What Happened?
Prime Minister Mark Carney and Alberta Premier Danielle Smith issued a joint announcement on Thursday signing a highly anticipated energy memorandum of understanding. This agreement has reset an often-troubled relationship between the province and Ottawa, with the federal government declaring their support for a new bitumen pipeline. Full measures include:
- Removal of the federal emissions cap for Alberta – Ottawa will withdraw its proposed oil and gas emissions cap in exchange for Alberta adopting a strengthened,
- province-specific carbon-pricing framework.
- Removal of federal net-zero power regulations – Alberta will be exempt from federal Clean Electricity Regulations as long as it meets the new carbon-pricing and emissions-reduction commitments outlined in the MOU.
- Support for major projects, including the Pathways project – The federal government commits to advancing approvals and financing tools for the Pathways Alliance CCS project, recognized in the MOU as the largest planned carbon capture initiative globally.
- Agreements related to nuclear power – Alberta and Ottawa will co-develop a nuclear generation strategy by 2027, enabling small modular reactors to support grid reliability and industrial decarbonization.
- Agreements related to sovereign data centres – Both governments will explore incentives and regulatory certainty to attract sovereign, Canadian-controlled data centres, framed as essential for AI, cybersecurity, and economic competitiveness.
- Agreements on strengthening a “tier system” – The two governments agree to modernize Alberta’s TIER (Technology Innovation and Emissions Reduction) system, including raising the industrial carbon price to $130/tonne and tightening performance standards.
- Agreements on methane regulations – Alberta will align with the federal target of a 75% reduction in methane emissions by 2035, supported by harmonized monitoring, reporting, and enforcement measures.
- Agreements on artificial intelligence – The MOU sets out joint work on AI policy, focusing on responsible development, provincial adoption in key sectors, and support for Alberta’s AI research ecosystem.
- Partnership agreements with Indigenous peoples in Alberta and British Columbia – Both governments commit to coordinated engagement with Indigenous nations on major projects, including new energy infrastructure, pathways to shared decision-making, and benefit-sharing mechanisms.
At its core, the MOU is structured to clear the path for a new West Coast energy corridor. Should the pipeline be completed, it will be able to carry a million barrels of oil a day to the British Columbian coast, diversifying Canada’s oil exports for the Asian market.
Prime Minister Carney described the MOU as part of his strategy of developing Canada’s critical sectors while shifting the Canadian economy away from its reliance on U.S. trade. To do this, the federal government has designated the project as one of “national interest,” meaning both the pipeline and the tankers that carry the oil may be exempt from laws like the Fisheries Act, the Species At Risk Act, and the Impact Assessment Act. The federal government was also keen to note that this pipeline will be entirely privately constructed and financed.
Alberta will seek to present its pipeline plan to the federal government’s newly created Major Projects Office for expedited review by July 2026, with the province aiming to have construction begin before 2029.
Additionally, the MOU suspends the proposed federal oil and emissions cap and Alberta’s requirements under the Clean Electricity Regulations. Alberta has also committed to increasing the industrial carbon price in the province from $95/tonne to $130/tonne. Canada and the province will similarly move ahead with Pathways Plus, the Alberta-based carbon capture project, and have agreed to lower methane emissions associated with the oil patch.
Beyond these measures, the MOU seeks to drive initiatives that will enable Alberta to build and operate competitive nuclear power generation, reinforce Alberta’s electricity grid to power sovereign AI data centres, and build large transmission interties with British Columbia and Saskatchewan to better supply power across the three provinces.
What’s Next?
This energy agreement is the culmination of weeks of difficult negotiations between Ottawa and Alberta, with Premier Smith describing the process as the “grand bargain.”
Premier Smith hopes the MOU will send a clear signal to the private sector that Canada is once again a country where significant energy projects can take place. This is especially important because the federal government has not committed any funding for the pipeline, and no other partner has yet come forward, partly due to the same government policies—the emissions cap and the tanker ban—that were addressed today.
A New Model for Ottawa – Province Bargaining
Regardless of Alberta’s intentions, no pipeline will ever be constructed without the consent of Premier David Eby and the B.C. Government. Premier Eby has frequently expressed opposition to the construction, saying he wishes to strengthen the consensus around resource development, not divide it, as he believes this does. Alberta and Ottawa, for their part and as outlined in the MOU, have promised to “collaborate with B.C. to ensure British Columbians share substantial economic and financial benefits of the proposed pipeline.”
B.C. is not alone in its opposition to this MOU. So too are some members of Prime Minister Carney’s caucus and cabinet who have privately expressed discomfort with the Liberals’ commitment to resource development after eight years of Justin Trudeau’s environmental focus.
Saskatchewan will have watched these negotiations with keen interest. Premier Scott Moe has previously asked for his own carve-out on the Clean Fuel Regulations, something that Alberta received today. Prime Minister Carney will likely face renewed pressure to remove these regulations from the province.
For specific questions about what’s in this MOU for your business or how to influence the implementation of initiatives announced in the document, contact us info@mcmillanvantage.com.
