Canada, Alberta Ease TIER Carbon Rules to Fast-Track Pathways CCS Project

Canada and Alberta have signed a trilateral memorandum of understanding (MOU) with the Oil Sands Alliance (OSA) that ties reduced carbon compliance costs to progress on the long-delayed Pathways carbon capture, utilization, and storage (CCUS) project. The deal, effective July 2, 2026, links emissions cuts from Canada's oil sands sector to expanded export capacity through a proposed pipeline to the West Coast.

The OSA is made up of five major producers: Canadian Natural Resources Limited, Suncor Energy Inc., Cenovus Energy Inc., Imperial Oil Limited, and ConocoPhillips Company.

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How the TIER Incentive Works

The agreement uses Alberta's industrial carbon pricing system, the Technology Innovation and Emissions Reduction (TIER) Regulation, as leverage. TIER benchmarks normally tighten by 2% a year, a feature called stringency. Under the MOU, OSA members that hit their share of a 6 million tonne per annum (mtpa) reduction target through the Pathways CCS project get that annual tightening rate cut to 1%, lowering their compliance costs.

Milestones Through 2045

The MOU sets a broader roadmap too. Beyond the initial 6 mtpa, the parties are aiming for another 5 mtpa by 2040 and a further 5 mtpa by 2045, for a total of 16 mtpa net. Companies that show demonstrable progress keep the reduced 1% stringency rate through each period. Those that fall short face the full 2% rate, and in some years an even steeper 1.5% annual tightening as a penalty.

Shared transport and storage infrastructure for Pathways is expected to be running by January 1, 2032, with the full 6 mtpa capacity in place by January 1, 2035.

Government Commitments and Market Access

In exchange, Canada agreed to review the CCUS Investment Tax Credit and work on the durability of the Clean Fuel Regulations, while Alberta agreed to extend its Carbon Capture Incentive Program to 2035 and apply a 120-day approval timeline for qualifying projects. The MOU also recognizes the Pathways project and the proposed West Coast Oil Pipeline as mutually dependent, meaning production growth and emissions reductions are expected to move forward together.

Oil Sands Alliance president Kendall Dilling called it a step forward for the industry:

"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."

Tim Hodgson, Canada's Minister of Natural Resources, framed the deal as part of a longer-running effort between Ottawa and the province:

"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."

Binding definitive agreements between the two governments and each OSA member company are targeted for signing on or before November 15, 2026, alongside the establishment of a trilateral working group to carry the plan forward. The MOU also commits all parties to early and meaningful consultation with Indigenous Peoples on activities tied to the pipeline and emissions work.

About Oil Sands Alliance

Oil Sands Alliance, formerly known as Pathways Alliance, is an industry association representing five of Canada's largest oil sands producers. Formed to advance a shared carbon capture and storage strategy for the region, the alliance is led by president Kendall Dilling and works alongside COSIA on environmental innovation across the sector.

Source: Government of Canada