Trilateral Pathways MOU: An Integrated Energy Development Strategy

Key Takeaways

• Canada, Alberta and the Oil Sands Alliance have signed a new MOU linking emissions reductions, oil sands growth and export infrastructure development.
• The Pathways Plus carbon capture and storage project is positioned as the centrepiece of the strategy, with infrastructure targeted to begin operating by 2032 and broader project completion by 2035.
• The Pathways MOU contemplates extending and refining carbon capture incentives, including tax credits, provincial funding programs and potential operating-cost supports.
• The central feature of the Pathways MOU is its integration of emissions reductions, oil sands production growth and export infrastructure development into a single policy framework.
• The agreement continues the federal and provincial push toward streamlined regulatory approvals and greater investment certainty for major resource projects.
• Indigenous consultation and economic participation remain key components of the proposed development strategy.

Following recent announcements regarding the proposed West Coast Oil Pipeline, the Northern Shield Energy Corridor proposal connecting Alberta and Ontario, commitments between Canada and British Columbia to accelerate LNG project approvals, and significant investments in energy-intensive artificial intelligence infrastructure, Canada and Alberta have taken another significant step toward advancing an integrated energy development strategy.

On July 2, 2026, Canada, Alberta and the Oil Sands Alliance (comprising Canadian Natural Resources Limited, Cenovus Energy Inc., ConocoPhillips Canada Resources Corp., Imperial Oil Resources Limited, and Suncor Energy Inc.) entered into a Memorandum of Understanding (Pathways MOU) establishing a framework for cooperation on large-scale emissions reduction projects, oil sands production growth and expanded export infrastructure.

For Alberta, these developments build on a series of commitments made between the province and Canada, including:

• initial Memorandum of Understanding (Initial MOU) signed on November 27, 2025,
• Agreement-in-Principle on March 25, 2026, which related to the expected methane equivalency agreement;
• Co-operation Agreement on April 2, 2026, which addressed the interaction of federal and provincial Environmental and Impact Assessments, furthering the federal government’s push for a “one project, one review” approach to streamline assessment processes for major infrastructure in Alberta; and
• Implementation Agreement entered into on May 15, 2026, which, among other things, set out the anticipated structure expected for Alberta’s carbon pricing and Technology Innovation and Emissions Reduction system.

This blog post provides further detail relating to the Pathways MOU, as well as an overview of other recent agreements. Our previous post, Alberta and Canada Step Up To The Plate, provides additional details relating to the Initial MOU.

The Pathways MOU

The Pathways MOU describes a shared objective of supporting a more resilient, competitive and sustainable oil sands sector while reducing emissions intensity and expanding market access for Canadian energy products. The agreement identifies four principal objectives:

• expanded market access for Canadian oil;
• sustained oil sands production growth;
• deployment of emissions reduction projects and supporting incentive frameworks; and
• continued engagement with Indigenous Peoples and support for Indigenous economic opportunities.

At the centre of the Pathways MOU is the Pathways Plus carbon capture and storage project (the Pathways Project). The parties acknowledge plans to reduce greenhouse gas emissions from Alberta oil sands operations by approximately six million tonnes annually through a carbon capture and storage network consisting of carbon capture facilities, transportation pipelines, compression infrastructure and storage hubs. The Pathways MOU contemplates the project infrastructure being operational by 2032, with the broader Pathways Project completed by 2035.

The Pathways MOU also recognizes a broader objective established in the Canada-Alberta Implementation Agreement of achieving an additional ten million tonnes per year of emissions reductions by 2045 through future technology deployment, operational improvements and potential expansions of the Pathways initiative.

To support these efforts, the Pathways MOU outlines a number of fiscal and regulatory measures, including:

• the extension of federal carbon capture investment tax credits to 2035;
• Alberta's commitment to finalize and extend the Alberta Carbon Capture Incentive Program;
• potential operating-cost support mechanisms for carbon capture projects; and
• regulatory working groups intended to identify barriers to investment and competitiveness.

The Pathways MOU recognizes that emissions reductions, production growth, and export infrastructure are interconnected policy objectives. The parties acknowledge that the Pathways Project and the proposed West Coast Oil Pipeline are mutually dependent and that future oil sands production growth will be necessary to underpin new export capacity.

The Pathways MOU also notes federal efforts to support the expansion of the Trans Mountain pipeline system. Several other initiatives aimed at accelerating project development and improving regulatory certainty are mentioned, including Alberta's recently enacted 120-day approval timeline for qualifying projects, the Canada-Alberta Cooperation Agreement, and federal commitments to streamline approvals for projects deemed to be of national significance.

In addition, both governments have committed to working with industry to identify statutory and regulatory barriers that may affect competitiveness and investment in the oil sands sector. The Pathways MOU contemplates the establishment of both federal-industry and provincial-industry working groups focused on regulatory reform and project development. While many project-specific approvals would still need to be obtained and significant commercial questions remain, the agreement signals a continued emphasis on reducing regulatory timelines and increasing predictability for major resource projects.

TIER Stringency Incentives

The Pathways MOU also introduces a proposed incentive under Alberta's Technology Innovation and Emissions Reduction (TIER) regime. Subject to achieving specified Pathways Project milestones and additional emissions-reduction objectives, participating oil sands producers may qualify for a reduced annual increase to their facility-specific benchmark stringency rate under TIER.

In practical terms, the incentive is intended to provide participating producers with greater carbon-pricing certainty where they meet specified project and emissions-reduction milestones.

Indigenous Participation and Consultation

Consistent with recent infrastructure and energy development initiatives, the Pathways MOU emphasizes the importance of Indigenous engagement and consultation. The parties expressly acknowledge the rights recognized and affirmed by section 35 of the Constitution Act, 1982 and recognize that consultation obligations may arise in connection with future approvals relating to both the Pathways Project and the proposed West Coast Oil Pipeline.

The Pathways MOU also contemplates pursuing opportunities for Indigenous economic participation in these projects, including potential participation by Indigenous groups located along future pipeline corridors and within the oil sands region.

Next Steps

The Implementation Agreement targeted approval of the West Coast Oil Pipeline as a project of national interest under the Building Canada Act by October 1, 2026. Further definitive agreements are expected with each of the Oil Sands Alliance parties by November 15, 2026. The two governments are also expected to publish a draft methane equivalency agreement for a 60-day public comment period, to conclude before the end of 2026.

The Pathways MOU is an important policy signal. By explicitly connecting emissions reductions, oil sands growth and energy infrastructure expansion, the MOU reflects an increasingly integrated approach to energy policy in Canada.

McCarthy Tétrault will continue to monitor developments and provide insights as these commitments unfold.