The memorandum of understanding for an energy framework signed by Alberta and Ottawa may mark the starting line for a new oil pipeline to northwest British Columbia, but major risks and unanswered questions persist. Has the agreement given private investors enough certainty around risks for a new pipeline to take off?
This new agreement is a step in the right direction. More than ever, it is clear the country needs diversified markets for our largest export, especially to Asian and other emerging markets expected to remain some of the only high-growth economies left in the world, necessitating increased energy consumption. Canada also needs continued growth of one of its most productive sectors.
For growth to be realized—by the private sector, it is worth reiterating—investors need an improved risk-reward ratio for such long-term projects. However, the memorandum of understanding (MOU) leaves many questions to answers.
Expanded pipeline capacity of the Trans Mountain project under the MOU and Enbridge Mainline Phase 1 and 2 optimizations, plus existing Keystone, Express, Milk, Rangeland pipeline systems capacity, as of September 2025—according to the Canada Energy Regulator (CER)—brings total pipeline future capacity to about 5.9 million barrels per day. This seems enough to handle future forecasted production, which is projected to be, with some basic assumptions, between 5.2 million and 5.9 million according to the Alberta Energy Regulator and CER estimates. Adding an additional million-barrel-per-day pipeline may widen the production pipeline capacity gap, which would decrease pipeline tolls across the system, possibly reducing profitability of existing pipelines.
The MOU restates both Canada’s and Alberta’s commitment to achieving net-zero greenhouse gas emissions by 2050 while addressing numerous climate policy questions. It also commits to not implement the upstream oil and gas emissions cap, remove the Clean Electricity Regulations pending a new carbon pricing agreement, adjustment to the Oil Tanker Moratorium Act if the pipeline is approved, extend carbon capture and storage investment tax credits to include enhanced oil recovery, and commitment to completing the Phase 1 Pathways Projects, and adjust the Competition Act to remove “greenwashing” provisions creating investment uncertainty.
On many of these fronts, especially the updated carbon pricing agreement, upcoming details may affect a private proponent investment decision. Further details will be needed on updates to Alberta’s Technology Innovation and Emissions Reduction system to meet the new $130/tonne price, and across what time frame. In addition, it remains unclear if the agreement will allow provinces to link their carbon-pricing systems, and if other provinces will be subject to the new agreement. In a globally competitive industry, any impact on company profit margins reduces the competitiveness of our oil products as oil companies will pass this cost onto customers, or choose not to be subject to the increased cost at all.
The MOU states Indigenous Peoples co-ownership as a requirement for the construction of “one or more” pipelines. While this will create economic benefits, this will be another risk-reward consideration for any private proponent.
Also, it states the pipeline is a project of national interest and can be referred to the Major Projects Office (MPO). However, direct negotiation with the federal government has now created three paths to approvals: MPO designation, business-as-usual approvals, and MOUs. Which has the lowest execution risk? Why are certain projects being treated differently? This agreement creates more procedural questions.
Finally, the MOU explicitly states the requirement to engage B.C. and share the economic benefits of the pipeline project with the province. For a private sector proponent, this necessarily means less profit from this investment.
The MOU is clear: the Government of Canada is supportive of the oil pipeline to northwest B.C. being referred to the MPO, with many caveats. What is not clear is whether it has provided enough confidence around the risk-reward equation for the private sector to come to the table.
Kate Koplovich serves as a senior policy analyst with the C.D. Howe Institute.