Prime Minister Mark Carney and Alberta Premier Danielle Smith have reached a preliminary agreement on a memorandum of understanding that would grant Alberta special exemptions from federal environmental regulations and extend political backing to a new oil pipeline to the B.C. coast, as per sources familiar with the matter. The memorandum is expected to be officially unveiled during a joint press conference in Calgary on Thursday.

The agreement hinges on Alberta adopting a more stringent industrial carbon pricing system and committing to a substantial investment in carbon capture technology by the Pathways Alliance, a group of oilsands companies. While several sources privy to the plan confirmed these details to CBC News, they preferred to remain anonymous until the memorandum of understanding is made public.

This landmark deal has the potential to reshape the strained relationship between the federal and provincial governments and is anticipated to be accompanied by a significant public relations campaign, likely involving the Calgary Chamber of Commerce, the prime minister, the premier, and other Alberta officials.

The agreement is expected to include provisions exempting Alberta from federal greenhouse gas regulations, including the net-zero clean electricity rules, in exchange for the province enhancing its industrial carbon pricing. Imposing an effective carbon price on major emitters, such as the oil and gas sector, is widely recognized as a crucial measure to reduce harmful emissions.

If the conditions laid out in the agreement are met, it could render the federal government’s proposed oil and gas emissions cap unnecessary, potentially leading to its removal. The federal government has proposed adjustments to the Competition Act to combat misleading environmental advertising by corporations, known as greenwashing, in its 2025 budget.

The Alberta government and industry stakeholders have advocated for the repeal of these regulations. The forthcoming agreement is anticipated to emphasize the importance of Alberta engaging in discussions with the B.C. government as it progresses on the development of an oil pipeline to the northwest coast.

Furthermore, the memorandum is likely to address Indigenous ownership and equity considerations and the necessity for collaborative engagement with British Columbia. Premier David Eby of British Columbia stated that Prime Minister Carney disclosed that the agreement’s specifics were still being finalized during their recent conversation.

Adrian Dix, B.C.’s minister for energy and climate solutions, highlighted that the focus of the impending agreement is on a hypothetical pipeline without a finalized route or confirmed buyers. The Alberta premier, Danielle Smith, is expected to confront her party’s members at a United Conservative Party event in Edmonton over the weekend.

It was indicated at a parliamentary committee hearing that exemptions to the tanker ban could be considered if there is support from Indigenous groups and relevant jurisdictions. The Alberta government refrained from providing further details but expressed intentions to reveal more in the near future.

The agreement is also set to prioritize the completion of the $16.5 billion Pathways Alliance carbon capture and storage initiative. This initiative, led by a coalition of oilsands companies, aims to capture greenhouse gas emissions from northern Alberta facilities and transport them via pipeline to an underground storage facility near Cold Lake, Alberta.

Greenpeace Canada’s senior energy strategist, Keith Stewart, criticized the initial terms of the memorandum, labeling it a “historic betrayal” of Canada’s climate commitments and Indigenous rights, citing concerns about the environmental impact of expanding oil production to fill a proposed new pipeline.