A Closer Look at the Alberta-Canada Memorandum of Understanding

By: Grant Sprague & Doug Schweitzer

Much has been said about the Memorandum of Understanding (MOU) between Alberta and Canada that was signed on November 27th 2025. There's no question that the signing of the MOU marked a change in tone and change in the appearance of relations between the governments of Alberta and Canada on perhaps the most contentious areas of policy: energy and climate.

And while a refreshing breeze of optimism has been gently blowing through industry and other groups as a result of the MOU, we need to remember that it is an MOU- and understanding of work to be done and of intentions to change. It is not a legally binding contract to deliver.

The MOU importantly sets out key work that needs to be done in order to continue with and maintain this new positive relationship between Alberta and Canada on the topics of energy and climate. In typical fashion, the work to be done is outlined on the final page of the document.

A quick review reveals there is a lot of work to be done, and much of it is to be by April 1, 2026. Here is a quick overview of the work to be done by April 1 and some of the anticipated challenges:

a)    Carbon Pricing Equivalency Agreement.

Carbon pricing has been one of the most intense areas of policy dispute between Alberta and Canada for many years. While Alberta notes that it had the first industrial carbon pricing policy in Canada, the federal approach has always been different. Bound up in this policy discussion are concepts such as stringency, trading of credits as well as carbon prices and the acceleration of price.

The disputes between Alberta and Canada within this complex policy area have not been small differences in approach but rather profound differences in approach and outcomes.

The challenge in quickly achieving an agreement will be for both sides to maintain their policy outlooks and achieving some degree of compromise that will not create political challenges for their respective stakeholders.

It also goes without saying that whatever carbon pricing agreement is achieved, it will have a significant impact on industrial development in Alberta and presumably throughout Canada.

The recent announcement by Canadian Natural Resources Ltd. to postpone making a decision to advance a major oil sands project, for example, was framed as being driven on ongoing uncertainty about the carbon regime.

Regardless of the final details, both governments are likely to be challenged once any agreement is reached on whether they have “sold out “on their traditional positions. Both government will likely be questioned on the benefit that they have achieved in reaching an agreement.

b)    A Methane Equivalency Agreement

Similarly, the question of methane equivalency agreement is seeking to resolve some policy differences that have existed between the Alberta and federal governments for some time.

At least methane is a smaller policy area of dispute. However, the longstanding differences between Alberta and Canada are not likely to be easily resolved. It will require compromise and any compromise is likely to result in adverse comments from those parties who have participated in this debate for the last decade.

One of the key areas of debate that is needed that's always been what is the degree of reduction and by when? This question of outcome or targets is likely to be the vexed issue between the governments as they seek an agreement.

c)     A Trilateral MOU with the Pathways companies  

This MOU is interesting in that it now involves third parties whose interests are likely different than those of either government.

The genesis of this obligation is found within the MOU where Alberta Commits to “expanding the Alberta carbon capture incentive program to support Pathways”. This program commits up to 12 1/2% of the capital cost of any project. Alberta had already committed to support the Pathways project with this program so it's unclear what this expansion is meant to cover.

Furthermore, both Canada and Alberta agreed work with Pathways partner companies, now called the Oil Sands Alliance, to enter into a new MOU for a multi phased approach to delivering projects focused predominantly on carbon capture and storage and solvent replacements.

Alberta in Canada agree that there must be accountability for these Pathways project and the new MOU is to include effective enforcement mechanisms for the various stages. Enforcement is an unusual piece to include in any Memorandum of Understanding.

Nonetheless this will be a complex piece of negotiation and, with the various parties having various interests, it likely will be a challenge to have it concluded by April 1.

d)    A Cooperation Agreement on Impact Assessment

This is another interesting area. Alberta and Canada have cooperated on the environmental assessment of large projects for many, many years. This has been done as well through various pieces of federal legislation.

The usual practice has been for Alberta and Canada to agree on the scope of assessment that needed to be completed in order to proceed with the project, and then both parties having some degree of regulatory approval required would then exercise their own regulatory powers. In the case of oil sands projects, this usually took the form of a hearing through what was called a joint review panel made up of officials from both Alberta and Canada.

It's unclear what new and improved process could be contemplated, although perhaps there will be merit arising from it.

The challenge is that this is occurring within a regulatory environment that is governed by statute and regulations. A mere agreement between parties will not suffice to change the law.

By way of update, the Province and Canada have announced they have an agreement in principle and it will be posted for public comment shortly.

While the MOU signals a more cooperative approach to natural resource development, these detailed sub-agreements will be critically important period as described quickly here they are not going to be simple and we should all be aware that much work needs to occur in order to make them a reality.

At the end of the day, what we need is clarity in the legal regime, and that is achieved through legislative and regulatory change as opposed to high-level political agreements.