does not, in this case a dependable “onshore” (or, at least, “on-continent”) supply of crude oil that would help to secure US energy independence. And as Canada seeks to decouple its economy from its dependence on American export markets, Washington’s “grand strategy” vis-à-vis Canada may focus increasingly on consolidating exclusivity over Canadian resources. 

It's More Than Just the Crude: Rare Earth Elements

Petroleum isn’t the only strategic resource in play here. So-called “rare earth elements” (REEs) – like yttrium, dysprosium, samarium, and scandium – are used in the manufacture of a whole range of consumer products, from EV batteries to wind turbines. Most importantly, they are critical to military weapons systems, where they are used in everything from aircraft power generators to missile guidance and control motors, to noise cloaking devices and laser targeting systems. A single F-35 fighter aircraft contains about kilograms of rare earth material.

The problem is that the United States, and especially its massive defence industry, is almost entirely dependent on imported REEs. China is by far the world leader in both REE production and research and, with around 50% of the world’s REE reserves, it is actively developing and expanding extraction and refinement capacity for what it promotes as “China’s oil.”

For China, this represents real geopolitical and geoeconomic leverage, especially in its ongoing trade disputes with the United States. Recently, China imposed strict new export controls on REEs. Foreign firms seeking to purchase and export magnets, AI technology and semiconductors that include Chinese REEs will require Ministry of Commerce approval on a case-by-case basis. Export licenses for military technology applications, meanwhile, are unlikely to be approved. This has provoked a furious response from the United States, including the threat of cross-the-board 100% tariffs on Chinese imports as well as retaliatory export controls of its own. 

At this point, it is impossible to tell how this latest iteration in the ongoing US/China trade dispute might play out. But given the importance of REEs to the American defence industry, as well as the fact that there is only one REE mining and production facility in the country, it is highly probable that the United States will begin actively seeking out new sources of REEs. 

Some of the largest proven reserves of REEs on the planet are in Canada, about 35% of known Chinese reserves. While extraction and exploitation of Canadian REEs is not particularly well-advanced, in 2024, the Saskatchewan Research Council opened the first Canadian REE processing plant. Intended to move REE production away from China, the plant received partial funding from the US Department of Defense as part of an initiative to secure critical supply chains. So, as with energy, Canada represents an important potential source of REEs for the United States, with the added advantage of proximity and without the political complications involved with other source countries like China, Russia, India, and the Democratic Republic of the Congo.

Why Is This Important?

Despite characterization of the latest Trump – Carney meeting as “positive, substantive,” the President also said that he views Canada as an “economic competitor and that there is “natural conflict” between the two nations.  And references to Canada as the potential “51st State remain very much part of the MAGA political rhetoric. Perhaps not coincidentally, Greenland, the other major subject of US expansionist musings, is also believed to be an important source of REEs. 

While many Canadians (and many Americans) are becoming inured to it, this kind of language, used publicly in the context of a trusted and longstanding ally, is extraordinary. The United States has already shown its willingness to reduce traditional bilateral and multilateral relationships – from trade to defence to intelligence-sharing – to a strictly utilitarian lowest common denominator. 

The United States will soften its rhetoric towards Canada until such time as it needs what we’ve got: energy, REEs, or water. At that point it will use all means at its disposal, including tariffs, sanctions, and even possible violations of Canadian sovereignty (Canadian REE reserves are concentrated in Labrador and the Arctic) to get what it needs.  

This assessment was completed using information valid as of 1800 EDT, 25/10/14