The Canada-Alberta Memorandum of Understanding (MOU) — to slash GHG emissions in the western province and support higher levels of oil and gas production partly by building a new bitumen pipeline to a deep-water port on the B.C. coast — was announced to great fanfare and some trepidation in late November.

Since the MOU was constructed in such a way that emissions reductions and the new pipeline are dependent upon each other, Part 1 of this two-part series will look at its potential to reduce emissions in Alberta and the major impediments facing a new bitumen pipeline to the B.C. coast.

The second part will provide a possible roadmap for overcoming B.C. government and Coastal First Nations opposition to a new pipeline to the northern coast of the province.

A carbon emissions reduction breakthrough?

The Canada-Alberta MOU may have been characterized as a betrayal of climate action by many environmentalists, while leading Steven Guilbeault — a Trudeau era environment minister — to resign as culture minister, but Adam Sweet, vice-president, Western Canada for Toronto-based environmental and economic think-tank Clean Prosperity, told DOB Energy that the MOU could in fact be a major step forward for carbon emissions reduction in Alberta and Canada.

The reason for this was the former stack of federal climate policies, including policies such as the oil and gas emissions cap and Clean Electricity Regulations, had led to political gridlock between Ottawa and the Prairie provinces and little in the way of emissions reductions, he said.

In contrast, the new approach relying on a strengthened industrial carbon pricing regime and further methane emissions reductions by the oil and gas industry — a proposed 75 per cent reduction from 2014 levels by 2035 — could lead to major decarbonization investments and a slashing of carbon emissions at relatively low cost.

A pivotal feature of the MOU was the federal and Alberta governments agreeing to reform the industrial carbon market in the province to increase the effective carbon credit price — not the largely symbolic headline price — to at least $130 a tonne, compared to around $20 per tonne in recent months due to an oversupply of credits under Alberta’s Technology Innovation and Emissions Reduction (TIER) system.

“At credit prices between $130 and $150 per tonne, Alberta’s industrial carbon market can unlock $90 billion in low-carbon capital investment and reduce 70 megatonnes (Mt) of annual emissions within the province,” Sweet said, based on analysis in Top TIER, a research report released by Clean Prosperity within days of the Canada-Alberta MOU.

“This is well over half of Alberta’s large point source industrial emissions and more than triple the emissions that would have been reduced in the province by the Clean Electricity Regulations suspended by the MOU,” he added.

However, to unlock massive investment and emissions reductions, the federal and Alberta governments need to commit to a financial mechanism — as mentioned in the MOU — to provide the certainty industry needs that carbon credit prices will remain high over the long term, Sweet said.

Clean Prosperity has long argued that this financial mechanism should take the form of broad-based carbon contracts for difference issued jointly by the federal and Alberta governments, he added.

“These contracts guarantee the future value of carbon credits for low-carbon project proponents,” Sweet said. “If the federal and Alberta governments maintain their commitments to strong carbon markets, the contracts need never be exercised, and cost taxpayers nothing.”

A bitumen pipeline to B.C.’s northern coast

In addition, these potential emission reductions are dependent upon “construction of one or more private sector constructed and financed pipelines” to allow “at least one million barrels a day of low emission Alberta bitumen” to be exported to Asian markets via a deep-water port on the B.C. coast — with a port on the northern coast by far the Alberta government’s preferred location for numerous reasons.

Sweet said he is “very optimistic” a new bitumen pipeline project will move forward, although it’s imperative the project proponents identify “the best possible pipeline route,” whereas Gitane De Silva, president of GDStrategic and former chief executive officer of the Canada Energy Regulator (CER), told DOB Energy hurdles remain high for the proposed project, especially to the northern coast of B.C.

Alberta Premier Danielle Smith recently said three pipeline routes are under consideration to the B.C. coast, with two to locations in the Port of Prince Rupert region on the northern coast and a third to Roberts Bank in the Lower Mainland — a port previously dismissed by Kinder Morgan for its Trans Mountain Expansion (TMX) project.

“The MOU has taken what was impossible [a new bitumen pipeline to the northern coast of B.C.] and made it possible, though time will tell if it is probable,” De Silva said.

“The federal government has removed barriers that would have prevented a proponent from coming forward, but it has not given Alberta a blank cheque,” she added. “The bar that Alberta needs to meet is still very high: Indigenous co-ownership and moving forward with the Pathways CCUS project. And the timelines are very aggressive.”

The key barriers were the now quashed oil and gas emissions cap, the suspension of the Clean Electricity Regulations in Alberta pending a new industrial carbon pricing agreement, and, assuming a new bitumen to the northern coast of B.C., an adjustment to the Oil Tanker Moratorium Act.

In terms of aggressive timelines, these include April 1, 2026, for an industrial carbon pricing equivalency agreement between the feds and Alberta, the previously mentioned methane equivalency agreement, a trilateral MOU with the Pathways companies for Phase 1 of its massive CCUS project, and a co-operation agreement on impact assessments.

In addition, Alberta is to submit its application for the bitumen pipeline project to the fed’s Major Projects Office on or before July 1, 2026.

It is important to note that the B.C. government and Coastal First Nations both remain vehemently opposed to a potential new bitumen pipeline to the northern coast of the province and expressed frustration at not being at the negotiating table with the federal and Alberta governments for talks leading to the MOU.

Potential roadblocks to the bitumen pipeline

De Silva and Radha Curpen, a partner and group head of ESG and sustainability at Vancouver-based law firm McMillan LLP, told DOB Energy that the B.C. government and Coastal First Nations have ways to slow down if not hamstring a bitumen pipeline project to the northern coast of the province, despite the federal government having jurisdiction over interprovincial pipelines.

“Interprovincial pipelines require both federal and provincial permits, unless both parties agree to the ‘one project, one review,’” De Silva said. Since the B.C. government is highly unlikely to agree to this for a new bitumen pipeline, “there are certainly ways that the provincial government and Coastal First Nations could slow things down.”

“While the B.C. government and Coastal First Nations cannot directly veto a federally regulated interprovincial pipeline, they can prevent the project from reaching tidewater by controlling essential terminal, marine access, and provincial authorization points,” Curpen said. This is because “they possess multiple, potent legal and regulatory tools to prevent access to tidewater and to challenge approvals that inadequately address Aboriginal rights and title.”

The decisive legal levers include approvals and tenures for non-port structures and adjacent industrial uses on provincial Crown land, environmental assessment and permitting for water, air, waste, spill response, and related infrastructure such as roads and power, according to Curpen.

In addition, “Section 35 of the Constitution Act, 1982 protects existing Aboriginal rights, including marine harvesting and stewardship, and some Nations assert title claims extending into foreshore and nearshore areas; approvals that may adversely affect these rights trigger duty to consult and, where appropriate, accommodation,” she said.

“The implication is that the economic viability of any export pathway depends as much on non-port structure siting, provincial and local authorizations, and Indigenous rights accommodation as on federal pipeline approval,” Curpen said. “A strategy that treats tidewater access as ancillary is likely to fail because bottlenecks at those infrastructures, foreshore, and marine routes are where legal risk concentrates.”

Added De Silva: “There is no short cut around meaningful consultation with Indigenous peoples. If you look at where past projects have ended up in court, it has been over inadequate consultation.”