The deal links pipeline construction directly to a carbon capture project that has scaled back its own targets
Canada's two most consequential energy governments struck a deal Friday that could see a new oil pipeline to the West Coast under construction by September 2027.
No private proponent has been named, no route confirmed, and the carbon price is set to rise regardless.
Prime Minister Mark Carney and Alberta Premier Danielle Smith signed the agreement in Calgary, building on a memorandum of understanding both governments signed in November.
According to CBC News, Alberta will submit a pipeline proposal to the federal government's Major Projects Office by July 1, and Ottawa will move to designate it a project of national interest by October 1.
An official speaking on background told the outlet the pipeline could start carrying oil no later than 2033 or 2034.
The deal sets Alberta's effective industrial carbon price on a path to $130 per tonne by 2040 and the headline price — what companies pay the Alberta government for compliance — to $140 per tonne by that time.
Alberta froze its industrial carbon price at $95 per tonne last year.
The headline price was previously expected to reach $170 per tonne by 2030 under the national framework.
A 2021 court ruling cited by the outlet requires equal treatment across jurisdictions, meaning Alberta's lower trajectory will force Ottawa to ease requirements on other provinces that follow the federal price.
Smith called the carbon pricing concession "a pretty big concession" on Alberta's part, telling reporters her preference would be "somewhere around $50 a tonne."
She said industry would save "billions" in compliance costs under the new schedule.
The deal also ties the pipeline to Pathways, a proposed carbon capture, utilization and storage project, stating both are "mutually dependent."
The Pathways targets have been scaled back from an initial 4.2 megatonnes per year by 2030 to six megatonnes by 2035, with an overall reduction goal of 16 megatonnes by 2045.
Industry reaction was split.
Adam Waterous, executive chairman of Strathcona Resources, told CBC News the agreement is a mixture of good and bad news, calling the higher carbon price "a pretty tough message to hear."
The Oil Sands Alliance, representing five of Canada's largest oilsands companies, said the deal "provides greater clarity" but ultimately adds uncompetitive costs to Canada's industry.
ATCO chief executive officer Nancy Southern told BNN Bloomberg she believes "all of us in industry will find ways to make ourselves just as competitive as we have been in the past with a new carbon price."
Waterous also said the industry holds a different view on the value of "decarbonized oil."
Smith and Carney have used the term to describe oil processed with carbon capture technology, though environmentalists have called it greenwashing.
"They have not seen evidence that buyers will pay a premium for decarbonized oil," Waterous told CBC News.
There is currently no private sector proponent for the pipeline.
Alberta said it will act as proponent in submitting the proposal, and Social Services Minister Jason Nixon told the outlet conversations with industry are going "very, very well."
Intergovernmental Affairs Minister Dominic LeBlanc said the federal government "will obviously look at the details of that proposal" and make a decision in the fall on whether it meets national interest criteria, including consultation with Indigenous rights holders.
BC Premier David Eby told the same outlet the federal government is "rewarding bad behaviour" given separatist pressures in Alberta.
"It cannot be the case that the projects that get prioritized in Canada are those where a premier threatens to leave the country," Eby said.
Carney said he will meet Eby next week.
A confirmed route has not been finalized, though Smith told CTV News Alberta has been examining five potential port options.
Former federal environment minister Catherine McKenna told The Canadian Press the pricing schedule "doesn't make sense from an environmental or economic perspective," and said on social media the deal is "so disappointing," adding it "leaves our kids to pay the price."
The Pembina Institute said the deal will "undermine clean energy investment and accelerate climate change," while the Canadian Climate Institute said it will "put Canada's target of net zero by 2050 well out of reach," according to CBC News.
Carney dismissed those concerns, saying the deal "more than compensates" for potential emissions from the pipeline.
The federal government provided no emissions modelling to support that claim.
Conservative Leader Pierre Poilievre praised Smith but criticized Carney for moving too slowly, calling for construction to begin this year and the industrial carbon price to be scrapped altogether.
NDP Leader Avi Lewis called the agreement Carney's "official surrender to the oil and gas lobby," according to the same outlet.
A court earlier this week threw out a petition seeking to put a separation question on the ballot, ruling it should never have been issued and that Smith's government neglected its duty to consult First Nations, BNN Bloomberg reported.
Smith said Alberta will appeal.
