Carney, Smith reach energy agreement that could see pipeline construction start in 2027

Carney, ian douglas smith expected to denote vim sell between Ottawa and Alberta

The federal and Alberta governments have advanced a climate and energy agreement that could see construction on an oil pipeline to the West Coast start as early as September 2027.

Prime Minister Mark Carney and Alberta Premier Danielle Smith made the announcement on Friday in Calgary. The agreement, which builds on the memorandum of understanding that the Alberta and federal governments signed in November, includes a plan to increase Alberta's industrial carbon price, though at a slower pace than previously projected.

The agreement would see Alberta submit a proposal for an oil pipeline to the major projects office by July 1, and the federal government designate it as a project of national interest by Oct. 1.

The Alberta government says design and construction "may commence as early as Sept. 1, 2027." Both governments said that the process will respect Canada's duty to consult with Indigenous peoples, and that they will engage with British Columbia in discussions on the pipeline application.

There is no private sector proponent or route for a possible pipeline. The Alberta government says it will act as the project's proponent in submitting the proposal to the federal government's major projects office.

An official speaking on background at a technical briefing Friday said the Alberta government expects the pipeline could start carrying oil no later than 2033 or 2034.

Friday's agreement follows the memorandum of understanding between the two governments last November that included a carbon price plan and a path toward building a pipeline.

Last week, the federal government proposed sweeping changes to speed approvals for major projects such as pipelines by cutting regulatory timelines and streamlining assessments.

Ottawa moves to fast-track major projects as talks with Alberta advance

The agreement also reaffirms both governments' commitment to the Pathways Project, a proposed carbon capture, utilization and storage project, and says that the construction of the Pathways and pipeline projects are "mutually dependent."

Last year, Alberta froze its industrial carbon emission price at $95 per tonne.

The difference between the effective carbon price and the headline price is the way in which companies accumulate credits to comply with their emission limits. 

The effective carbon price — the market price — is the price at which credits are bought and sold on the open market.

The headline price is what companies pay the Alberta government to reach compliance. The money goes into a general fund to invest in emissions reduction technology.

Friday's agreement also sees Alberta commit to a minimum floor price for those credits beginning in 2030.

The agreement appears to put Alberta's target below the national carbon price that is supposed to apply to all provinces and territories. The headline price was supposed to rise to $170 per tonne by 2030.

The lower price would force the federal government to be more lenient with other provinces that follow the federal price. A judge ruled in 2021 that all jurisdictions need equal treatment for carbon pricing.

It's not clear how the agreement will impact the federal government's emission reduction targets.

The agreement also says the clean electricity regulations will remain in abeyance in Alberta pending the outcome of a legal challenge.

If the rules are upheld, Canada and Alberta will enter negotiations on an equivalency agreement under the regulations. If the regulations are found to be unconstitutional, the federal government would repeal them.

On Thursday, Carney announced a new national strategy to double the capacity of Canada's electrical grid by 2050, which would include an expanded role for natural gas power.

More to come

Senior producer, digital

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