Premier Smith negotiates publicly with PM Trudeau: cancel ‘just transition’ and collaborate on carbon capture

Letter from Premier Smith to Prime Minister Trudeau

Premier Danielle Smith invites Ottawa to collaborate with Alberta on carbon capture, utilization and storage investment and halt introduction of Just Transition legislation and oil and gas emissions cap.

Dear Prime Minister:

I am writing in follow up to our meeting of February 7^th, during which we discussed the need for the Government of Canada to halt introduction of the proposed Just Transition legislation and implementation of unachievable targets and measures under the federal Emissions Reduction Plan (ERP) such as the Clean Electricity Regulations (CER) and oil and gas sector emissions cap.

As a much more productive alternative, I invited your government to agree to commencing a collaborative effort between Ottawa and Alberta to develop a series of cooperative initiatives to attract investment and workers into Alberta’s emerging, conventional and non-conventional energy sectors while substantially reducing Canada’s and Alberta’s net emissions.

In that meeting, you expressed a willingness to pursue this course of collaborative action, but requested it be commenced promptly. The morning following my return to Alberta, I met with several of my ministers regarding this issue and can advise as follows.

The Government of Alberta is prepared to work with the federal government on a coordinated approach for a carbon capture, utilization and storage (CCUS) incentive program for the purpose of net emissions reductions in our province while attracting billions in new investments for Alberta-based oil and gas projects, electricity, manufacturing and other sectors.

To this end, we propose coordinating a federal CCUS income tax credit with an expansion of our current Alberta Petrochemicals Incentive Program (APIP) to include CCUS projects. This new incentive program would be in addition to the over $1.8 billion already invested into CCUS projects across the province by the Government of Alberta as well as our province’s additional implicit contribution to CCUS made through our current royalty regime.

Our government is also willing to discuss with your government expanding this coordinated approach to incentivizing other emerging emission reducing technologies as well, though we suggest beginning with agreement on a coordinated CCUS incentive program, so we are able to establish a successful foundation on which to build upon.

To this end, I request that we immediately create a federal/provincial minister-led working group with the objective of reaching agreement on a coordinated provincial-federal CCUS incentive program in the coming weeks.

Prime Minister, I must make it clear that the above invitation for cooperation and collaboration on this CCUS proposal and other energy and climate initiatives comes with one non-negotiable condition.

It is that the federal government refrain from introducing any new federal legislation or policies that materially impact Alberta’s oil and gas resource development, management or workforce participation without the full involvement, consultation and consent of Alberta.

This includes the contemplated Just Transition legislation and implementation of unachievable targets and measures under the federal Emissions Reduction Plan (ERP) such as the Clean Electricity Regulations (CER) and oil and gas sector emissions cap.

Each of these initiatives, as currently understood, would pose an unconstitutional and existential threat to the Alberta economy and the jobs of hundreds of thousands of Albertans.

As an alternative to this policy package of economic destruction, Alberta proposes working collaboratively with the federal government on aggressively advancing emission reducing technologies in Alberta as outlined above while simultaneously increasing export of LNG through the lens of replacing higher emitting fuels around the world to meet aggressive but achievable overall emissions reduction in Alberta’s oil and gas and other sectors. Ideally, our government would like to incorporate these collaborative federal-provincial initiatives into our soon-to-be-released Alberta Emissions Reduction and Energy Development Plan.

I must once again emphasize to you, Prime Minister, that although Alberta is willing to work as an active partner with the federal government on a coordinated approach to reducing Alberta’s and Canada’s net emissions, under no circumstances will our province accept the imposition of arbitrary and unachievable targets or policies that spell the end of meaningful long-term investment in Alberta’s energy sector, and as a result, the imminent phase out of Alberta’s largest industry. In such circumstances, our government would have no other choice but to oppose these destructive policies using every tool at our disposal in order to protect Albertans, their jobs and our province’s future.

Prime Minister, this issue is far larger and more important than you or I. There are literally hundreds of billions in public revenues and investments, and millions of jobs, riding on Alberta and Ottawa working together – instead of in conflict – on energy and environmental issues to create an attractive and certain investment climate that millions around the world want to invest in and move to.

Failure to do so will not only undermine Canada’s prosperity by driving billions in energy investment and revenue out of Canada and into the hands of the world’s most brutal and undemocratic regimes, but will also result in increased energy poverty and food insecurity in many of the world’s most impoverished countries, a loss of our nation’s global influence, and most ironically, an increase in the world’s global emissions due to an increased use of coal, as opposed to LNG, by developing nations to meet increasing world demand for electricity.

Canada has the potential to become a global energy superpower with all of the economic and political influence for good that such standing would grant us. We can and must seize this opportunity without delay. Please come to the table and work collaboratively with Alberta on likely the most important economic issue facing this country in a generation.

I look forward to reading your response and to learning of the appointment of your government’s side of the federal/provincial minister-led working group for the CCUS incentive program so that our two governments can take our first steps in this critical collaborative effort.

Related Topics:#AlbertaOttawa #CarbonCapture #DanielleSmith #JustinTrudeau #JustTransition #SmithTrudeau feature

Up Next

Cenovus CEO Pourbaix to step down, become executive chair; Jon McKenzie to be new CEO

Don't Miss

Alberta health minister promises $158M in budget to recruit front-line health staff

Government of Alberta

This is a news release from the Government of Alberta.

Follow Author

Alberta and Ottawa ink landmark energy agreement

Alberta / 4 days ago

Alberta introducing dual practice health care model to increase options and shorten wait times while promising protection for publicly funded services

Alberta / 4 days ago

Premier Smith explains how private clinics will be introduced in Alberta

Alberta

READ IT HERE – Canada-Alberta Memorandum of Understanding – From the Prime Minister’s Office

Published on November 28, 2025

Todayville

From Energy Now

Prime Minister of Canada

Calgary, Alberta

PREFACE

At this pivotal global moment, Canada and Alberta, working closely with Indigenous Peoples and industry, must work together cooperatively, and within their respective jurisdictions, to foster the conditions necessary for infrastructure, including pipelines, rail, power generation, a strong and integrated transmission grid, ports and other means that will unlock and grow natural resource production and transportation in Western Canada. As a result, Canada will be able to reach its international export goals and develop new technologies including Artificial Intelligence (AI), and, through innovation and intergovernmental cooperation, be a source of clean energy to lower global greenhouse gas (GHG) emissions.

WHEREAS

Canada and Alberta remain committed to achieving net zero greenhouse gas emissions by 2050;
Alberta and Canada will work together to achieve the shared objective of establishing Canada as a global energy superpower, unlocking the growth potential of Western Canada’s oil and gas (including liquified natural gas (LNG)), renewable energy, critical minerals, and other resources that the world needs;
Alberta and Canada recognize their obligations to consult with, and where appropriate accommodate, Indigenous Peoples; and
Canada and Alberta are committed to respecting Aboriginal and Treaty rights, engaging in early, consistent, and meaningful consultation with Indigenous Peoples, in a manner that promotes reconciliation, and respects the rights and cultures of Indigenous Peoples while advancing economic opportunities through Indigenous ownership and partnerships.

THE OBJECTIVES

The Governments of Canada and Alberta are focused on achieving the following objectives and have developed the following clear actions towards this goal:

Increasing production of Alberta oil and gas to reach Canada’s export and national security goals, creating hundreds of thousands of new jobs, while simultaneously reaching carbon neutrality by, in part, reducing the emissions intensity of Canadian heavy oil production to best in class in terms of the average for heavy oil by 2050.
Increasing electrical generation for consumer and industrial use on Alberta’s electricity grid, including meeting the needs of AI data centres, while simultaneously reaching net-zero greenhouse gas emissions for the electricity sector by 2050.
Creating electricity and energy policies that address consumer affordability, electricity grid stability, economic competitiveness and long-term competitive certainty, that attract Canadian and foreign sources of private sector capital investment.
Reducing layers of regulatory overlap and simplifying regulatory systems to ensure a maximum 2-year timeframe for permitting and approvals with the goal of shorter project approval timelines where feasible.
Providing meaningful opportunity for Indigenous rightsholders to participate in consultation processes and economic opportunities through Indigenous ownership, partnerships and benefits.

THE PROJECTS

Construction of one or more private sector constructed and financed pipelines, with Indigenous Peoples co-ownership and economic benefits, with at least one million barrels a day of low emission Alberta bitumen with a route that increases export access to Asian markets as a priority. The application for this pipeline project will be ready to submit to the Major Projects Office on or before July 1, 2026. It is agreed this new pipeline would be in addition to the expansion of the Trans Mountain pipeline for an additional 300,000 to 400,000 barrels per day destined for Asian markets.
Construction and financing of the world’s largest carbon capture, utilization, and storage (CCUS) project (Pathways) for the purpose of making Alberta oil among the lowest carbon intensity produced barrels of oil in the world.
Construction of thousands of megawatts of AI computing power, with a large portion dedicated to sovereign cloud for Canada and its allies.
Construction of large transmission interties with British Columbia and Saskatchewan to strengthen the ability of the western power markets to supply low carbon power to oil, LNG, critical minerals, agricultural, data centres and CCUS industries in support of their sustainability goals.

THE COMMITMENTS

Alberta commits to:

Act as proponent for advancing the development of a bitumen pipeline to Asian markets, that offers the opportunity for Indigenous co-ownership and other forms of economic benefits, for designation and authorization under the Building Canada Act.
In consultation with Indigenous leadership, utilize the Alberta Indigenous Opportunities Corporation (AIOC) to help backstop Indigenous co-ownership of the bitumen pipeline project and, if appropriate, Pathways.
Extend the Alberta Carbon Capture Incentive Program (ACCIP) to support Pathways.
Foster the development of sequestration permitting, worker training, and the capability for Alberta exports of CCUS-related products and services.
On or before July 1, 2026, implement a policy framework to incentivize large investments in data centre development, including incentives for Canadian sovereign computing.
On or before January 1, 2027, collaborate with Canada to develop a nuclear generation strategy to build and operate competitive nuclear power generation that can serve the Alberta and inter-connected markets by 2050.
Collaborate with Canada to significantly increase the inter-tie transfer capability between the western provinces (with consideration to the northern regions) to build the low carbon generation and transmission grid that supports the growth of low intensity heavy oil, LNG, critical minerals, agriculture, data centres and CCUS industries for export growth and domestic use.
Collaborate with B.C. to ensure British Columbians share substantial economic and financial benefits of the proposed pipeline.

Canada commits to:

In consideration for the mutual commitments agreed to in this MOU, Canada will not implement the Oil and Gas Emissions Cap, which has not yet been put into effect.
Acknowledge Alberta’s approach to regulating heavy electricity generation emitters through Alberta’s Technology Innovation and Emissions Reduction (TIER) program for Alberta to provide long-term certainty and time needed by industry and innovators to develop the needed CCUS, direct air capture, nuclear infrastructure and other emissions technologies necessary to achieving a net-zero power grid by 2050.
Suspend immediately the Clean Electricity Regulations (CER) in Alberta pending a new carbon pricing agreement, which includes the electricity sector, administered through Alberta’s TIER program to be negotiated by the parties on or before April 1, 2026. Upon completion of the new carbon pricing agreement and factoring all other measures to the satisfaction of both parties, Canada will place the CER in Alberta in abeyance.
Declare that an Alberta bitumen pipeline to Asian markets as a priority, that offers opportunities for Indigenous co-ownership and economic benefits, is a project of national interest and can be referred to the Major Projects Office for consideration of designation under the Building Canada Act.
Collaborate with Alberta to provide a clear and efficient approval process for the Alberta bitumen pipeline under the Building Canada Act.
In consultation with Indigenous leadership, utilize Canada Indigenous Loan Guarantee Corporation to help backstop Indigenous co-ownership of the bitumen pipeline project and, if appropriate, Pathways.
If an Alberta bitumen pipeline is ultimately approved under the Building Canada Act and provides opportunities for Indigenous co-ownership and shared economic benefits, Canada confirms that it will enable the export of bitumen from a strategic deep-water port to Asian markets, including if necessary through an appropriate adjustment to the Oil Tanker Moratorium Act.
Extend federal ITCs and other policy supports to encourage large scale CCUS investments, including Pathways and enhanced oil recovery in order to provide the certainty needed to attract large additional sources of domestic and foreign capital.
Work collaboratively with Alberta to design policy supports that enable deployment of nuclear technology, CCUS and energy storage to enable decarbonization of the electricity system, while ensuring its reliability and affordability.
As outlined in Budget 2025, propose amendments to the Competition Act to remove some of the “greenwashing” provisions that are creating investment uncertainty.
Undertake to conduct good faith consultations with Alberta on the development and implementation of federal regulatory or policy measures that might impact Alberta industry and the shared goal of making Canada a global energy superpower.

Canada and Alberta together will:

Canada and Alberta agree to engage with British Columbia immediately in a trilateral discussion on the pipeline project, and during the potential development and construction of the bitumen pipeline referred to in this MOU, and to further the economic interests of B.C. related to their own projects of interest that involve the Province of Alberta including interties. In addition, Canada will work with B.C. on other projects of national interest in their jurisdiction.
Canada and Alberta also agree to engage meaningfully with Indigenous Peoples in both Alberta and British Columbia on this project, with the involvement of the B.C. Government for engagement with B.C. First Nations.
Work collaboratively to design and commit to globally competitive, long-term carbon effective prices, carbon levy recycling protocols, and sector-specific stringency factors for large Alberta emitters in both the oil and gas and electricity sectors through Alberta’s TIER system. The TIER system will ramp up to a minimum effective credit price of $130/tonne. The parties will conclude an agreement on industrial carbon pricing on or before April 1, 2026.
Examples of issues to be addressed in the new agreement include the date for introduction of the effective price and the price increases over time.
This industrial carbon pricing agreement will include a financial mechanism to ensure both parties maintain their respective commitments over the long term to provide certainty to industry, and to achieve the intended emissions reductions.
Recognizing Alberta’s jurisdiction over the TIER system, Canada and Alberta agree to work co-operatively to ensure the Alberta carbon market functions reliably and provides a predictable basis for decision-making by industry and investors. This includes a shared undertaking that following the completion of this Memorandum of Understanding, the two governments will work co-operatively to ensure the application of Alberta’s carbon pricing system (including pricing and stringency) is adapted to the specific circumstances of the electricity sector, the oil and gas sector, and other large emitters such as fertilizer and cement sectors.
Enter into a methane equivalency agreement on or before April 1, 2026, with a 2035 target date and a 75% reduction target relative to 2014 emissions levels.
Work cooperatively with the Pathways partner companies to develop and enter into a tri-lateral MOU on or before April 1, 2026 for a multi-phased approach to delivering a set of emissions savings projects (the “Phase 1 Pathways Projects”), focused predominantly on carbon capture and storage, solvent-based replacements or other actions taken by Pathways that reduce emissions intensity. The Phase 1 Pathways Projects will be built and commence operations in a staged manner between 2027 and 2040 to achieve committed emissions reductions at date-certain intervals. Canada and Alberta agree this tri-lateral MOU and the approval and commencement of the initial Phase 1 Pathways Projects will be a precondition to the commencement of the approved bitumen pipeline referred to in this MOU.
Canada and Alberta agree that the approval, commencement and continued construction of the bitumen pipeline is a prerequisite to the Pathways project, including the extension of the Alberta ACCIP Program.
Canada and Alberta agree that the Pathways Project is also a prerequisite to the approval, commencement and continued construction of the bitumen pipeline, given that the two projects referred to in this MOU are mutually dependent.
Canada and Alberta agree that in order to hold all parties to account for all phases of the Pathways projects, the trilateral MOU with Pathways must include effective enforcement mechanisms to ensure the completion of all phases of the infrastructure and the associated emissions reductions by the Pathways companies as outlined in the MOU. Such mechanisms could include, but are not limited to, tax and regulatory measures.
Canada and Alberta agree to work collaboratively, including with other provinces where appropriate, to develop domestic carbon capture supply chains and Canadian steel and pipe production supply chains.
Negotiate a cooperation agreement on impact assessments on or before April 1, 2026, that reduces duplication through a single assessment process that respects federal and provincial jurisdictions.
Work cooperatively to streamline the regulatory processes among federal agencies, the Canadian Energy Regulator, the Alberta government and municipalities to achieve a maximum 2-year timeframe for approvals while targeting shorter approval timelines where feasible.
Work cooperatively with Indigenous parties in Alberta to consult and accommodate on the CO2 pipeline and capture and storage facilities related to Pathways.
Continue to work together to achieve the objectives set out in this MOU.
Establish a communications protocol whereas each party must agree to public communications of this MOU and its content prior to information being released.

IMPLEMENTATION COMMITTEE

Canada and Alberta will appoint an Implementation Committee responsible for delivering the following outcomes:

A carbon pricing equivalency agreement on or before April 1, 2026.
A methane equivalency agreement on or before April 1, 2026.
A tri-lateral MOU with the Pathways companies on or before April 1, 2026.
A cooperation agreement on impact assessments by on or before April 1, 2026.
Determining the means by which Alberta can submit its pipeline application to the Major Projects Office on or before July 1, 2026.
Acquiring feedback from the federal government for Alberta’s policy framework for AI data centres which is to be finalized by Alberta on or before July 1, 2026.
Collaborating with Alberta on the design of Alberta’s nuclear power generation strategy which is to be finalized by Alberta on or before January 1, 2027.

Alberta

Falling resource revenue fuels Alberta government’s red ink

Published on November 28, 2025

Todayville

From the Fraser Institute

By Tegan Hill

According to this week’s fiscal update, amid falling oil prices, the Alberta government will run a projected $6.4 billion budget deficit in 2025/26—higher than the $5.2 billion deficit projected earlier this year and a massive swing from the $8.3 billion surplus recorded in 2024/25.

Overall, that’s a $14.8 billion deterioration in Alberta’s budgetary balance year over year. Resource revenue, including oil and gas royalties, comprises 44.5 per cent of that decline, falling by a projected $6.6 billion.

Albertans shouldn’t be surprised—the good times never last forever. It’s all part of the boom-and-bust cycle where the Alberta government enjoys budget surpluses when resource revenue is high, but inevitably falls back into deficits when resource revenue declines. Indeed, if resource revenue was at the same level as last year, Alberta’s budget would be balanced.

Instead, the Alberta government will return to a period of debt accumulation with projected net debt (total debt minus financial assets) reaching $42.0 billion this fiscal year. That comes with real costs for Albertans in the form of high debt interest payments ($3.0 billion) and potentially higher taxes in the future. That’s why Albertans need a new path forward. The key? Saving during good times to prepare for the bad.

The Smith government has made some strides in this direction by saving a share of budget surpluses, recorded over the last few years, in the Heritage Fund (Alberta’s long-term savings fund). But long-term savings is different than a designated rainy-day account to deal with short-term volatility.

Here’s how it’d work. The provincial government should determine a stable amount of resource revenue to be included in the budget annually. Any resource revenue above that amount would be automatically deposited in the rainy-day account to be withdrawn to support the budget (i.e. maintain that stable amount) in years when resource revenue falls below that set amount.

It wouldn’t be Alberta’s first rainy-day account. Back in 2003, the province established the Alberta Sustainability Fund (ASF), which was intended to operate this way. Unfortunately, it was based in statutory law, which meant the Alberta government could unilaterally change the rules governing the fund. Consequently, by 2007 nearly all resource revenue was used for annual spending. The rainy-day account was eventually drained and eliminated entirely in 2013. This time, the government should make the fund’s rules constitutional, which would make them much more difficult to change or ignore in the future.

According to this week’s fiscal update, the Alberta government’s resource revenue rollercoaster has turned from boom to bust. A rainy-day account would improve predictability and stability in the future by mitigating the impact of volatile resource revenue on the budget.