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by Yogi Schulz
Alberta Premier Danielle Smith and Prime Minister Mark Carney signed an MOU Implementation Agreement on May 15, 2026, that outlines various commitments and a timeline for approval of the UCP government’s much-sought-after crude oil pipeline to the West Coast. The agreement also advances Carney’s dreams of pulling Canada out of the U.S. orbit.
Premier Danielle Smith called it “a good day for Alberta and for Canada. We’re much closer to attaining our joint ambition to make Canada into a global energy leader and a trusted supplier of responsibly produced, lower emissions energy in the world.”
Prime Minister Mark Carney said, “Today’s agreement reinforces that Alberta and Canada are lands where the opportunities are plentiful, the rules are clear, and one project means one review. We are building a Canada that works with a more prosperous, sustainable, and resilient economy for all.”
Last week’s agreement contains significant progress and builds on the Memorandum of Understanding (MOU) Canada and Alberta signed in November 2025. Various parties must still conclude agreements on significant topics before the MOU can reasonably be considered implemented.
Significant Progress
“The MOU Implementation Agreement is a meaningful step toward restoring confidence in Canadian energy infrastructure,” says Michael Binnion, President of Questerre Energy Corporation. “However, the underlying economics deserve a clearer hearing.”
Agreed pipeline approval timeline
The federal government and Alberta agreed to the following timeline:
- July 1, 2026 – Alberta will submit its crude oil pipeline plan to the Major Projects Office. The submission will include a recommended route, estimated construction costs and a destination port.
- October 1, 2026 – The federal government will declare the pipeline to be in Canada’s national interest and fast-track it for construction approval.
- September 1, 2027 – The pipeline will receive construction approval.
Also on Friday, the federal government released its plan to simplify and accelerate federal reviews and the regulatory process for major projects. The plan largely abandons the much-criticized Impact Assessment Act.
Concern: Premier Smith and others have expressed the concern that this pipeline approval process not be stalled, bogged down, delayed or made to wait and wait and wait. The concern stems from a decade of disappointing experience.
However, Prime Minister Carney is adamant that this time will be different.
Pathways CCUS project of the Oil Sands Alliance
The federal government and Alberta reaffirm that construction of the Pathways CCUS project and the crude oil pipeline project are mutually dependent.
The federal government confirms its support through the Carbon Capture, Utilization, and Storage Investment Tax Credit (CCUS ITC), covering about 50% of the capital cost. Alberta confirms its support through the Alberta Carbon Capture Incentive Program (ACCIP), covering about 12% of the capital cost. The governments expect oilsands producers to pay for the remaining 38%.
The federal government retains the option to decrease the Carbon Capture, Utilization, and Storage Investment Tax Credit to no less than 20% in the future.
Concern: The oilsands producers are unwilling to pay their share because other jurisdictions don’t require producers to bear the cost of CCUS, creating a significant competitive issue. This problem may yet scuttle the pipeline project.
Concern: The GHG emissions benefit Pathways CCUS will deliver is modest, given its enormous cost. Oilsands development will likely proceed better without the project.
Concern: Prime Minister Carney’s actions appear constrained by climate goals that reflect the depth of support for Steven Guilbeault’s unrealistic views within the Liberal Party caucus.
Alternatives: Instead of implementing the expensive Pathways CCUS project, which produces no revenue, oilsands producers can:
- Use their CO2 emissions for Enhanced Oil Recovery (EOR) projects that produce net income.
- Use the Investment Tax Credit (ITC), which the federal government recently expanded to include EOR, to improve its profitability.
- Continue the progress they’ve made in reducing their GHG emissions, as they have for two decades.
- Use their CO2 emissions to manufacture one or more of the industrial materials that require CO2 as an input.
Carbon market
The agreement increases the carbon price gradually from $95 per tonne in 2026 to $130 per tonne in 2035. From there, the price will increase by 1.5% per year, reaching $140 per tonne in 2040. This price trajectory is a noticeable reduction from the federal government’s previous proposal.
The federal government and Alberta agreed on various measures to improve the functioning of the carbon credit market, driving it more by supply and demand than mandated targets. Alberta will continue to operate its carbon markets and ensure the overall operational function of TIER.
Concern: Some producers are concerned that the agreed carbon price undermines Canada’s competitiveness, given that producers in other jurisdictions do not pay such a cost. At a carbon price of $130 per tonne, producers would incur a minimum of 50 cents per barrel in compliance costs, up to a maximum of $2 per barrel.
Electricity grid growth and stability
The federal government and Alberta will work collaboratively to double the capacity of the electricity distribution grid. Electricity generation will expand the use of natural gas and develop lower-carbon energy sources.
The federal government will extend the Clean Electricity Investment Tax Credit to support major high-voltage intra-provincial transmission projects.
This initiative is positive because it recognizes the:
- Major continuing role of natural gas-fired electricity generation. That was a contentious issue in the previously proposed Clean Electricity Regulations.
- Need to rapidly increase electricity generation in Canada to meet the demands of electrification and AI data centres.
- Value of intra-provincial transmission projects to improve the utilization of renewable energy electricity generation, and grid resilience.
Significant Losers
Canadian taxpayers
Governments are expecting Canadian taxpayers to indirectly pay for most of the $20 billion capital cost of the Pathways CCUS project and billions more in annual operating costs.
Concern: Many Canadian taxpayers already pay significant taxes and are experiencing an affordability crisis. Adding the cost of the Pathways CCUS project increases the burden.
Concern: Governments are using the ITC to finance the Pathways CCUS project. The ITC reduces government tax revenue, which is badly needed to pay for interest expenses on existing debt and to reduce that debt.
Concern: Are all these costs, risks and the forgone value worth it just so the Liberal government can achieve some climate change bragging rights on the international stage?
Significant Loose Ends
Various parties must still conclude significant actions to implement various components of the MOU. These include the following.
Private sector proponent for the pipeline
A private-sector proponent with the significant technical expertise and financial capacity required to build and operate the pipeline has yet to come forward.
Concern: The most likely proponents will be cautious because development work on previous pipeline proposals that were cancelled inflicted significant losses.
Consultations with various Indigenous Peoples
Consultations with various Indigenous Peoples must still be organized and completed.
Concern: While the majority of Indigenous Peoples appear to favour the pipeline, a noisy, determined minority opposes it. Consultations are at risk of being drawn out by legal challenges, as has occurred with previous pipeline proposals.
British Columbia
The B.C. government and many of its residents remain outspoken opponents of any new pipeline. Many erroneously believe that:
- Blocking pipelines will accelerate the energy transition to address climate change.
- Pipelines are dangerous despite an 80-year track record that contradicts that claim.
Concern: These extreme views seriously delayed and added significant costs to the recently completed TMX pipeline.
The federal government’s declaration that TMX was in the national interest previously overruled these objections. That will likely happen again.
Conclusions
The benefits of implementing the contemplated MOU are huge for Canada. The benefits include:
- Increasing Canada’s economic growth and employment.
- Building investor confidence in Canada as a country for business investment.
- Strengthening national unity.
- Increasing government Crown Royalty and tax revenue.
However, governments often fail to recognize that “each new cost and inefficiency that international competitors do not face compounds the challenge for Canadian producers — particularly in the various commodity price environments,” says Michael Binnion, President of Questerre Energy Corporation.
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