Canada and Alberta seal Pathways carbon capture deal tied to new oil pipeline

The Canadian federal government, the government of Alberta and the Oil Sands Alliance have reached an agreement to advance construction of the Pathways Project, a carbon capture and storage scheme expected to become one of the largest of its kind in the world. The agreement was announced on 2 July 2026 by Prime Minister Mark Carney alongside Alberta Premier Danielle Smith, and links the CCS scheme directly to federal approval of a proposed new oil pipeline running largely along the existing Trans Mountain corridor from Alberta to the British Columbia coast.

According to the joint announcement, Pathways will deliver 16 million tonnes of emissions reductions per year once operational, alongside additional commitments to emissions reductions contained in the wider agreement. The Oil Sands Alliance, formerly known as the Pathways Alliance, is made up of five major oil sands producers: Canadian Natural Resources, Cenovus Energy, Imperial Oil, Suncor Energy and ConocoPhillips Canada. The companies would be responsible for installing carbon capture equipment at their own oil sands facilities, with flue gases collected from boilers, steam generators and other combustion equipment before being transported to a central storage hub.

The announcement builds on a Memorandum of Understanding between Ottawa and Alberta reached in November 2025, and an Implementation Agreement signed on 15 May 2026 that set out a revised schedule for industrial carbon pricing in the province. That earlier agreement introduced carbon contracts for difference, intended to give investors greater certainty over the future carbon price regime by guaranteeing a fixed price floor and ceiling over the project’s operating life. Government officials have described this mechanism as central to making the capital-intensive Pathways scheme commercially viable, given that carbon capture at oil sands facilities requires large upfront investment with returns dependent on a stable long-term carbon price.

The proposed west coast pipeline, which would be developed by government-owned Trans Mountain Corporation working with Pembina Pipeline Corporation as a private-sector partner, would carry up to one million barrels of oil per day toward global markets. The federal government confirmed the pipeline proposal has been referred to Canada’s Major Projects Office, with Ottawa and Alberta acting as equal partners and a meaningful equity stake reserved for Indigenous peoples. Consultations with Indigenous representatives on both the pipeline and the carbon capture scheme are due to begin immediately, and the government said the pipeline would respect the existing Oil Tanker Moratorium Act along the northern coast.

Officials estimate the combined construction and operation of the pipeline and the Pathways Project will create approximately 175,000 jobs across Alberta, British Columbia and the rest of Canada, with up to 140,000 of those tied to the pipeline itself. The Pathways Project alone is projected to contribute more than 16 billion Canadian dollars to national GDP and support more than 40,000 jobs annually once running. A separate Canada-British Columbia Cooperative Prosperity Agreement was also signed the same day between the Prime Minister and BC Premier David Eby, intended to accelerate construction of energy and trade infrastructure across the province.

The Oil Sands Alliance, in its own statement responding to the wider federal-provincial agreement, said it welcomed the added clarity on the industrial carbon tax framework but cautioned that the announced tax structure continues to impose costs on the sector that it argues remain uncompetitive relative to other major oil-producing nations. The Alliance said it remained committed to advancing the Pathways scheme provided the necessary regulatory and fiscal terms are put in place to support both the carbon capture project and continued oil sands production growth.

No final cost figure for the Pathways CCS infrastructure has yet been published, though earlier industry estimates placed the project’s starting cost in the range of 24 billion Canadian dollars and above. A submission to the Major Projects Office from the Alberta government estimated the pipeline itself would cost between 35.2 billion and 43.7 billion Canadian dollars, with the lower estimate assuming savings from regulatory reform. Definitive agreements between the parties on project financing and risk-sharing are expected to be finalised by September 2026.