Canada, Alberta reach carbon compromise that may pave way for new 1M bbl/day oil pipeline

[Three Pipeline Reflecting Blue Sky]
zorazhuang/iStock via Getty Images

Canada's Prime Minister Mark Carney and Alberta's Premier Danielle Smith signed a deal Friday that could open the way to start construction on a new crude oil pipeline [https://www.cbc.ca/news/politics/carney-smith-energy-announcement-mou-9.7200652] capable of carrying 1M bbl/day of Canadian oil to the coast of British Columbia, where it can be shipped to Asian countries that need the crude.

The agreement, which builds on the memorandum of understanding that the federal and provincial governments signed in November, includes a plan to increase Alberta's industrial carbon price, though at a slower pace than previously projected.

It would raise the effective carbon credit cost to C$130/metric ton (US$94.59) by 2040 from C$95/ton, but under a previous policy from former Prime Minister Trudeau, the industrial carbon tax was set to climb to C$170/ton by the end of the decade.

The deal is unlikely to satisfy environmentalists or oil executives who fear any industrial carbon price puts the industry at ​a disadvantage to the U.S., which does not have carbon prices.

But just hours after Friday's signing ceremony in Calgary, Enbridge (ENB [https://seekingalpha.com/symbol/ENB]) CEO Greg Ebel told Bloomberg that his company "definitely would consider [https://www.bloomberg.com/news/articles/2026-05-15/enbridge-warms-up-to-new-canada-oil-pipeline-after-carbon-compromise?srnd=homepage-americas]" backing a new pipeline, calling the agreement "a big step forward for Canada."

Just three months ago, Ebel said his company would not take on the development risk of a new west coast pipeline.

Premier Smith told Bloomberg that the blocking of the Strait of Hormuz has sparked demand in Asia for new and reliable oil supplies and strengthened the case for a new Canadian pipeline.

"They will take whatever amount of energy we're able to provide to them, and it will act as a hedge against that insecurity of what might happen in the Middle East," Smith said.

The premier said the potential owners of a new conduit could be a combination of indigenous groups, foreign oil buyers, and pipeline firms such as Enbridge (ENB [https://seekingalpha.com/symbol/ENB]), South Bow (SOBO [https://seekingalpha.com/symbol/SOBO]), or government-owned Trans Mountain Corp.

The pact was criticized by British Columbia Premier David Eby, who said his province still wants the federal government to keep a federal ban on oil tankers off its northern coast.

Alberta now has until July 1 to submit a proposed pipeline project for federal backing; should the proposal pass muster while other conditions are met, Carney could declare the pipeline project in the national interest, which would accelerate the approval process and set up construction to begin as early as September 2027.

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