Key Takeaways
Canadian Prime Minister Carney signed an agreement with the Alberta government to allow a pipeline carrying Alberta’s oil sands to British Columbia for export mainly to Asian markets.
The energy agreement exempts the proposed pipeline from some Canadian climate laws.
In exchange, Alberta will increase its carbon pricing and develop the world’s largest carbon capture program.
A plan for the pipeline is to be submitted by next July, and construction could begin by 2029.
The northern Alberta region has 164 billion barrels of proven oil reserves — one of the largest oil reserves in the world.
Carney sees the agreement as making Canada more independent, as he aims to double Canada’s non-U.S. energy exports.
Prime Minister Mark Carney will lift former Prime Minister Trudeau’s climate laws to allow a new oil pipeline from Alberta to British Columbia’s coast. Carney signed a memorandum of understanding with Alberta’s government, which is a step toward helping transform Canada into a “global energy superpower,” a promise he made during his campaign. Carney has set a goal for Canada to double its non-U.S. exports in the next decade, since over 95% of Canada’s energy exports go to the United States. According to Reuters, almost 99% of oil shipments entered the U.S. duty-free in June. Alberta Premier Danielle Smith claimed that the agreement will lead to more than one million barrels of oil per day for mainly Asian markets. Carney also believes a pipeline can reduce the price discount on current oil sales to U.S. markets.
As reported by the National Post, besides the construction of a new million-barrel-a-day bitumen pipeline from Alberta to the Pacific Coast, the deal includes Alberta being exempted from a set of clean energy regulations and an adjustment of an oil tanker ban off parts of the British Columbia coast. According to CBC, Carney will suspend the proposed federal oil and gas emissions cap and Alberta’s requirements under the Clean Electricity Regulations. The Canadian government is prepared to designate this pipeline as a project of “national interest,” which triggers powers under the Building Canada Act passed in June. That designation means the pipeline — and possibly the tankers associated with transporting the oil — could be exempted from some federal laws, including the Fisheries Act, the Species At Risk Act, and the Impact Assessment Act.
The plan calls for a formal project proposal to be ready by July 2026 and pipeline construction could begin by 2029. The agreement stresses that the pipeline will be privately constructed and financed. The memorandum of understanding mandates consultation with Indigenous groups and Indigenous co-ownership of any infrastructure. The pipeline would lead to the shipment of up to 400,000 additional barrels per day directly to Asian markets, bypassing the need to export through the United States. The Alberta government has pledged $10 million to put together a proposal that the province hopes will later be taken on by the private sector. According to BBC, the plan is in its preliminary stages with no firm route yet identified, though it is expected to run through to British Columbia’s northern coast.
Via the National Post, in exchange, Alberta agreed to raise the province’s industrial carbon price from its current price of $95 per metric ton to a “minimum price” of $130 per metric ton. The exact details, timelines, and future increases are to be negotiated through an agreement no later than next April. Additionally, CBC reports that both Canada and Alberta are moving ahead with Pathways Plus, an Alberta-based carbon capture, utilization, and storage project, which could reduce the emissions intensity of exports from the province’s oil sands. Canada and Alberta are agreeing to dramatically lower methane emissions associated with the oil patch — a 75% reduction target relative to 2014 emissions levels by 2035, as they attempt to reach net-zero carbon by 2050.
According to Politico, the memorandum urges the development of “thousands of megawatts” of new power generation to support the rapid growth of artificial-intelligence computing, including a significant share reserved for a sovereign cloud system serving Canada and its allies. It also calls for the establishment of “large transmission entities” to strengthen connections between Alberta’s grid and those of British Columbia and Saskatchewan.
Background
According to the Associated Press, former Prime Minister Justin Trudeau approved the Trans Mountain expansion in 2016, allowing a major increase in shipments from Alberta’s oil sands to the British Columbia coast. As the project drew strong opposition from environmental and Indigenous groups, Ottawa ultimately stepped in to build and complete it. The expansion’s price tag eventually exceeded $24.3 billion. At the same time, Trudeau rejected the Northern Gateway pipeline, a proposed route to northwest British Columbia that would have cut through the Great Bear Rainforest and carried roughly 525,000 barrels a day from Alberta to Pacific markets, largely in Asia. Northern Alberta holds an estimated 164 billion barrels of proven reserves—among the largest concentrations of crude oil in the world.
Analysis
The risk of trade disruptions from U.S. tariffs is leading Canada to invest in a new bitumen pipeline from Alberta to the Pacific Coast. Although Alberta conceded to raising its industrial carbon price as part of the agreement, Prime Minister Carney’s support of the pipeline is a step toward taking advantage of the province’s vast energy potential by exporting oil to Asian markets. Alberta’s oil sands are the fourth-largest proven oil reserves in the world, and the oil and gas sector contributes to 25% of provincial GDP. Despite being a net-zero banker in the past, Carney has shown some recognition that restrictions against oil and natural gas production inhibit Canadian economic growth and threaten national security.
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