Feds, Alberta, and Oilsands Companies Sign Deal to Move Forward With Pathways Carbon Capture Project

Prime Minister Mark Carney participates in a signing ceremony with Alberta Premier Danielle Smith in Calgary, Alta., on May 15, 2026. The Canadian Press/Jeff McIntosh

The federal government, Alberta, and five major oilsands companies have announced the signing of a memorandum of understanding that they say will advance the multibillion-dollar Pathways carbon capture and storage project.

The memorandum of understanding (MOU) on the Pathways project was signed July 2, the same day that Alberta submitted its proposal to the Major Projects Office for a new crude oil pipeline from Alberta to the southern coast of B.C.

‘Mutually Dependent’

The July 2 MOU was announced July 13 and proposes to “responsibly” boost oilsands production while lessening carbon emissions. The MOU specifically notes that the proposed new pipeline and the Pathways project are “mutually dependent,” echoing past statements from Prime Minister Mark Carney that any new pipeline will carry “decarbonized” oil.

The Pathways project was put forward by five major oilsands companies that make up the Oil Sands Alliance, namely Canadian Natural Resources, Cenovus Energy, ConocoPhillips Canada, Imperial, and Suncor.

The proposed project, which is estimated to cost $16.5 billion to $20 billion, would use a network of pipelines to transport captured carbon dioxide from several major oilsands facilities in northern Alberta and carry it to underground carbon storage sites near Cold Lake, Alta.

The new agreement proposes that Ottawa and Alberta work together to develop tax and regulatory policies that will incentivize oilsands production and make sure there is sufficient crude oil to fill the proposed new pipeline to B.C.

Specifically, the MOU has four main goals, according to a July 13 backgrounder from Ottawa, namely boosting and diversifying global market access for Canadian oil, cutting greenhouse gas emissions from oilsands operations by a net 16 million tonnes annually by 2045, and incentivizing “substantial oil sands development and production growth.”

It also aims to achieve consistent engagement and economic partnership with indigenous peoples in relation to the proposed pipeline.

Cooperation

Under the July 2 MOU, federal investment tax credits for eligible carbon capture spending are extended until 2035 and cover 50 percent of eligible capital spending on carbon capture equipment and 37.5 percent of spending on related carbon transportation and storage infrastructure.

The MOU lists the Pathways project as being developed in stages, with infrastructure scheduled to be up and running by Jan. 1, 2032, and the full project operational by 2035.

Part of the incentive for companies to meet the emissions reduction targets is derived from Alberta’s own industrial carbon pricing system known as TIER, or the Technology Innovation and Emissions Reduction system.

The TIER framework obligates facilities to hit increasing emissions-intensity reduction targets, with those failing to do so required to buy credits or put larger payments into the TIER fund.

Under the deal, companies that meet the Pathways emissions reduction targets would be subject to lower carbon compliance costs under TIER. Companies that continue working toward further emissions cuts could keep the benefit through 2040.

By contrast, companies that don’t deliver on agreed-upon emissions reduction targets would face stricter benchmarks.

Oil Sands Alliance companies also agree in the MOU to make “commercially reasonable efforts” to prioritize the use of Canadian technology, suppliers, steel, and aluminum for their emissions-reduction infrastructure and equipment needs.

The July 2 MOU is not legally binding, but is intended as a guide for potentially legally binding future agreements between the federal government, Alberta, and individual oil companies that are aimed to be signed by Nov. 15 of this year.

Reactions

Premier Smith praised the signing of the agreement, saying in a July 13 statement that it “shows what can be achieved when governments and industry work together to grow our economy, strengthen our energy security and unlock new opportunities for people across Canada.”

On July 2, Carney spoke of the new proposed pipeline and carbon capture project as a major milestone.

Alberta’s Minister of Energy Brian Jean heralded the July 2 Pathways agreement as a win-win for Alberta energy, calling it “one of the biggest agreements for Alberta in decades,” and saying Pathways and the pipeline will create “tens of thousands of jobs in Alberta.”

Oil Sands Alliance President Kendall Dilling also said the agreement represents a “step forward” for the oilsands industry and Pathways.

“We believe we’ve achieved a framework that is positive for the oil sands industry and provides a step forward to help enable production growth and to advance the Pathways Project,” Dilling said in the July 13 release from the province of Alberta.

Conservative Leader Pierre Poilievre, by contrast, has criticized the broader Alberta–Ottawa arrangement tying the proposed West Coast pipeline to federal carbon pricing and emissions-reduction measures, which he says hamper Canada’s economy.

“Conservatives want a pipeline without a carbon tax, not a carbon tax without a pipeline,” Poilievre said in a May 15 statement, adding that in addition to the industrial carbon tax, federal policies including the oil tanker moratorium on B.C.’s north coast and federal impact assessment legislation are holding back resource development.

On Pathways specifically, Poilievre has previously stated that he would reserve his full opinion until after seeing the Pathways proposal, but said on July 2 that tying Pathways to the new pipeline is “unfair.”

“For the federal government to force Albertans to spend billions of dollars on this project as a condition of building a highly productive and profitable pipeline is unfair,” he told media July 2.

“What the federal government needs to do is get rid of all these conditions, get rid of the industrial carbon tax, the anti-development laws, the Pathways requirement, and let the private sector build this pipeline with private money.”

The NDP has also been critical of carbon capture being tied to the new pipeline, with former NDP environment critic Alexandre Boulerice previously characterizing the plan as “magical thinking.”

“It’s not easy to do, and it’s not really efficient, and the technology is not really proven,” Boulerice told the Hill Times late last year following the original November 2025 Ottawa–Alberta MOU.