What the Alberta-Canada pipeline MOU means for Saskatchewan

Pipeline Online digs deep into the MOU and its implications for Saskatchewan. There are many.

CALGARY – Months in the making, the Memorandum of Understanding (MOU) signed by Prime Minister Mark Carney and Alberta Premier Danielle Smith may not only pave the way for a new pipeline(s) to the West Coast, but reset increasingly deteriorating federal-provincial relations more than 10 years.

The fate of the nation could be at stake, particularly for Alberta. If Carney failed to concede on most, if not all of the “Nine bad laws,” as Smith described them, he, and Smith, could end up overseeing the breakup of Canada.

The MOU lays out a number of cards in one of the highest stakes poker games in recent years, as failure on this front could dramatically strengthen the movement for Alberta to leave confederation. The cards that have been dealt, and the hands played, also have major implications for Saskatchewan as we take our place at the table.

The meat of the agreement, which you can read in its entirety here, addresses not only most of Alberta’s disgruntlement regarding federal energy regulation, but also offers the feds several carrots as well.

The agreement also has indirect impacts on Saskatchewan, not so much for an oil pipelines to the BC coast, but in electrical power generation, transmission and regulations. But in turn, it could also have implications for Saskatchewan oil flowing on other pipelines. More on that in a bit.

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CCUS

Signed in Calgary on Nov. 27, the MOU intimately ties two major projects – a pipeline (or pipelines) to the coast to deliver bitumen, and the “Pathways Alliance Plus.” One will not happen without the other, meaning that for a pipeline to the coast to go ahead, so, too, must the major oilsands players commit to carbon capture, utilization and storage (CCUS) via the Pathways Alliance. And without the coastal pipeline, CCUS is going nowhere.

And that “utilization” part is a big, big change. Up until this point, using carbon dioxide for enhanced oil recovery got no love from the federal Liberal government. Federal investment tax credits (ITC) could be attained for putting CO2 into the ground and leaving it there, i.e. carbon capture and storage, CCS, but without the “utilization.” But if you wanted to use it to produce more oil via enhanced oil recovery, like Saskatchewan’s Weyburn Unit or Midale Unit, no dice.

As a result, the Pathways Alliance project, up until now, spoke of simply CCS. It would capture CO2 emissions from the major oilsands players around Fort McMurray, and pipeline it down to the Cold Lake area for “storage,” with no economic benefit other than reducing CO2 emissions.

That changes with this agreement, which specially refers to “enhanced oil recovery.” The MOU states Canada commits to:

• Extend federal ITCs and other policy supports to encourage large scale CCUS investments, including Pathways and enhanced oil recovery in order to provide the certainty needed to attract large additional sources of domestic and foreign capital.
• Work collaboratively with Alberta to design policy supports that enable deployment of nuclear technology, CCUS and energy storage to enable decarbonization of the electricity system, while ensuring its reliability and affordability.

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Those commitments, in turn mean that all those millions of tonnes of CO2 to be captured and pumped into a depleted oilfield (like the Weyburn Unit) can soon be used to produce much more oil. Metrics at the Weyburn Unit show for each tonne of CO2, roughly three barrels of oil can be produced. With the volumes of CO2 discussed of 10 to 12 million tonnes per year, that could lead to an incremental 82,000 to 99,000 barrels per day, if those metrics hold. That’s oil which will also, in turn, need more pipeline takeaway capacity.

That the Pathways Alliance Website makes no mention of “utilization” as of Nov. 27 means this is a dramatic new development. “Utilization” is not mentioned once in the October project fact sheet posted on the website.

However, what that fact sheet reveals is the depth of the oil-bearing Mannville Formation where Pathways envisions the CO2 injection to take place. For CO2 to function as a supercritical miscible fluid in the Weyburn Unit, for instance, it needs to go 1,000 metres deep. The Mannville is 300 to 450 metres deep in the Pathways injection area, according to the fact sheet. So there will likely be a major revision, now that “utilization” is at hand as per the MOU.

The agreement states Alberta and Canada commit to:

• Work cooperatively with the Pathways partner companies to develop and enter into a tri-lateral MOU on or before April 1, 2026 for a multi-phased approach to delivering a set of emissions savings projects (the “Phase 1 Pathways Projects”), focused predominantly on carbon capture and storage, solvent-based replacements or other actions taken by Pathways that reduce emissions intensity. The Phase 1 Pathways Projects will be built and commence operations in a staged manner between 2027 and 2040 to achieve committed emissions reductions at date-certain intervals. Canada and Alberta agree this tri-lateral MOU and the approval and commencement of the initial Phase 1 Pathways Projects will be a precondition to the commencement of the approved bitumen pipeline referred to in this MOU.

So that could mean just carbon capture and storage without the utilization, to start, and the utilization portion to be added later.

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More pipeline capacity overall

The MOU speaks of a new pipeline to a deepwater port without any particular terminus named. The two most likely candidates are Prince Rupert or Kitimat (the original terminus for Enbridge’s defunct Northern Gateway project). With the new Coastal GasLink pipeline to Kitimat in the ground and operational, feeding LNG Canada, that provides one possible existing route to parallel. But increasingly Prince Rupert has been the subject of discussion. When Pipeline online spoke with Premier Scott Moe at a conference in Saskatoon in late July, Moe stressed the important of a pipeline to Prince Rupert as being Saskatchewan’s highest priority for a new export pipeline to tidewater. While Saskatchewan oil would not flow through that pipeline, the expanded capacity would make space on other pipelines, particularly the Enbridge Mainline, for possible expansion of Saskatchewan production.

And that would be key for this province, as Moe’s government has set a goal of expanding oil production from the current level around 450,000 barrels per day to 600,000 barrels per day by 2030. Moe personally has also spoken on numerous occasions of eventually hitting one million barrels per day. For that to happen, Saskatchewan would need takeaway capacity. And it the new bitumen pipeline to the coast adds a million barrels per day, and expansion of the Trans Mountain Pipeline system increase another 300,000 to 400,000 barrels per day (as referenced in the MOU), there should conceivably be room for more Saskatchewan oil in the Enbridge Mainline.

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Tanker Ban?

You can’t build a pipeline to the coast and ban the ships that are meant to take it away. Implementing a tanker ban off the northern BC coast was a prominent early action under then-Prime Minister Justin Trudeau. He famously proclaiming that the Great Bear Rain Forest was “no place for a pipeline,” and implemented a ban on tankers hauling Canadian oil.

On this front, the MOU states:

• If an Alberta bitumen pipeline is ultimately approved under the Building Canada Act and provides opportunities for Indigenous co-ownership and shared economic benefits, Canada confirms that it will enable the export of bitumen from a strategic deep-water port to Asian markets, including if necessary through an appropriate adjustment to the Oil Tanker Moratorium Act.

 

Clean Electricity Regulations

Perhaps the largest implication for Saskatchewan is the MOU scrubbing the federal Clean Electricity Regulations, for Alberta at least. That’s the regulations that seek to eliminate fossil fuel-fired power generation by 2035, at least in their first iteration, as introduced by then-Minister of Environment and Climate Change Steven Guilbeault in what was perhaps his crowning achievement. (Guilbeault resigned hours after the MOU was signed, indicating not only his displeasure, but the fact this MOU may indeed have serious teeth in reversing previous Liberal climate change and energy policies.)

Getting rid of fossil fuels any time soon would be problematic, as about 11 hours before the announcement, 97 per cent of Alberta’s power generation was coming from natural gas-fired power stations. The sun wasn’t shining at midnight, and wind power fell to 7 megawatts out of a nameplate capacity of 5,684 megawatts. That’s 0.12 per cent capacity.

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The MOU states Canada commits to:

• Suspend immediately the Clean Electricity Regulations (CER) in Alberta pending a new carbon pricing agreement, which includes the electricity sector, administered through Alberta’s TIER program to be negotiated by the parties on or before April 1, 2026. Upon completion of the new carbon pricing agreement and factoring all other measures to the satisfaction of both parties, Canada will place the CER in Alberta in abeyance.

Doing so for Alberta means that Saskatchewan, which brought in the Saskatchewan First Act specifically to fight the Clean Electricity Regulations, will certainly seek a similar carve out.

The CER, which, if implemented to their fullest extent on Nov. 26 would have meant 97 per cent of Alberta homes, businesses, factories and hospitals would have gone without power most of the night. So what does the MOU envision?

Numerous times it speaks of “Net Zero by 2050.” Just as Saskatchewan’s government in October committed to developing nuclear power generation, so, too, it appears does the Alberta government. The MOU states Alberta commits to:

• On or before January 1, 2027, collaborate with Canada to develop a nuclear generation strategy to build and operate competitive nuclear power generation that can serve the Alberta and inter-connected markets by 2050.

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And this is where Saskatchewan comes in, as Alberta commits to:

• Collaborate with Canada to significantly increase the inter-tie transfer capability between the western provinces (with consideration to the northern regions) to build the low carbon generation and transmission grid that supports the growth of low intensity heavy oil, LNG, critical minerals, agriculture, data centres and CCUS industries for export growth and domestic use.

And

• Construction of large transmission interties with 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.

Currently the interconnection between Alberta and Saskatchewan is quite small – just 154 megawatts at maximum capacity. And there’s only one. That was problematic as the McNeill Station, just on the Alberta side of the border, north of Highway 1, was out of commission for most of the past year.

It’s also a rare type of intertie, as Saskatchewan and Alberta are on different regional interconnects – with different synchronization of their operating frequencies. They are the same frequency, but out of sync with each other. That’s a complicated way of saying the two grids don’t play nice with each other unless you do an AC/DC/AC conversion, which is what McNeill does.

So for Alberta to carry out its commitment to greatly expanded interties, Saskatchewan will have to play ball, with likely hundreds of millions, if not billions of dollars expenditure on this side of the border.

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But that, too, may work not only for Alberta, but Saskatchewan, as it considers its nuclear power generation future. One of the most difficult issues when considering large, 1,000 meagwatt-scale nuclear reactors like the Westinghouse AP1000 (actually 1,200 megawatts in capacity per unit) is the fact grids need backup capacity in case their largest unit goes down (which does indeed happen). While the expectation is for grids across North America will double in the coming decades, on a cold day in winter, we generally consumer 3,600 megawatts (and 2,700 in spring or fall). That means a singular AP1000 would account for one third of Saskatchewan’s power demand (based on current levels). The standard is for the largest generating unit to be no more than 10 per cent.

So increasing large scale interties with Alberta, much larger than the one under construction to the US at this moment near Estevan, could make nuclear power generation much more tenable for both provinces. And looking beyond outages, a much larger intertie(s) between the two provinces could provide Saskatchewan with the opportunity to sell excess power, including nuclear power, into the Alberta grid.

But for Alberta reach “net-zero greenhouse gas emissions for the electricity sector by 2050,” as the MOU states, it would need to essentially replace nearly its entire natural gas-based power generation in 24 years, one month and three days. It would need to build at least eight AP1000s, based on current load and no growth for artificial intelligence, industry, population or adoption of electric vehicles. Indeed, the number of reactors would almost certainly need to be higher to achieve true “net zero.”

And if it does go whole hog into nuclear power generation to achieve net zero by 2050, it means that Alberta’s natural gas industry will lose much of its largest customers – those power plants – resulting in a dramatic curtailment of gas production. Until major oilsands projects paid out in recent years and royalties started coming in, Alberta’s most significant royalties had come from natural gas, not oil.

There is discussion of power generation to support artificial intelligence computing power. In a post on X, former Premier Jason Kenney took that as meaning “a shared commitment to harness Alberta’s enormous natural gas reserves to become a major centre for data processing, partly to support ‘sovereign artificial intelligence.” However, with statements in the MOU about net zero by 2050, that would be impossible to do with expansion or even continued operation of natural gas-fired power generation into 2050.

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Methane reductions

And that is another key point of the MOU – while it scraps the greenhouse gas emissions cap for oil and gas production – one of Smith’s “Nine bad laws” – it maintains and perhaps strengthens the commitment to a reduction of methane gas emissions. (this was one of Guilbeault’s key policies, announced just before Christmas, 2024.) The MOU states Alberta commits to:

• Enter into a methane equivalency agreement on or before April 1, 2026, with a 2035 target date and a 75% reduction target relative to 2014 emissions levels.

Carbon pricing

For its magnanimity on an oil pipeline, the Carney government gets something it really wants – a commitment from Alberta to maintain an industrial carbon tax, and even increase it. The MOU states Canada and Alberta together will:

• Work collaboratively to design and commit to globally competitive, long-term carbon effective prices, carbon levy recycling protocols, and sector-specific stringency factors for large Alberta emitters in both the oil and gas and electricity sectors through Alberta’s TIER system. The TIER system will ramp up to a minimum effective credit price of $130/tonne. The parties will conclude an agreement on industrial carbon pricing on or before April 1, 2026.
• Examples of issues to be addressed in the new agreement include the date for introduction of the effective price and the price increases over time.
• This industrial carbon pricing agreement will include a financial mechanism to ensure both parties maintain their respective commitments over the long term to provide certainty to industry, and to achieve the intended emissions reductions.
• Recognizing Alberta’s jurisdiction over the TIER system, Canada and Alberta agree to work co-operatively to ensure the Alberta carbon market functions reliably and provides a predictable basis for decision-making by industry and investors. This includes a shared undertaking that following the completion of this Memorandum of Understanding, the two governments will work co-operatively to ensure the application of Alberta’s carbon pricing system (including pricing and stringency) is adapted to the specific circumstances of the electricity sector, the oil and gas sector, and other large emitters such as fertilizer and cement sectors.

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Early in 2025, when it looked like the Pierre Poilievre-led Conservatives were likely to win the federal election, Saskatchewan Premier Scott Moe ended implementation of the industrial carbon tax in this province. The “Output-Based Pricing System” in Saskatchewan is 80 per cent paid for by SaskPower (and through it, Saskatchewan power ratepayers.) If Saskatchewan is to seek its own accommodations, such as on the Clean Electricity Regulations, Alberta’s agreement to continue their industrial carbon tax and even increase it raises the table stakes for Saskatchewan’s negotiations.

Summation

In summation, the MOU to build an oil pipeline to the West Coast has broad implications for Saskatchewan. It could free up space for expanded Saskatchewan oil production on existing pipelines. Dramatic expansion of electrical interties would go a long way in creating a “national electrical grid,” which in turn could be a big deal when it comes to nuclear power development. But to get what it seeks, Saskatchewan might have to give way on an industrial carbon tax and on methane gas emissions reductions. Those are the cards as they are currently dealt, and Saskatchewan will likely be anteing up to the table in short order.

 

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