By Paul Vieira
OTTAWA-Canada's federal government and the energy-rich province of Alberta agreed to a truce on Thursday, following a decadelong fight between Ottawa and western Canada about the country's environmental laws and their impact on resource development.
The pact, in the form of a memorandum of understanding, sets conditions under which a new oil-carrying pipeline could be built, such as a corridor connecting the Alberta oil sands with the Pacific Coast. In the agreement, Canada declares such a pipeline a national priority.
Canada also agrees to suspend some environmental rules for Alberta--like the cap on emissions from oil-and-gas producers and clean-electricity regulations--if the province fulfills agreed-upon commitments, such as adopting a tougher industrial carbon-pricing system. The federal and regional governments also commit to work with oil companies to build one of the world's largest carbon-capture and storage projects, which could cost tens of billions of dollars.
"Alberta and Canada will work together to achieve the shared objective of establishing Canada as a global energy superpower," the agreement said, "unlocking the growth potential of western Canada's oil and gas, renewable energy, critical minerals and other resources that the world needs."
Analysts say the agreement should send a signal to companies and investors that Canada is open to development in the energy sector at a time when Prime Minister Mark Carney is trying to rebuild an economy squeezed by U.S. trade-policy uncertainty and hefty tariffs.
In brief remarks, Carney said the agreement "really sets the stage for an industrial transformation," because there are commitments from Alberta to lower emissions intensity from the resource-rich province. At the core of the deal, he said, is a new crude pipeline to reach a west-coast port, for tankers destined to Asian markets.
Alberta Premier Danielle Smith said she expects the deal to unleash billions in investments for her province, Canada's fourth-largest by population. "Today is a new starting point for nation building as we increase our energy production for the benefit of millions and forge a new relationship between Alberta and the federal government," she said.
For nearly a decade, political and industry leaders in western Canada criticized efforts by the Liberal government, under former Prime Minister Justin Trudeau, to impose climate-change policies that they said threatened the region's livelihood. Among the flashpoints were the sector-specific emissions cap for oil-and-gas producers and a federal ban on oil-tanker traffic in northern British Columbia.
Trudeau also rejected a proposed pipeline from Alberta to the northern British Columbia coast, which Alberta is now trying to revive. The Canada-Alberta agreement indicates the province intends to submit an application for this revived pipeline by July 1 of next year.
"The message from Ottawa is no longer that certain things are off the table," said Heather Exner-Pirot, director of energy policy at the Macdonald-Laurier Institute think tank in Ottawa. "That is very important."
Since coming to power in March, Carney has pledged to position Canada as a global energy superpower, building on one of the country's main strengths as he navigates an economy squeezed by U.S. trade policy. His administration's economic and fiscal policy is now geared toward attracting private-sector investment to develop resources, from energy to critical minerals, and build infrastructure and new trade corridors--all in an effort to reduce the country's dependence on U.S.-bound exports to fuel growth.
His government has thrown its weight behind two new liquefied natural-gas export facilities on the Pacific Coast. Exner-Pirot said investors appear to be embracing Carney's message. The Toronto stock market's energy subindex has climbed over 20% since the time Carney took power. Furthermore, Canadian pipeline operator Enbridge said this month it would invest over $1 billion to increase the capacity of its core network to boost deliveries of heavy oil.
A new crude-carrying pipeline to the Pacific Coast faces myriad obstacles, most notably stiff opposition from the British Columbia politicians and local indigenous groups, said Paul Griss, an energy consultant to companies and governments over the past quarter century. Nevertheless, Griss said the pact is "a means of reconciliation" between Ottawa and Alberta. "There's been a tremendous amount of bad blood."
Write to Paul Vieira at paul.vieira@wsj.com
(END) Dow Jones Newswires
November 27, 2025 12:34 ET (17:34 GMT)
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