Alberta Premier Danielle Smith declared victory Thursday with the signing of a new memorandum of understanding (MOU) on energy development with the federal government, saying she had achieved seven of her nine demands from Ottawa.

Smith and Prime Minister Mark Carney said the deal could trigger 1.4 million barrels per day of new production in Canada’s oil sands.

Canadian Identity Minister and lifelong climate advocate Steven Guilbeault resigned from the federal Cabinet hours later, declaring that “environmental issues must remain front and centre” in national strategy despite the “difficult economic context” of a changing relationship with the United States. “That is why I strongly oppose the Memorandum of Understanding between the federal government and the government of Alberta.”

The MOU commits the two governments to:

• Build “one or more private sector constructed and financed pipelines, with Indigenous peoples co-ownership and economic benefits” and priority on exports to Asia, beginning with a referral to the federal Major Projects Office by July 1, 2026;

• Introduce an “adjustment” to the federal ban on northwest coastal tanker traffic to give the pipeline access to Asian markets;

• Increase oil output in Alberta by up to 1.4 million barrels per day, one million through a new northwest pipeline and the rest by expanding the capacity of the existing Trans Mountain pipeline;

• Build the Pathways Plus carbon capture, utilization and storage (CCUS) project as the world’s biggest installation of its kind, on the hope or pretext that it will make Alberta bitumen “among the lowest carbon intensity produced barrels of oil in the world”;

• Make each of the proposed megaprojects, the pipeline and Pathways, contingent on the other;

• Abandon the federal government’s watered-down, long-delayed cap on oil and gas emissions, which wasn’t to take effect until 2030-2032;

• Suspend the federal Clean Electricity Regulations in Alberta pending a new industrial carbon pricing regime that will operate through the province’s Technology Innovation and Emissions Reduction (TIER) program, aiming to create certainty for investors with a minimum effective carbon credit price of $130 per tonne;

• Adopt a methane equivalency agreement that provides for Alberta to reduce its emissions of the climate super-pollutant by 75% from 2014 levels by 2035, five years later and from a more forgiving baseline year (2014 as opposed to 2012) than Ottawa’s commitment at the COP28 climate summit in 2023;

• Develop a nuclear generation strategy by January 1, 2027;

• Build thousands of megawatts of AI computing power, while building new grid connections to Alberta from 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”;

• Ensure that British Columbians “share substantial economic and financial benefits of the proposed pipeline.”

Smith’s Demands

A little over seven months ago, Smith met with Carney with a list of demands that she said must be met within six months of the April 28 federal election. The list included multi-directional “unfettered oil and gas corridors,” repeal of the federal Impact Assessment Act, lifting the federal moratorium on tanker traffic off British Columbia’s northwest coast, eliminating the oil and gas emissions cap, scrapping the federal government’s much-diminished Clean Electricity Regulations, provincial oversight over the industrial carbon tax, and getting rid of federal anti-greenwashing rules.

At a news conference in Calgary following the signing of the MOU, a jubilant Smith said she and her United Conservative Party (UCP) caucus were “pretty happy” with the result. It’s good news for a government facing severe backlash for a number of controversial moves, including the use of the notwithstanding clause twice in as many weeks to force teachers back to work and block gender-affirming care for minors. 

The province has also seen recall petitions launched against 14 UCP MLAs and a successful petition for a referendum whose wording would support keeping Alberta in Canada. Speculation has been swirling for a while that Smith would call an early election in the spring, a move that would nullify the recall petitions and allow the premier to ask for a mandate on some of her most controversial moves, including the introduction of more privatized health care.

But most pundits were predicting an early election based on the rejection of Smith’s demands of the federal government, including specific support for a crude oil pipeline, not a wholesale agreement to nearly everything she wanted. Now, just the promise of a pipeline may give Smith another reason to go to the polls.

“Just like that, the premier could call an early election and get her United Conservative Party re-elected based on her success pushing Canada’s new Liberal PM around with her sly threats of sovereignty association,” veteran analyst David Climenhaga writes in the Tyee.

Guilbeault: No Consultation, Major Impacts

In his resignation letter posted on social media, Guilbeault, who had endorsed Carney for the federal Liberal leadership and served as his Quebec lieutenant, said he’d sought elected office “to champion the fight against climate change and the protection of the environment.” Over the last decade, he wrote, “our country has made historic progress in reducing climate pollution, protecting nature and the environment, while our economy continued to grow.”

But while he said he could “understand and share” Carney’s motivation “to ensure our country remains united and that all regions feel they have a voice,” Guilbeault decried a Memorandum of Understanding that:

• Was adopted with no consultation with coastal First Nations or the B.C. government;

• Supports a pipeline that would have major environmental impacts, drive up climate pollution, and “move Canada further away from its greenhouse gas reduction targets”;

• Significantly increases the risk of tanker accidents off the west coast of B.C. and hinders the creation of a marine conservation area in the Great Bear Sea;

• Undercuts efforts to decarbonize Canada’s electricity supply by exempting Alberta from the Clean Electricity Regulations;

• Contradicts the federal government’s efforts to end fossil fuel subsidies by introducing a new subsidy for enhanced oil recovery, a process that uses captured carbon to push more oil out of depleted wells.

On Friday, iPolitics reported that Coastal First Nations have been unable to secure a meeting with Energy and Natural Resources Minister Tim Hodgson, even though their support is reportedly crucial to securing approval from the federal government for a new pipeline.”

“Over the past few months, several elements of the climate action plan I worked on as Minister of the Environment have been, or are about to be, dismantled,” Guilbeault wrote, including consumer carbon pricing, the zero-emission vehicle standard, the oil and gas emissions cap, the federal framework to eliminate fossil fuel subsidies, and Clean Electricity Regulations. “In my view, these measure remain essential to our climate action plan.”

Acknowledgements were quick to pour in after Guilbeault’s announcement.

“Since entering Parliament, Steven has helped move Canada’s environmental and climate agenda forward in concrete and meaningful ways,” said MP Éric St-Pierre (L, Honoré-Mercier), who led one of Canada’s top climate charities before seeking elected office. “Through his leadership, Canada has made great progress in accelerating the climate transition and strengthening our economy. At the same time, he has consistently championed Quebec and Canadian culture, as well as the preservation of our heritage, helping to elevate them here at home and abroad.”

“I’ve never met a more tireless, sincere, and relentlessly optimistic guy,” Canadian Climate Institute President Rick Smith said in a statement. “His accomplishments have measurably improved the quality of life of Canadians.”

“I can only imagine how difficult this decision was on him both personally and professionally,” added Trudeau-era Cabinet minister Mark Miller, who told the Globe and Mail he’d become friends with Guilbeault while campaigning together in 2019. “I wish him and his family all the best and look forward to continuing our work together as colleagues in the House of Commons.”

Guilbeault also won praise for his announcement from Climate Action Network Canada Executive Director Caroline Brouillette.

“Minister Steven Guilbeault is showing Prime Minister Mark Carney and his cabinet the political consequences of trampling on climate action and Indigenous rights,” she wrote on LinkedIn. “The ineffective grand bargain with Alberta announced today will undoubtedly contribute to greater greenhouse gas emissions,.”

Smith and Carney: A Friendly Rapport

Smith didn’t hesitate to turn the news conference into a victory lap—especially after Carney left the room early to deliver a speech to the Calgary Chamber of Commerce.

“We finally have a partner in Ottawa that recognizes that the policies are unworkable, impractical, damaging to Canada, and damaging to Alberta,” said Smith. “I think this agreement is the first step in being able to correct nine bad laws.”

The friendly rapport between Smith and Carney seemed to catch some off-guard, including longtime provocateur and wannabe journalist Ezra Levant, who was allowed into a restricted media event by Smith‘s handlers. “Is there anything the Prime Minister has said to you that would signal that his lifetime’s work of attacking carbon-based fuels will somehow be put to the side?” an incredulous Levant asked.

“I think he hates the oilpatch as his life’s work,” said Levant, without presenting evidence. 

Smith praised the PM’s willingness to work with her, calling it “something that we have not seen from a Canadian prime minister in over a decade.” Those years, which included the Trudeau-era decision to saddle Canadian taxpayers with a $34-billion pipeline megaproject, left “hundreds of thousands of Albertans skeptical and oftentimes questioning the long term viability of our nation,” Smith asserted.

Carney did not stick around for the news conference with Smith, but he made some brief remarks before it started, saying the two governments were “setting the stage for an industrial transformation.”

“At the core of the agreement, of course, is a priority to have a pipeline to Asia that’s going to make Canada stronger, more independent, more resilient, more sustainable,” he said. “Because the way we’re going to do that is in combination with the Pathways project, which will be the largest carbon capture project in the world.”

The agreement would result in “some adjustments to regulations” to “help us move forward more efficiently and effectively,” he said.

With members of the Canadian Building Trades Union standing behind him, Carney said a private sector proponent would have to come forward before the pipeline can be built. There would also have to be “full partnership, including equity ownership, substantial economic benefits with First Nations in Alberta, First Nations in British Columbia, as well as agreement and substantial economic benefits for the people of British Columbia.”

While the pipeline and the Pathways project were the main focus of the announcement, “it’s also about building nuclear capacity in Alberta, interties for transmission with British Columbia and Saskatchewan, so we have a much more efficient, competitive, and lower-cost grid,” he added. “And it’s about building AI data centres that are sovereign, so that we control our data, our information, our intelligence, in Canada.”

A ‘Race to the Bottom’ in Climate Policy

The Climate Institute’s Rick Smith said in a statement that while improvements to industrial carbon pricing are important, carveouts for Alberta invite copycat demands from other provinces and territories and create policy fragmentation across Canada, “triggering a race to the bottom on climate policy.”

“At a time when Canadian climate change policy needed increased certainty, today’s MOU does the opposite,” he said. “Investor certainty drops when rules become negotiable.”

Smith welcomed Alberta’s agreement to strengthen its industrial carbon pricing system, which covers about 25% of Canada’s total greenhouse gas emissions, calling it “one of the most important and cost-effective steps the province can take to reduce emissions.”

Yet “by framing these elements as part of a negotiated deal with Alberta, the MOU also undermines the credibility of the federal benchmark and backstop as an objective, consistent minimum standard across all provinces,” he said.

Smith called on the federal government to move quickly to define minimum standards for all provinces and work with them to develop a national price floor for industrial emissions credits.

Anna Johnston, staff lawyer at West Coast Environmental Law,  called the MOU “a slap in the face to B.C., Coastal First Nations, and all Canadians who care about making meaningful progress on the climate crisis.” She warned that “a northwest coast crude oil pipeline and tankers project would create an unacceptable risk of a catastrophic spill that would irreparably harm the marine environment and the coastal economies that depend on it. It would also create a carbon bomb that would make it impossible for Canada to reach its climate targets.”

Chris Severson-Baker, executive director of the Calgary-based Pembina Institute, called the MOU a “missed opportunity” for a policy reset that could have made Alberta oil more competitive in a world that is rapidly decarbonizing.

“After years of Alberta weakening or outright challenging climate policies and regulations, today should have been a reset on how climate policies are being implemented in Canada’s highest-emitting province,” he said.

“However, today’s memorandum raises as many questions as it answers. Most concerningly, it opens the door to not only Alberta— but any province—renegotiating new deals on federal climate policies, which will only serve to delay climate action and sow continued investment uncertainty, at a time when Canada must urgently attract private capital to its economy.”

Carney has repeatedly said the goal of his 2025 budget is to attract more than $1 trillion in investment to Canada in the next five years.

With files from Mitchell Beer.