From the Fraser Institute

By Kenneth P. Green

The stiffer carbon tax will make Alberta’s oil sector more expensive and thus less competitive at a time when many analysts expect a surge in oil production. The costs of mandated carbon capture will similarly increase costs in the oilsands and make the province less cost competitive.

As we enter the final days of 2025, a “deal” has been struck between Carney government and the Alberta government over the province’s ability to produce and interprovincially transport its massive oil reserves (the world’s 4th-largest). The agreement is a step forward and likely a net positive for Alberta and its citizens. However, it’s not a second- or even third-best option, but rather a fourth-best option.

The agreement is deeply rooted in the development of a particular technology—the Pathways carbon capture, utilization and storage (CCUS) project, in exchange for relief from the counterproductive regulations and rules put in place by the Trudeau government. That relief, however, is attached to a requirement that Alberta commit to significant spending and support for Ottawa’s activist industrial policies. Also, on the critical issue of a new pipeline from Alberta to British Columbia’s coast, there are commitments but nothing approaching a guarantee.

Specifically, the agreement—or Memorandum of Understanding (MOU)—between the two parties gives Alberta exemptions from certain federal environmental laws and offers the prospect of a potential pathway to a new oil pipeline to the B.C. coast. The federal cap on greenhouse gas (GHG) emissions from the oil and gas sector will not be instituted; Alberta will be exempt from the federal “Clean Electricity Regulations”; a path to a million-barrel-per day pipeline to the BC coast for export to Asia will be facilitated and established as a priority of both governments, and the B.C. tanker ban may be adjusted to allow for limited oil transportation. Alberta’s energy sector will also likely gain some relief from the “greenwashing” speech controls emplaced by the Trudeau government.

In exchange, Alberta has agreed to implement a stricter (higher) industrial carbon-pricing regime; contribute to new infrastructure for electricity transmission to both B.C. and Saskatchewan; support through tax measures the building of a massive “sovereign” data centre; significantly increase collaboration and profit-sharing with Alberta’s Indigenous peoples; and support the massive multibillion-dollar Pathways project. Underpinning the entire MOU is an explicit agreement by Alberta with the federal government’s “net-zero 2050” GHG emissions agenda.

The MOU is probably good for Alberta and Canada’s oil industry. However, Alberta’s oil sector will be required to go to significantly greater—and much more expensive—lengths than it has in the past to meet the MOU’s conditions so Ottawa supports a west coast pipeline.

The stiffer carbon tax will make Alberta’s oil sector more expensive and thus less competitive at a time when many analysts expect a surge in oil production. The costs of mandated carbon capture will similarly increase costs in the oilsands and make the province less cost competitive. There’s additional complexity with respect to carbon capture since it’s very feasibility at the scale and time-frame stipulated in the MOU is questionable, as the historical experience with carbon capture, utilization and storage for storing GHG gases sustainably has not been promising.

These additional costs and requirements are why the agreement is the not the best possible solution. The ideal would have been for the federal government to genuinely review existing laws and regulations on a cost-benefit basis to help achieve its goal to become an “energy superpower.” If that had been done, the government would have eliminated a host of Trudeau-era regulations and laws, or at least massively overhauled them.

Instead, the Carney government, and now with the Alberta government, has chosen workarounds and special exemptions to the laws and regulations that still apply to everyone else.

Again, it’s very likely the MOU will benefit Alberta and the rest of the country economically. It’s no panacea, however, and will leave Alberta’s oil sector (and Alberta energy consumers) on the hook to pay more for the right to move its export products across Canada to reach other non-U.S. markets. It also forces Alberta to align itself with Ottawa’s activist industrial policy—picking winning and losing technologies in the oil-production marketplace, and cementing them in place for decades. A very mixed bag indeed.

Kenneth P. Green

Senior Fellow, Fraser Institute

From the Fraser Institute

By Kenneth P. Green

The pending Memorandum of Understanding between the Carney government and the Alberta governments will reportedly support a new oil pipeline from Alberta’s oilsands to British Columbia’s tidewater. But B.C. Premier David Eby continues his increasingly strident—and factually challenged—opposition to the whole idea.

Eby’s arguments against a new pipeline are simply illogical and technically incorrect.

First, he argues that any pipeline would pose unmitigated risks to B.C.’s coastal environment, but this is wrong for several reasons. The history of oil transport off of Canada’s coasts is one of incredible safety, whether of Canadian or foreign origin, long predating federal Bill C-48’s tanker ban. New pipelines and additional transport of oil from (and along) B.C. coastal waters is likely very low environmental risk. In the meantime, a regular stream of oil tankers and large fuel-capacity ships have been cruising up and down the B.C. coast between Alaska and U.S. west coast ports for decades with great safety records.

Next, Eby argues that B.C.’s First Nations people oppose any such pipeline and will torpedo energy projects in B.C. But in reality, based on the history of the recently completed Trans Mountain Expansion (TMX) pipeline, First Nations opposition is quite contingent. The TMX project had signed 43 mutual benefit/participation agreements with Indigenous groups along its route by 2018, 33 of which were in B.C. As of March 2023, the project had signed agreements with 81 out of 129 Indigenous community groups along the route worth $657 million, and the project had resulted in more than $4.8 billion in contracts with Indigenous businesses.

Back in 2019, another proposed energy project garnered serious interest among First Nations groups. The First Nations-proposed Eagle Spirit Energy Corridor, aimed to connect Alberta’s oilpatch to a port in Kitimat, B.C. (and ultimately overseas markets) had the buy-in of 35 First Nations groups along the proposed corridor, with equity-sharing agreements floated with 400 others. Energy Spirit, unfortunately, died in regulatory strangulation in the Trudeau government’s revised environmental assessment process, and with the passage of the B.C. tanker ban.

Premier Eby is perfectly free to opine and oppose the very thought of oil pipelines crossing B.C. But the Supreme Court of Canada has already ruled in a case about the TMX pipeline that B.C. does not have the authority to block infrastructure of national importance such as pipelines.

And it’s unreasonable and corrosive to public policy in Canada for leading government figures to adopt positions on important elements of public policy that are simply false, in blatant contradiction to recorded history and fact. Fact—if the energy industry is allowed to move oil reserves to markets other than the United States, this would be in the economic interest of all Canadians including those in B.C.

It must be repeated. Premier Eby’s objections to another Alberta pipeline are rooted in fallacy, not fact, and should be discounted by the federal government as it plans an agreement that would enable a project of national importance.