Prime Minister Mark Carney signs a pipeline memorandum of understanding with Alberta Premier Danielle Smith in Calgary on Thursday.Jeff McIntosh/The Canadian Press
It was supposed to be all about an oil pipeline, but the memorandum of understanding that Prime Minister Mark Carney and Alberta Premier Danielle Smith signed this week looks a lot more like a major shift in energy policy.
For Alberta and its oil patch, a potential bitumen line that would ship one million barrels a day to the West Coast is the obvious centrepiece. But look at all the other items in the hopper: halts to clean electricity and oil and gas emissions cap regulations, transmission and power grid upgrades, nuclear energy, artificial intelligence and carbon capture. This goes well beyond a bid to ship more crude to Asia.
And to hammer home the shift from the federal Liberals’ climate priorities of the past decade: Steven Guilbeault, the former environment minister who had championed several of the policies now being unravelled, resigned from Mr. Carney’s cabinet. He and many other environmental advocates have lamented the change in direction by the Prime Minister, who had previously been recognized as the leading exponent of climate finance.
Now, the Prime Minister has staked his government on cultivating Canada’s ability to construct major industrial projects, and quickly, to kickstart the domestic economy in response to U.S. President Donald Trump’s punishing trade war.
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Alberta’s long-standing grievance has been an inability to build oil pipelines to tidewater at will, and now Mr. Carney and Ms. Smith, newly aligned, are set to retest Canadians’ appetite for such a project, against the wishes of B.C. Premier David Eby and Coastal First Nations.
But to Avik Dey, chief executive officer of Edmonton-based Capital Power Corp., a pipeline is one feature in a federal-provincial deal that has morphed into a larger strategy to put Canada’s resource wealth and infrastructure to work.
“I’m not talking about pipelines. I’m talking about economic development. The linkage of a broader energy policy to how do we consume, extract and market energy in this country is not about oil versus gas versus electricity. It’s about what’s in our net economic interest as Canadians, and how do we accomplish the things that we want to accomplish in this country because the reality is we need all of those things,” Mr. Dey said in an interview.
Capital Power has its sights on providing the electricity needed for data centres in Alberta for the surge in artificial intelligence demand, with its natural-gas fired Genesee power plant generating the juice. Under the MOU, Alberta would be carved out of federal clean electricity regulations, which require provinces to start phasing out gas-fuelled power starting in 2035. Once new rules are established, it could open up several investment opportunities for the company, Mr. Dey said.
“Yesterday’s announcement materially changes things for us because now we’ve got an environment, a regulatory environment, that allows us to look at building new infrastructure in Alberta to go solicit and find new customers for power in Alberta, and the conditions are there to be able to make investments with certainty,” he said.
Capital Power’s Genesee power plant near Edmonton in 2022. The company has its sights on providing the electricity needed for data centres in Alberta.Supplied/The Canadian Press
About the pipeline, the MOU spells out conditions for a new line to B.C’s northwest coast. They include the need for a private-sector backer, Indigenous co-ownership and a higher industrial carbon price in Alberta. In exchange, Ottawa agrees to lift the clean-electricity requirements, suspend its planned cap on oil and gas emissions and find a workaround to a ban on oil tanker traffic on the northwest coast.
Both governments would offer financial supports for the $16.5-billion carbon capture and storage project proposed by the Pathways Alliance of major energy companies, a development aimed at reducing the climate impact of northern Alberta’s oil sands.
Calgary’s business community cheered the developments. It almost has the feel of the Western Accord – the 1985 agreement between the federal government of then-prime minister Brian Mulroney and the Western provinces that ended oil and gas price and export controls imposed under the National Energy Program.
Though, with numerous potential roadblocks still in place and a recent history of deep divisions between the two jurisdictions, it’s still too early to declare it a love-in.
“The trust between Alberta and Ottawa was at record lows over the past decade. So one MOU will go a long way, but it will not absolutely erase 10 years of problems and challenges for the private sector,” said Adam Legge, CEO of the Business Council of Alberta.
Advocates for tougher climate action have harshly criticized the deal with Alberta. These new provisions are in addition to other changes to environmental policies under Mr. Carney, such as scrapping the consumer carbon tax and pausing the rollout of the electric-vehicle sales mandate for 2026 and launching a review of the policy.
“Most concerningly, it opens the door to not only Alberta – but any province – renegotiating new deals on federal climate policies, which will only serve to delay climate action and sow continued investment uncertainty, at a time when Canada must urgently attract private capital to its economy,” Chris Severson-Baker, executive director of the Pembina Institute, an Alberta-based environmental think tank, said in a statement.
The MOU includes setting a target to reduce emissions of methane by 75 per cent from 2024 levels by 2035. That represents an unnecessarily long period to cut emissions of the gas that is 28 times more potent than CO2 as a contributor to climate change, Mr. Severson-Baker said.
Mr. Carney defended the sweeping changes, telling reporters on Thursday that Canada can only meet its climate objectives through “massive investments. And so we need agreements like this in order to drive that massive investment.”
If a new pipeline is the linchpin to new energy policy, its biggest risks are in disputes with British Columbia and the affected Indigenous nations. The proposal has support from a number of Alberta First Nations, but those whose territories encompass the Western end of such a project remain opposed, especially to lifting the tanker ban.
“We will never consent to allowing oil tankers in our coastal waters,” Marilyn Slett, president of Coastal First Nations, said this week. Her organization comprises nine nations. “We will never tolerate exemptions to an oil tanker ban that has existed for over 50 years, and it is foundational to protecting our economy and our way of life.”
Premier Eby has called the pipeline concept a distraction, as it does not yet have a detailed route or a private-sector proponent. Lifting the tanker ban could also jeopardize Indigenous support for other major projects in the region, he has warned.
Jeremy Barretto, co-lead of the national major projects team at the law firm Cassels Brock & Blackwell LLP, said he was surprised there was no explicit mention of the Coastal First Nations in the MOU, given their importance to the process and the now-accepted practice of engaging with affected Indigenous communities at the start.
The risk is that the proposal could meet the same fate of previous pipeline proposals, and get bogged down in the courts. Indeed, Ms. Slett said her organization would consider mounting a legal challenge.
“Looking at the glass half-full, it’s good that the federal government and Alberta are talking. Does it get Alberta a pipeline? No. But it’s a first step, and I think these governments and B.C. should talk, and these governments and Indigenous nations should talk,” he said.
“It’s good, because the alternative is just a private proponent throwing in an application and then hoping in three, five, 10 years they will get an approval. That just didn’t work.”
With a report from Emma Graney