Canada, Alberta, Oil Sands Pact Targets Emissions, Exports

On July 2, 2026, Canada and Alberta announced they had concluded a trilateral Memorandum of Understanding (MOU) with the Oil Sands Alliance (OSA), comprised of Canada Natural Resources Limited, Suncor Energy Inc., Cenovus Energy Inc., Imperial Oil Limited and ConocoPhilips Company.

1. Expanded Market Access: Expansion and diversification of global market access for Canadian oil including through the West Coast Oil Pipeline (WCOP).
2. Production Growth: Supporting the development of fiscal and regulatory frameworks to enable substantial oil sands development and production growth.
3. Emissions Reduction: The shared objective for the OSA to reduce emissions by 16 million tonnes per annum (net), aligned with the Canada-Alberta Implementation Agreement.
4. Indigenous Peoples: Respecting consistent and early engagement and meaningful consultation with Indigenous Peoples while advancing Indigenous economic opportunities relating to the WCOP.

Key considerations

Effective July 2, 2026, the MOU outlines key actions to be undertaken by Canada, Alberta and the OSA.

I. Emissions Reduction Projects

• OSA companies intend to reduce their emissions by 6 million tonnes per annum (mtpa) through the Pathways CCS project.
  • The full 6 mtpa (net) of Pathways CCS is expected to be completed by January 1, 2035.
  • The shared transportation and storage infrastructure is expected to be operating by January 1, 2032.
  • Each company's specific commitments and milestones will be set out in definitive legal agreements.

II. Additional 10 Mtpa of Emission Reductions

• Canada, Alberta and the OSA recognize a common goal of achieving a further 5 mtpa (net) of reductions by 2040, and an additional 5 mtpa (net) by 2045.
  • These reductions may come from expanding the CCS projects, or by using other technologies or practices that become available over time.
  • Canada and Alberta will maintain appropriate fiscal support to enable the required investments.

III. TIER Stringency Rate Incentive

• The intention of the MOU is to use industrial carbon pricing - specifically, the feature known as "stringency" - as an incentive to deliver on the agreed emissions reductions.
• Alberta's industrial carbon pricing program, the Technology Innovation and Emissions Reduction (TIER) Regulation, requires GHG emissions intensity benchmarks to tighten every year. This is known as "stringency".
  • As stringency increases, a facility must reduce its emissions intensity more quickly, purchase additional credits, or make larger payments into the TIER Fund to remain compliant.
• The trilateral MOU rewards OSA companies for achieving agreed emissions reductions by slowing the annual tightening of their TIER benchmarks, thereby lowering their carbon compliance costs.
  • Companies that do not deliver the agreed reductions are penalized and face more stringent benchmarks and higher compliance costs.
  • The MOU codifies this through the stringency rate incentive.

More specifically:

• OSA companies will reduce their TIER stringency from 2% to 1% if they achieve their share of the 6 mtpa of emissions reductions from CCS.
• Members that are taking clear action toward their share of the subsequent 5 mtpa of emissions reductions can keep the 1% rate through 2040.
  • However, if members fail to achieve their full share of the additional emissions reductions, their benchmark will tighten by 1.5% annually from 2035 to 2040.
• The same approach applies to the second 5 mtpa of emissions reductions for 2040 to 2045.
  • OSA companies that take demonstrable action can keep the 1% rate through 2045.
  • However, OSA companies that fail to deliver by the end of 2044 will face the full 2% annual tightening rate for 2040 to 2044.

IV. Participant Commitments

Oil Sands Alliance

• The OSA companies have agreed to advance the emissions reductions projects in line with agreed milestones.
• They have agreed to work with Canada and Alberta to support oil sands production growth associated with the new WCOP.
• They have agreed to prioritize Canadian technologies, suppliers and supply chains, including Canadian steel and aluminum.

Government of Canada

• Canada has agreed to advance financing to support operating costs for CCS projects, including measures to enhance the durability of the Clean Fuel Regulations (CFR).
• Canada has agreed to review and address technical clarifications and industry concerns related to the CCUS Investment Tax Credit.
• Canada and the OSA have agreed to establish a regulatory working group to improve the efficiency and effectiveness of federal statutes and regulations governing oil sands development.

Government of Alberta

• Alberta has agreed to implement financial supports to enable the oil production growth needed to underpin new export capacity, including the pipeline to Asian markets and the Trans Mountain Expansion (TMX) optimization.
• Alberta has agreed to extend its Carbon Capture Incentive Program to 2035 and issue a Carbon Sequestration Agreement for the Pathways CCS projects and its planned storage complex.
• Alberta has agreed to apply a 120-day approval timeline for qualified projects and establish a bilateral working group with the OSA to address provincial regulatory barriers to oil sands investment and growth.

V. Expanded Market Access

• Canada, Alberta and the Oil Sands Alliance recognize that the WCOP and the Pathways project are mutually dependent, and that production growth, with proper fiscal and regulatory frameworks in place to support that growth, is essential to underpin the WCOP.

VI. lndigenous Peoples

• Canada, Alberta and the OSA will respect the rights of Indigenous Peoples of Canada recognized and affirmed by Section 35 of the Constitution Act, 1982. They recognize the importance of consistent and early engagement and meaningful consultation with Indigenous Peoples.
• Canada, Alberta and the OSA acknowledge that Alberta and Canada may have a duty to consult and, if appropriate, accommodate Indigenous Peoples arising from their respective actions and decision-making related to the WCOP and related emissions reductions, which are mutually dependent.
• Canada, Alberta and the OSA are committed to pursuing opportunities for Indigenous economic participation in emissions reductions and egress related activities.
• Canada, Alberta and the OSA will work cooperatively, and commit to sharing information and coordinating engagement and consultation activities, where possible, to ensue efficiency and effectiveness in their processes.

Next steps

Canada, Alberta and OSA will establish a trilateral working group to advance the goals and objectives as set out in the trilateral MOU.

This MOU is also intended to inform the development of the future binding Definitive Agreements among Canada and Alberta with each of the OSA companies, with target signings on or before November 15, 2026.