Canada's Prime Minister Mark Carney signed an agreement with Alberta's premier on Thursday that rolls back certain climate rules to spur investment in energy production, while encouraging construction of a new oil pipeline to the West Coast.
Under the agreement, the federal government will scrap a planned emissions cap on the oil and gas sector and drop rules on clean electricity in exchange for a commitment by Canada's top oil-producing province to strengthen industrial carbon pricing and support a carbon capture-and-storage project.
Carney is counting on the energy sector to help the Canadian economy weather uncertainty from U.S. President Donald Trump's tariffs, and is seeking to diversify from the U.S. market which currently takes 90% of Canada's oil exports.
He has relaxed some environmental restrictions implemented by his predecessor, Justin Trudeau, while reaffirming his commitment to net-zero carbon emissions by 2050.
Reuters first reported in September that Carney's government was in discussions with Alberta Premier Danielle Smith on a potential deal to eliminate the emissions cap.
Alberta is also exploring the feasibility of a new crude oil pipeline to British Columbia's northwest coast in order to increase exports to Asia but no private-sector company has committed to building a new pipeline.
Pipeline companies and the Alberta government have repeatedly said significant federal legislative changes - including removing a federal cap on oil and gas sector emissions and ending a ban on oil tankers off British Columbia's northern coast - would be required before a private entity would consider proposing a new pipeline.
Thursday's agreement includes a commitment by the federal government to adjust the Oil Tanker Moratorium Act in order to facilitate oil exports to Asia.
British Columbia Premier David Eby, who opposes a new pipeline through his province, said on Wednesday the legislation should stay in place.
Other pipeline opponents are also speaking out. A coalition of Indigenous groups in British Columbia said this week it will not allow oil tankers on the northwest coast and that the pipeline project will "never happen."
The Trans Mountain pipeline from Alberta to the British Columbia coast, which is owned by the Canadian government and is currently the only option to ship Canadian oil directly to Asian markets, tripled its capacity last year with a C$34 billion ($24.2 billion) expansion.
The federal government and Alberta also said they would conclude an agreement on industrial carbon pricing by April 1 next year.
In addition, the two agreed to cooperate on building the Pathways Plus project, expected to be the world's biggest carbon capture project and designed to capture emissions from Canada's oil sands.
The federal government will also assist Alberta in building and operating nuclear power plants, strengthening its electricity grid to power AI data centers, and building transmission lines to neighboring provinces.
Canadian Association of Petroleum Producers (CAPP) President & CEO Lisa Baiton said: “CAPP welcomes the memorandum of understanding (MOU) between the federal and Alberta governments, which reflects an earnest commitment to collaborate and grow Canada’s oil and natural gas industry. The elimination of the emissions cap, changes to the Competition Act, and the commitment to work together on new market access are all significant steps towards unlocking Canada’s vast natural energy resources and putting us on a path to become the world’s next energy superpower.
“Canadians want to see their valuable oil and natural resources responsibly developed to build prosperity and strengthen the nation's economic sovereignty. They expect this to be done the Canadian way, with innovation, in partnership with Indigenous communities, and with respect for the environment. CAPP and our members are ready to work with the federal and provincial governments to build on the momentum created by this important agreement.”
(Reuters and staff)