Prime Minister Mark Carney and Alberta Premier Danielle Smith on Thursday announced the signing of a Memorandum of Understanding (the MOU) intended to lower emissions, support natural resource development, and strengthen economic competitiveness. The MOU sets out a framework for enhanced federal-provincial collaboration in the energy sector with the stated goal of achieving net-zero emissions by 2050 while advancing Alberta’s energy-resource potential. The announcement also prompted debate, including references to the potential development of at least one new bitumen pipeline to the B.C. coast. It also prompted the resignation from Cabinet of Steven Guilbeault, Minister of Canadian Identity and Culture and former Minister of Environment and Climate Change.
This bulletin summarizes the MOU’s key objectives, priority projects, and federal and provincial commitments, including actions related to Alberta’s Technology Innovation and Emissions Reduction (TIER) system.
Objectives. The MOU outlines the following objectives:
- Increase production of Alberta oil and gas to contribute to export and national security goals, while reducing the emissions intensity of Canadian heavy oil production to reach net-zero by 2050.
- Expand electricity generation capacity in Alberta for consumer and industrial use, including demand from AI data centres, while achieving net-zero GHG emissions in the electricity sector by 2050.
- Establish electricity and energy policies that advance affordability, grid stability, competitiveness, and long-term investment certainty, and that attract domestic and foreign private-sector capital.
- Reduce regulatory overlap and simplify permitting processes to achieve a maximum two-year approvals timeline.
- Provide opportunities for Indigenous rightsholders to participate in consultation processes and economic activities, including through ownership and partnership arrangements.
Priority projects. The MOU identifies the following priority projects:
- Development of one or more privately financed pipelines, in addition to the Trans Mountain expansion, with Indigenous co-ownership and economic participation. At least 1 million barrels per day of lower-emission Alberta bitumen with access to Asian markets is identified as a priority. An application to the Major Projects Office is anticipated on or before July 1, 2026.
- Construction and financing of the Pathways carbon capture, utilization, and storage (CCUS) network.
- Development of large-scale AI computing capacity, with a significant portion dedicated to sovereign cloud infrastructure for Canada and its allies.
- Expansion of major transmission interties with B.C. and Saskatchewan to support low-carbon electricity supply for oil, LNG, critical minerals, agriculture, data centres, and CCUS-related industries.
Alberta commitments. Alberta commits to undertake the following actions:
- Act as the project proponent to advance a bitumen pipeline to Asian markets (the Pipeline) for designation and authorization under the Building Canada Act.
- Work with Indigenous leadership and utilize the Alberta Indigenous Opportunities Corporation (AIOC) to support Indigenous co-ownership of the Pipeline and the Pathways project.
- Extend the Alberta Carbon Capture Incentive Program (ACCIP) to support Pathways.
- Implement, by July 1, 2026, a policy framework to incentivize major data-centre investment, including sovereign computing capacity.
- Collaborate with Canada on a nuclear-generation strategy, with operational competitiveness targeted for 2050.
- Work with Canada to substantially increase intertie capacity among western provinces (with consideration to the northern regions).
- Collaborate with B.C. to ensure British Columbians share economic and financial benefits associated with the Pipeline.
Federal commitments. Federal commitments include:
- Not implementing the Oil and Gas Emissions Cap and suspending the Clean Electricity Regulations (the CER) in Alberta pending negotiation of a new carbon pricing agreement (the CPA), to be administered through Alberta’s TIER system, on or before April 1, 2026. Upon completion of the CPA and assessment of related measures, Canada is expected to hold the CER in abeyance in Alberta.
- Declaring the Pipeline a priority project of national interest eligible for referral and possible designation under the Building Canada Act.
- Collaborating with Alberta to provide a clear and efficient approval process for the Pipeline under the Act.
- Utilizing the Canada Indigenous Loan Guarantee Corporation to support Indigenous co-ownership of the Pipeline and Pathways.
- If the Pipeline is ultimately approved under the Building Canada Act, enabling the export of bitumen from a strategic deep-water port to Asian markets, including, if necessary, through an appropriate adjustment to the Oil Tanker Moratorium Act.
- Supporting extension of federal investment tax credits and other measures to encourage large-scale CCUS deployment, including Pathways and enhanced oil recovery.
- Working with Alberta on policy supports for nuclear technology, CCUS, and energy storage to enable decarbonization of the electricity system.
- Proposing amendments to the Competition Act to revise certain “greenwashing” provisions (see our earlier bulletin on Budget 2025 here).
Joint Canada-Alberta commitments. Canada and Alberta agree to:
- Engage with B.C. in trilateral discussions on the Pipeline.
- Conclude a methane equivalency agreement by April 1, 2026, targeting a 75% GHG reduction relative to 2014 levels by 2035.
- Work with Pathways partners toward a trilateral MOU by April 1, 2026, outlining phased emissions-reduction initiatives.
- Treat the approval and construction of the Pipeline and the Pathways network as mutually dependent projects.
- Collaborate with other provinces, where appropriate, to support domestic CCUS supply chains and Canadian steel and pipe production.
- Negotiate an impact assessment cooperation agreement by April 1, 2026, reducing duplication and clarifying jurisdictional roles.
- Streamline regulatory processes among federal entities, the Canadian Energy Regulator, the Government of Alberta, and municipalities to achieve a two-year approvals timeline.
Alberta’s TIER system. Canada and Alberta commit to completing the CPA by April 1, 2026, including:
- Designing globally competitive, long-term carbon-effective prices;
- Establishing recycling protocols for carbon levy revenues;
- Setting sector-specific stringency factors for oil and gas and electricity-sector emitters under TIER.
The parties also commit to increasing the minimum effective credit price to up to $130 per tonne from the current $95 per tonne, while assessing the timing for implementation and price escalation. Uncertainty remains regarding how the “minimum effective” price will be determined, particularly as TIER credits often trade below regulated cost of compliance levels.
The CPA is expected to include a financial mechanism to support long-term adherence to commitments and to enhance investment certainty. The parties also agree to cooperate to ensure Alberta’s carbon market functions reliably for large emitters and investors.
Next steps. The MOU provides for the creation of a joint “Implementation Committee” responsible for the following:
- Finalizing a carbon pricing equivalency agreement by April 1, 2026.
- Finalizing a methane equivalency agreement by April 1, 2026.
- Completing a trilateral MOU with the Pathways companies by April 1, 2026.
- Concluding an impact assessment cooperation agreement by April 1, 2026.
- Determining the process for Alberta to submit a pipeline application to the Major Projects Office by July 1, 2026.
- Obtaining federal feedback on Alberta’s AI data-centre policy framework, due July 1, 2026.
- Collaborating on Alberta’s nuclear generation strategy, to be finalized by January 1, 2027.
For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com or Jonathan McGillivray at jonathan@resilientllp.com.
