Cutting A Gordian Knot – The Canada-Alberta Energy MOU And The Path Forward

Overview

The Canada-Alberta energy Memorandum of Understanding (MOU) announced in late November is a seismic development. It attempts to cut a Gordian knot that has challenged Canada for a generation: advancing robust, long‑term economic development in the energy sector for the benefit of all Canadians, including Indigenous groups, while remaining aligned with Canada's sustainability commitments and climate ambitions.

Much of the initial public reaction focused on the prospect of a new West Coast oil pipeline from Alberta, conditioned on a large‑scale carbon capture storage and utilization (CCUS) facility, private‑sector investment, Indigenous participation, and support from British Columbia. However, the MOU sets out a broader and more ambitious agenda that, if realized, would significantly impact the entire Canadian energy sector.

Unsurprisingly, the MOU sparked immediate debate. Critics point to what they view as an abrupt reversal of years of energy and climate policy. Proponents argue that a revised strategy is necessary to respond to macroeconomic shifts, national security concerns, and evolving geopolitical dynamics. These debates are certain to continue.

In announcing the MOU, the federal government noted that "Canada and Alberta share the same ambitions: diversify our export markets, make Canada an energy superpower, and build a stronger, more sustainable, more competitive economy." This echoes the spirit of earlier nation‑building projects — some highly successful, others more cautionary. The opportunities are compelling, but the potential pitfalls and stakeholder interests are numerous.

This is the first in a series of bulletins examining both the opportunities and challenges arising under the MOU, as well as important nuances of the MOU that may not be immediately evident from its black and white terms.

In this bulletin, we address: (i) a potential new "grand bargain" and the market signal it sends; (ii) the structural benefits of an MOU, (iii) the MOU's timetable considerations; (iv) implications for British Columbia; and (v) considerations for, and engagement with, Indigenous groups as partners, co‑owners and developers of major projects.

A Potential "Grand Bargain" — A New Market Signal?

That the MOU was negotiated without the participation of either B.C. or Indigenous groups is arguably its most striking aspect. It is technically correct that neither holds a veto over federal projects under Canada's constitution. It is also correct that the MOU expressly contemplates their heavy involvement going forward. Nonetheless, strong arguments can be made that they should have been involved. The adverse impact of excluding them was immediately manifest.

The federal government appears to have been intent on sending a bold market signal that it is breaking from past approaches — both in policy substance and political style. While many in the energy and investment community may welcome this, the strategy carries risks. By interlinking a new pipeline, CCUS, industrial carbon pricing, and related infrastructure, the MOU ties the success or failure of multiple complex initiatives together. This strengthens the signal, but it also increases collective risk.

Why an MOU? Structural Benefits

Though not a binding contract, the MOU provides clarity, transparency, and accountability around agreed‑upon objectives. This strengthens its market signal while also increasing political and reputational risk, should either party fail to meet its commitments.

Canada and Alberta have made comparable — albeit less significant — reciprocal pledges in the past. One example occurred in 2016 among Prime Minister Trudeau and Premier Notley. Alberta agreed to accelerate the decommissioning of its coal power plants. Ottawa agreed to approve the Trans Mountain pipeline expansion. Alignment on energy policy between the two steadily deteriorated thereafter. The structure set by the MOU may be aimed at guarding against a similar unravelling this time around.

Timetable Considerations

To place more accountability on the parties, the MOU sets out a specific timetable for certain developments. These include:

• By April 1, 2026: Canada and Alberta will conclude (i) an agreement on industrial carbon pricing, (ii) a methane equivalency agreement and (iii) a cooperation agreement on impact assessments.
• By April 1, 2026: Canada, Alberta, and the Pathways companies will enter into a MOU for a multi-phased approach to delivering a set of emissions savings projects.
• By July 1, 2026: an application for a new West Coast pipeline project will be ready to submit to the Major Projects Office.
• By July 1, 2026: Alberta will implement a policy framework to incentivize large investments in data centre development, including incentives for sovereign Canadian cloud.
• By January 1, 2027: Alberta and Canada will develop a nuclear generation strategy to build and operate competitive nuclear power generation for Alberta.

An implementation committee has been established to oversee progress towards these milestones. Many stakeholders will seek to hold the parties to this timetable, while others may pursue delay. In any event, these milestones create a clear benchmark for assessing progress. In this context, clarity is a mixed blessing: failing to meet these ambitious targets could cause the underlying deal to unravel, whereas meeting them could meaningfully reduce project uncertainty and attract additional investment.

Key Considerations for British Columbia

The exclusion of both British Columbia and Indigenous groups from the MOU's negotiation created immediate political tension.

B.C. Premier David Eby raised concerns that the proposed pipeline could become an "energy vampire," diverting limited federal and provincial attention and resources from other important projects, including critical‑mineral initiatives. He also warned that the MOU risks undermining hard‑won progress with coastal and inland Indigenous groups.

The Assembly of First Nations swiftly called for the MOU's withdrawal and opposed any exemptions from the federal tanker moratorium. Public support in B.C. for additional pipeline capacity had been gradually increasing, but the province's exclusion from the negotiation may stall or reverse that trend.

Overall, Ottawa appears to have taken a calculated risk — betting that speed, policy clarity, and a unified federal-Alberta front was more likely to produce an acceptable bargain than trilateral or quadrilateral negotiations. It likely estimated that its goals stood a better chance of being met by quickly setting policy and spending part of the time saved on damage control afterward. It remains to be seen whether this bet will pay off.

Engaging Indigenous Groups as Partners, Co‑Owners, and Developers

The MOU appears to rely on the expectation that meaningful consultation, combined with opportunities for equity participation and economic benefit, will attract sufficient Indigenous support to make a pipeline politically and commercially viable.

Indigenous equity participation is now central to many major projects in Canada and is widely seen as a pathway to economic reconciliation and improved project risk‑management. Recent precedents — including Indigenous ownership stakes in large‑scale pipeline and energy infrastructure — reinforce this trend.

Notably, Canada and Alberta now have well-established indigenous loan guarantee programs. While the MOU does not include any minimum thresholds for Indigenous equity stakes, it does commit to use funds in the Alberta Indigenous Opportunities Corporation and the Canada Indigenous Loan Guarantee Corporation to help finance Indigenous ownership. In addition, significant precedent for Indigenous ownership of energy pipeline infrastructure has also recently been set. This includes the Stonlasec8 Indigenous Alliance Limited Partnership's $715 million transaction to acquire a 12.5 percent interest in Enbridge's gas pipeline distribution system in British Columbia and others.

At the same time, many Indigenous communities located along the proposed pipeline route, or those potentially affected by associated tanker traffic, will be deeply concerned about the possible risks posed to their traditional lands and waters. Addressing these concerns will be a critical factor in determining the political and commercial viability of the proposed pipeline project. It cannot be expected that the offer of Indigenous equity alone will persuade Indigenous communities to relinquish their concerns regarding environmental impacts and the safeguarding of Indigenous rights.

The MOU presents new and significant opportunities for Indigenous participation in each of the projects described. While offering Indigenous equity is likely to be a necessary condition for these opportunities to be realized, it won't be sufficient. Federal and provincial support will be needed to create the fiscal conditions for many Indigenous communities to benefit from equity participation. More fundamentally, offering Indigenous equity cannot substitute for genuine consultation, good faith negotiations and substantive involvement in decision-making processes. There is a real prospect of success, but grasping it will demand a far greater effort than has been shown to date to engage Indigenous communities directly as full partners in these nation-building efforts.

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