This story has been updated to reflect a further erosion of the emission reduction requirements attached to the proposed West Coast Pipeline.

A multi-billion-dollar plan to transport and store greenhouse gas emissions from Canada’s emissions-intensive oil sands received a major boost Monday, even though the highly-touted deal between Ottawa, Alberta, and the five oil major sands companies will only capture a tiny fraction of the oil sands’ climate pollution.

Yet the tentative agreement to advance the Pathways Project would bring the companies one step closer to increasing Canada’s bitumen production, The Canadian Press reports, in the midst of an accelerating climate emergency.

Pathways is a condition for the proposed West Coast oil sands pipeline moving ahead, with 90% of the up to $43.7 billion price tag coming from Canadian taxpayers. Pathways would offset about 6.5% of the carbon dioxide emissions the industry currently produces, and its boosters have repeatedly talked about doubling that output.

The Pathways agreement was announced Monday, but signed on July 2—the same day Alberta filed its pipeline proposal to the federal major projects office.

The Oil Sands Alliance said the Pathways Project will have the capacity to transport and store about six million tonnes per year of captured CO2 by the mid-2030s. The parties are aiming for another 10 million tonnes of reductions by 2045.

The alliance, previously branded as the Pathways Alliance, had earlier targeted 22 million tonnes of emissions by 2030. While those promises were being made, the Regina-based International Carbon Capture and Storage (CCS) Knowledge Centre admitted in October, 2023 that even a 2035 target date would be extremely difficult to meet based on the current state of the technology, CP reported at the time.

“This blows my mind,” David Schlissel, a Massachusetts-based consultant then associated with the Institute for Energy Economics and Financial Analysis (IEEFA), told The Energy Mix in response. “It’s hypocritical. These guys have been hyping 90%, 95% capture, and now it’s, ‘well. we really can’t do it that fast, it’s not tested, it’s not certain’.”

‘Smallest of Fig Leaves’

Oilsands and thermal heavy oil production poured 92 million tonnes of CO2 emissions into the atmosphere in 2024, according to the federal government’s latest national inventory report released this year.

“Imagine the smallest of fig leaves, but the leaf is actually made of plastic,” Keith Stewart, senior energy strategist at Greenpeace Canada, told CP.

“This is a master class in greenwash, as the pollution reductions committed to in this agreement are only 7% of current carbon pollution from the oil sands and would be dwarfed by the additional pollution enabled by a new, taxpayer-financed pipeline.”

“The terms of this non-binding agreement mean that once again taxpayers will shoulder additional costs to bolster an industry that has not shown any interest in meaningfully increasing oil production or curbing harmful emissions,” Janetta McKenzie, director of the Pembina Institute’s oil and gas program, said in a Monday afternoon release.

The terms of the deal “are neither ambitious enough on the emissions reductions side, as the carbon capture project has shrunk by half from its original proposal, nor do they place enough financial accountability on the side of the oil producers to pay for reducing their own pollution,” she added. “This is a problematic equation that is once again left largely on the shoulders of taxpayers.”

The two governments touted the carbon capture deal as a nation-building project, just 10 days after Energy and Natural Resources Minister Tim Hodgson told CBC Power & Politics the pipeline is a “good investment” for taxpayers. CP says the governments have agreed to pursue regulatory and fiscal policies that would spur oil sands growth, which in turn would ensure the pipeline from Alberta to a tanker port in southern British Columbia can be filled.

Related: Tell us your better ideas for investing $43.7 billion of your tax dollars!

“The biggest nation-building projects in Canada’s history have succeeded through partnership. This agreement shows what can be achieved when governments and industry work together to grow our economy, strengthen our energy security, and unlock new opportunities for people across Canada,” Alberta Premier Danielle Smith said in a news release.

The West Coast pipeline and the Pathways carbon capture project were declared “mutually dependent”—or as Hodgson told media at an energy efficiency conference in Montreal two weeks ago, “co-dependent”—as part of the sweeping and controversial memorandum of understanding that Smith and Prime Minister Mark Carney signed in November. That announcement led to the resignation of then-environment and climate minister Steven Guilbeault from Cabinet, and he will soon be leaving his seat in Parliament.

“Over the last eight months, we have been steadily delivering on each commitment in the Canada-Alberta MOU, working with Alberta and the energy industry to build major energy infrastructure, reduce emissions, create jobs and prosperity, and secure energy sovereignty,” said Hodgson.

On Tuesday, MOU-watchers pointed to a subtle shift in requirements between the MOU implementation agreement signed in mid-May by the federal and Alberta governments and their deal with Pathways announced this week. While the Ottawa-Alberta accord called for six million tonnes of emissions reductions per year from CCS and another 10 megatonnes by other means, the deal with the companies is limited to six megatonnes, with the other 10 subject to less stringent requirements and conditional on fiscal support—meaning that even the measly emission reductions the two governments settled for are no longer a condition attached to the proposed West Coast Pipeline.

Fun With Tax Credits

The federal government has committed to extending investment tax credits of 50% on eligible carbon capture equipment and 37.5% for associated transportation, storage, and use equipment, CP says. Those rates were previously put in place until 2030, but will now remain in effect until 2035.

Ottawa will also follow through on legislation enabling investment tax credits for enhanced oil recovery—25% on carbon capture equipment and 18.75% for transportation, storage, and use. Enhanced oil recovery, which was left out of the government’s investment tax credit system but then restored in this year’s Spring Economic Update, involves injecting carbon dioxide into depleted oil fields to bring more oil to the surface.

As recently as 2021, 81% of the CO2 captured by CCUS projects world-wide was being sold to oil companies for EOR.

For its part, Alberta committed to finalize its own incentive program for carbon capture. The province also agreed to “implement financial supports to encourage the oil production growth required to underpin” the new West Coast oil pipeline and expansions planned for other pipelines.

The agreement announced Monday also includes incentives for the companies under Alberta’s carbon pricing regime if they meet certain milestones.

It says Pathways would proceed in stages, with infrastructure in service by Jan. 1, 2032, and the project completed three years later.

The members of the Oil Sands Alliance, the consortium behind the Pathways project, are Canadian Natural Resources Ltd., Imperial Oil, Suncor Energy, Cenovus Energy, and ConocoPhillips. The companies initially estimated the cost of the project at $16.5 billion. But at a fossil energy conference in June, Cenovus CEO Jon McKenzie said it would likely land between $20 billion and $30 billion.

“We believe we’ve achieved a framework that is positive for the oil sands industry and provides a step forward to help enable production growth and to advance the Pathways project,” alliance president Kendall Dilling said Monday.

The agreement includes a commitment for Pathways to make “reasonable” efforts to use Canadian construction materials.

Actual binding agreements between the federal and Alberta governments and each of the Oil Sands Alliance partners are to be signed on or before Nov. 15.

The main body of this story was first published by The Canadian Press on July 13, 2026.