The controversial memorandum of understanding (MOU) on fossil fuel development between the federal and Alberta governments has undergone a dramatic metamorphosis, with the fossil companies it was meant to serve fighting hard to blow it up, while climate hawks who broadly opposed it try to preserve key elements of the deal.
It was a very different scene in late November, 2025, when Prime Minister Mark Carney and Alberta Premier Danielle Smith signed an agreement that called for up to 1.4 million barrels per day of additional oil sands development, at least one new pipeline from Alberta to Canada’s West Coast, and a massive carbon capture and storage (CCUS) hub in northern Alberta. The MOU also committed the two governments to:
• Refer the first of “one or more private sector constructed and financed pipelines, with Indigenous peoples co-ownership and economic benefits” to the federal Major Projects Office by July 1, 2026;
• Introduce an “adjustment” to the federal ban on northwest coastal tanker traffic to give the pipeline access to Asian markets;
• Make each of the proposed megaprojects, the pipeline and Pathways, contingent on the other;
• Abandon the federal government’s watered-down, long-delayed cap on oil and gas emissions, which wasn’t to take effect until 2030-2032;
• Suspend the federal Clean Electricity Regulations in Alberta pending a new industrial carbon pricing regime that was to operate through the province’s Technology Innovation and Emissions Reduction (TIER) program, aiming to create certainty for investors with a minimum effective carbon credit price of $130 per tonne (Smith moved to undercut the TIER regulation less than two weeks after signing the MOU);
• Adopt a methane equivalency agreement that provides for Alberta to reduce its emissions of the climate super-pollutant by 75% from 2014 levels by 2035, five years later and from a more forgiving baseline year 2014 as opposed to 2012) than Ottawa’s commitment at the COP28 climate summit in 2023 (Alberta took steps to weaken its methane regulations two days after that deal was announced);
• Develop a nuclear generation strategy by January 1, 2027;
In the immediate aftermath, federal environment and climate minister and lifelong climate hawk Steven Guilbeault resigned from Cabinet, while Carney received a standing ovation when he showed up to discuss the MOU with the Calgary Chamber of Commerce.
• Build thousands of megawatts of AI computing power, while building new grid connections to Alberta from 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”;
• Ensure that British Columbians “share substantial economic and financial benefits of the proposed pipeline.”
That Was Then…This Is Now
Since then, the April 1 deadline for many of the key elements of the MOU has come and gone, amid reports that the details of an industrial carbon price had emerged as a key point of contention between the two governments. Bloomberg News reported in late April that an agreement was within sight, and this week iPolitics said the federal government is standing firm against industry opposition to what it calls an “uncompetitive” carbon price.
In March, the Canadian Climate Institute calculated that the industrial carbon price would cost oil sands companies the equivalent of one Timbit per barrel.
But in the months since, fossil industry voices have been in an all-out messaging campaign to cancel major elements of the MOU.
The most recent leading edge of that effort was a May 1 Globe and Mail op ed by Martha Hall Findlay, a former Liberal Member of Parliament and now director of the University of Calgary School of Public Policy. Hall Findlay called for Canada to abandon the carbon capture and storage hub, recently rebranded as Pathways Plus, that was meant to be a centrepiece of the “grand bargain” in the MOU, after acknowledging that she’d “devoted several years of my life” to building the original industry alliance that pushed the project forward.
Instead, she said, Canada should pursue “economic diversification” by building new pipelines and other export capacity, without the CCUS project the industry had put forward as a way to offset its emissions. It was an abrupt turnaround from her reaction when the MOU was signed.
“The support wasn’t always there… to have those two [Carney and Smith] in those roles talk about how absolutely critical the Pathways project will be to making all of this happen, I felt like I wanted to cry,” she told CBC at the time. “For those of us who’ve been working on some of these things for a long time and feeling like sometimes it was just like banging our head against a wall, or a few walls… there’s a huge amount to do, but today was extraordinary.”
Even if proponents of the carbon capture hub had been able to attract investors, rather than lobbying persistently for ever more generous and possibly permanent taxpayer subsidies, the industry never acknowledged that the technology was still expensive and prone to failure—and that even if it worked as advertised, it would never touch the 80% of the emissions in a barrel of oil that enter the atmosphere after end users burn the final product.
In her more recent op ed, Hall Findlay left those concerns behind by arguing for a radical reframe of the MOU.
“It is historic and remains critical not only for our national economy but our national unity,” she said of the Nov. 27 deal. “So let’s build on it. Let’s reframe the effort into a better version of Pathways, one that uses its public-private and federal-provincial collaborations to support more [fossil] energy production and the building, instead of a CCUS project, of a pipeline to sell more of what we have to the world.”
The newly-rebranded Oil Sands Alliance, previously known as the Pathways Alliance after it rebranded from Hall Findlay’s original Oil Sands Pathways to Net Zero Alliance, issued a statement Monday contending that progress on the MOU has been too slow, The Canadian Press reports.
“Global events over the past few months highlight the importance of affordable, reliable energy in people’s lives and to the health and well-being of national economies, including Canada’s,” the group wrote. [No disagreement on that—Ed.]
“We are at risk of letting this opportunity pass Canada by,” the alliance added. “Because of complex regulatory processes, uncompetitive carbon frameworks, and fiscal systems that do not incent growth, there has not been a major new greenfield oil sands project sanctioned in Canada since 2013 and investment has dramatically declined.”
‘Meaningful Action’ Wanted
The Calgary-based Pembina Institute challenged those claims in a fact check issued Tuesday.
“It is simply false to claim that carbon pricing and the Canadian regulatory environment have prevented new greenfield development in the oil sands,” said Janetta McKenzie, director of Pembina’s oil and gas program. “There are greenfield oil sands projects that have long since received the necessary regulatory approvals, but that companies have chosen not to take forward.”
Oil sands producers still increased production and increased revenues, but made a “strategic choice”—along with the rest of the global oil industry—“to protect shareholders from future price disruptions by moving away from long-term projects and investments, and instead focusing on cost-cutting through layoffs, efficiency through automaton, and economies of scale through corporate mergers,” McKenzie added. “As a result, Canadian oil and gas production increased by more than 47 per cent from 2012-2023, setting new records each year up to and including 2025.”
That same day, Pembina and five other national or international climate organizations urged Carney to protect the MOU provisions on industrial carbon pricing, clean electricity, and methane controls.
“A year into your mandate, it is more important than ever that you begin to deliver meaningful action on policies that will scale domestic clean energy solutions, reduce emissions, and set Canada up for economic success in a rapidly decarbonizing world,” wrote the executive directors or CEOs of the Pembina Institute, Clean Energy Canada, Environmental Defence Canada, Équiterre, the Winnipeg-based International Institute for Sustainable Development, and Climate Action Network Canada.
A Doomed Marriage
One of the six signatories to the letter, Environmental Defence Canada Executive Director Tim Gray, said his organization never had much confidence in the MOU.
“It was like a marriage that was not going to work,” he told The Energy Mix in an interview. “What’s happened is what we expected, that the prospect of paying a meaningful carbon price from the industry’s perspective would become the thing they were most interested in stopping. They have less enthusiasm, despite saying they do, for building new infrastructure, like paying for a pipeline or building out a new expansion to the oil sands,” since “any kind of longer-term expansion or pipelines obviously will not be taking advantage of this particular moment” of high fossil fuel prices.
Instead, “the pressure on the federal government is to give them everything they want in terms of expansion, have [taxpayers] pay for Pathways and the pipeline, have us get rid of all environmental regulations and the industrial carbon price, and just give them carte blanche to make as much money as they can for as long as they can,” Gray continued.
“Unfortunately, it completely conflicts with the commitments the Prime Minister has made. So our effort was to try and get out there and insert an environmental voice into those overwhelming screams and siren songs of the oil industry. saying that all the regulatory framework needs to go away… It’s very important for the public interest around carbon pricing and methane regulations that that focus remains.”
A ‘Pragmatic Reset’
In an emailed statement, Pembina Executive Director Chris Severson-Baker said there’s “frustration” that federal-provincial negotiations on the MOU haven’t lived up to their promise.
“The MOU should be a pragmatic reset in relations, leading to robust, durable climate and energy policies that investors and Albertans can count on,” he told The Mix in an emailed statement. “All around the world, the transition to clean, electrified energy resources is happening at a faster pace than ever before, accelerated not just by government policies, but by consumers making choices to minimize energy insecurity in their own lives.”
With the closure of the Strait of Hormuz in the wake of the American/Israeli war on Iran, millions of people saw that a foreign conflict “instantly made their commute to work or their air conditioning bill less affordable,” Severson-Baker added. “Once people have lived that reality, they won’t quickly forget it.”
But Canada is still “stuck in an unproductive debate—largely pushed by the oil and gas companies themselves—about the need to remove emissions regulations in the name of what they call ‘competitiveness’.” With global oil and gas demand “changing fast”, Severson-Baker said the MOU could still give Carney an opportunity for “real action to reposition Canada towards the electrified energy economy much of the world is already embracing.”