THE CANADA-ALBERTA MEMORANDUM OF UNDERSTANDING
Contributed by Robert Lyman © 2025. Robert Lyman’s bio can be read here.
EXECUTIVE SUMMARY
The Memorandum of Understanding signed by the Canadian and Alberta governments on November 27, 2025 has been warmly welcomed by the media and many in the Canadian public as a document that could end the acrimony that has long characterized relations between the two orders of government, potentially lay the foundation for higher investment in the oil and gas industry, support the attainment of climate policy goals, and reduce the risk of successful secessionist movements in Alberta. Consequently, many sources have been hailed the agreement as a major triumph for Prime Minister Mark Carney, one that potentially will increase the prospects for the Liberal Party of Canada to gain a majority in the next Parliamentary elections.
Others, however, have been much less sanguine about what the MOU really means and whether it will offer the advantages initially welcomed by the media. The media also has focused on the potential impact of the agreement on the prospects for a possible new pipeline to transport bitumen from northern Alberta to the British Columbia coast. The government of Alberta will take on the role of project sponsor for the pipeline and intends to submit an application to the Major Projects Office for its approval on or before July 1, 2026. It is recognized that for the project to proceed beyond that, including the review by federal and provincial regulatory authorities, a private sponsor or group of sponsors must come forward.
Many who have analyzed the MOU in detail have commented that the commitments in it are vague and, while requiring upfront action by Alberta, leave in place many of the roadblocks to increased oil and gas development and pipeline construction that existed previously.
The MOU contains the statement that “Canada and Alberta remain committed to achieving net zero greenhouse gas emissions by 2050”. This amounts to a political commitment to an undesirable and unattainable goal.
The timetable envisaged by the MOU is full of risk. Alberta has agreed that it will submit an application for the construction of a new pipeline to the Major Projects Office no later than July,1, 2026, a little more than six months from now. Before that time (i.e. before April, 2026) Alberta must develop a new carbon pricing agreement, administered through the province’s TIER program; sign an agreement to reduce methane emissions by 75% below 2014 levels by 2035; and enter into a trilateral agreement with the federal government and the Pathways partners on an MOU on a “multi-phased approach for delivering a set of emissions reductions projects”. Sometime after that (months or years?) a private sponsor for the pipeline must be found and induced to take the risks associated with sponsoring the project. The private sponsor could take years to study the route and prepare the documentation needed to support an application to the Canada Energy Regulator for a certificate of public convenience and necessity. The CER review and subsequent Cabinet consideration could easily take three years. Then, assuming all approvals are granted and no court cases further delay the process, the project would be built. In effect, Alberta would have to make major financial and political commitments at least four to six years before a pipeline could be in operation.
The federal government agreed to forego the imposition of a cap on the greenhouse gas emissions from the oil and gas sector. Part of the quid pro quo for this was Alberta’s cooperation in “decarbonizing” the oil through construction of a set of projects to capture the CO2 and transport it by pipeline to places where it can be permanently stored (the Pathways Project for CCUS). This project would be hopelessly uneconomic without major government (i.e. taxpayer) subsidies. The federal Tax Credit for Carbon Utilization and Storage already offers to cover 50% of the costs of the Pathways Project. The Government of Alberta, through the Alberta Carbon Capture Incentive Program, is providing a 12% grant for all CCUS projects. The Pathways Consortium has said that this is not enough; the taxpayers need to increase their support from 62% to at least 75%.
The Alberta-Canada MOU is silent on which government (and which group of taxpayers) will be required to increase the financial incentives demanded by the Pathways sponsors. Decisions on this will have to be made well before a new pipeline will be approved or built.
The costs imposed on oil and gas producers due to carbon taxes, methane regulations, and “decarbonization” (i.e. reduced emissions intensity plus the Pathways project) seem likely to make investments in Canada’s oil and gas sector far less appealing than investments elsewhere.
The main beneficiary of the Canada-Alberta MOU would appear to be the Carney government. It has succeeded in creating the probably false impression that climate policy will not harm Alberta’s resource development and economic growth prospects, while leaving uncertain the conditions that need to be satisfied at some point in future. The Net-Zero policy remains in place, unchallenged despite its non-attainability and adverse economic consequences. The MOU delivers mainly hopes, contradictions and strategic ambiguities.
The truth is likely a pipe-dream and not a pipeline….
I don’t understand Mr. Carney’s obsession with net zero carbon emissions. Nor do I understand how he justifies pushing net zero when Brookfield invested billions in fossil fuels and bought the Colonial pipeline in the US? And what about China? Mr. Carney is a proud supporter of China, all while China has the most coal powered plants in the world. How does he explain the hypocrisy?
Feminists should be outraged. Mr. Carney gets the glory while Ms. Smith is left with the hard work of finding private sector investors not only for a pipeline but also for expansion of oil sands production to fill the pipeline. This in spite of headwinds from indigenous groups (loaded up with additional ammo from BC’s DRIPA and Canada’s adoption UNDRIP), foreign financed ENGO’s that will use the courts and protesters to oppose oil sands development and the pipeline, a BC government dedicated to preventing the pipeline, and higher costs of production resulting from the industrial carbon tax, CCUS, and methane emissions reductions.