Punishing Alberta Oil Production: The Divisive Effect of Policies For Carney’s “Decarbonized Oil”

The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate.

Following meetings in Saskatoon in early June between Prime Minister Mark Carney and Canadian provincial and territorial leaders, the federal government expressed renewed interest in the completion of new oil pipelines to reduce reliance on oil exports to the USA while providing better access to foreign markets. However Carney, while suggesting that there is “real potential” for such projects nonetheless qualified that support as being limited to projects that would “decarbonize” Canadian oil, apparently those that would employ carbon capture technologies. While the meeting did not result in a final list of potential projects, Alberta Premier Danielle Smith said that this approach would constitute a “grand bargain” whereby new pipelines to increase oil exports could help fund decarbonization efforts. But is that true and what are the implications for the Albertan and Canadian economies?

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The federal government has doubled down on its commitment to “responsibly produced oil and gas”. These terms are apparently carefully crafted to maintain federal policies for Net Zero. These policies include a Canadian emissions cap, tanker bans and a clean electricity mandate. Many would consider that Canadians, especially Albertans, should be wary of these largely undefined announcements in which Ottawa proposes solely to determine projects that are “in the national interest.”

The federal government has tabled legislation designed to address these challenges with Bill C-5: An Act to enact the Free Trade and Labour Mobility Act and the Building Canada Act (the One Canadian Economy Act). Rather than replacing controversial, and challenged, legislation like the Impact Assessment Act, the Carney government proposes to add more legislation designed to accelerate and streamline regulatory approvals for energy and infrastructure projects. However, only those projects that Ottawa designates as being in the national interest would be approved. While clearer, shorter regulatory timelines and the restoration of the Major Projects Office are also proposed, Bill C-5 is to be superimposed over a crippling regulatory base.

It remains to be seen if this attempt will restore a much-diminished Canadian Can-Do spirit for economic development by encouraging much-needed, indeed essential interprovincial teamwork across shared jurisdictions. While the Act’s proposed single approval process could provide for expedited review timelines, a complex web of regulatory processes will remain in place requiring much enhanced interagency and interprovincial coordination. Given Canada’s much-diminished record for regulatory and policy clarity will this legislation be enough to persuade the corporate and international capital community to consider Canada as a prime investment destination?

As with all complex matters the devil always lurks in the details. Notably, these federal initiatives arrive at a time when the Carney government is facing ever-more pressing geopolitical, energy security and economic concerns. The Organization for Economic Co-operation and Development predicts that Canada’s economy will grow by a dismal one per cent in 2025 and 1.1 per cent in 2026 – this at a time when the global economy is predicted to grow by 2.9 per cent.

It should come as no surprise that Carney’s recent musing about the “real potential” for decarbonized oil pipelines have sparked debate. The undefined term “decarbonized”, is clearly aimed directly at western Canadian oil production as part of Ottawa’s broader strategy to achieve national emissions commitments using costly carbon capture and storage (CCS) projects whose economic viability at scale has been questioned. What might this mean for western Canadian oil producers?

The Alberta Oil sands presently account for about 58% of Canada’s total oil output. Data from December 2023 show Alberta producing a record 4.53 million barrels per day (MMb/d) as major oil export pipelines including Trans Mountain, Keystone and the Enbridge Mainline operate at high levels of capacity. Meanwhile, in 2023 eastern Canada imported on average about 490,000 barrels of crude oil per day (bpd) at a cost estimated at CAD $19.5 billion. These seaborne shipments to major refineries (like New Brunswick’s Irving Refinery in Saint John) rely on imported oil by tanker with crude oil deliveries to New Brunswick averaging around 263,000 barrels per day. In 2023 the estimated total cost to Canada for imported crude oil was $19.5 billion with oil imports arriving from the United States (72.4%), Nigeria (12.9%), and Saudi Arabia (10.7%). Since 1988, marine terminals along the St. Lawrence have seen imports of foreign oil valued at more than $228 billion while the Irving Oil refinery imported $136 billion from 1988 to 2020.

What are the policy and cost implication of Carney’s call for the “decarbonization” of western Canadian produced, oil? It implies that western Canadian “decarbonized” oil would have to be produced and transported to competitive world markets under a material regulatory and financial burden. Meanwhile, eastern Canadian refiners would be allowed to import oil from the USA and offshore jurisdictions free from any comparable regulatory burdens. This policy would penalize, and makes less competitive, Canadian producers while rewarding offshore sources. A federal regulatory requirement to decarbonize western Canadian crude oil production without imposing similar restrictions on imported oil would render the One Canadian Economy Act moot and create two market realities in Canada – one that favours imports and that discourages, or at very least threatens the competitiveness of, Canadian oil export production.

Ron Wallace is a former Member of the National Energy Board.

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Alberta Next Panel calls to reform how Canada works

Published on December 22, 2025

Todayville

From the Fraser Institute

By Tegan Hill

The Alberta Next Panel, tasked with advising the Smith government on how the province can better protect its interests and defend its economy, has officially released its report. Two of its key recommendations—to hold a referendum on Alberta leaving the Canada Pension Plan, and to create a commission to review programs like equalization—could lead to meaningful changes to Canada’s system of fiscal federalism (i.e. the financial relationship between Ottawa and the provinces).

The panel stemmed from a growing sense of unfairness in Alberta. From 2007 to 2022, Albertans’ net contribution to federal finances (total federal taxes paid by Albertans minus federal money spent or transferred to Albertans) was $244.6 billion—more than five times the net contribution from British Columbians or Ontarians (the only other two net contributors). This money from Albertans helps keep taxes lower and fund government services in other provinces. Yet Ottawa continues to impose federal regulations, which disproportionately and negatively impact Alberta’s energy industry.

Albertans were growing tired of this unbalanced relationship. According to a poll by the Angus Reid Institute, nearly half of Albertans believe they get a “raw deal”—that is, they give more than they get—being part of Canada. The Alberta Next Panel survey found that 59 per cent of Albertans believe the federal transfer and equalization system is unfair to Alberta. And a ThinkHQ survey found that more than seven in 10 Albertans feel that federal policies over the past several years hurt their quality of life.

As part of an effort to increase provincial autonomy, amid these frustrations, the panel recommends the Alberta government hold a referendum on leaving the Canada Pension Plan (CPP) and establishing its own provincial pension plan.

Albertans typically have higher average incomes and a younger population than the rest of the country, which means they could pay a lower contribution rate under a provincial pension plan while receiving the same level of benefits as the CPP. (These demographic and economic factors are also why Albertans currently make such a large net contribution to the CPP).

The savings from paying a lower contribution rate could result in materially higher income during retirement for Albertans if they’re invested in a private account. One report found that if a typical Albertan invested the savings from paying a lower contribution rate to a provincial pension plan, they could benefit from $189,773 (pre-tax) in additional retirement income.

Clearly, Albertans could see a financial benefit from leaving the CPP, but there are many factors to consider. The government plans to present a detailed report including how the funds would be managed, contribution rates, and implementation plan prior to a referendum.

Then there’s equalization—a program fraught with flaws. The goal of equalization is to ensure provinces can provide reasonably comparable public services at reasonably comparable tax rates. Ottawa collects taxes from Canadians across the country and then redistributes that money to “have not” provinces. In 2026/27, equalization payments is expected to total $27.2 billion with all provinces except Alberta, British Columbia and Saskatchewan receiving payments.

Reasonable people can disagree on whether or not they support the principle of the program, but again, it has major flaws that just don’t make sense. Consider the fixed growth rate rule, which mandates that total equalization payments grow each year even when the income differences between recipient and non-recipient provinces narrows. That means Albertans continue paying for a growing program, even when such growth isn’t required to meet the program’s stated objective. The panel recommends that Alberta take a leading role in working with other provinces and the federal government to reform equalization and set up a new Canada Fiscal Commission to review fiscal federalism more broadly.

The Alberta Next Panel is calling for changes to fiscal federalism. Reforms to equalization are clearly needed—and it’s worth exploring the potential of an Alberta pension plan. Indeed, both of these changes could deliver benefits.

Tegan Hill

Director, Alberta Policy, Fraser Institute

Alberta

Alberta’s huge oil sands reserves dwarf U.S. shale

Published on December 21, 2025

Todayville

From the Canadian Energy Centre

By Will Gibson

Oil sands could maintain current production rates for more than 140 years

Investor interest in Canadian oil producers, primarily in the Alberta oil sands, has picked up, and not only because of expanded export capacity from the Trans Mountain pipeline.

Enverus Intelligence Research says the real draw — and a major factor behind oil sands equities outperforming U.S. peers by about 40 per cent since January 2024 — is the resource Trans Mountain helps unlock.

Alberta’s oil sands contain 167 billion barrels of reserves, nearly four times the volume in the United States.

Today’s oil sands operators hold more than twice the available high-quality resources compared to U.S. shale producers, Enverus reports.

“It’s a huge number — 167 billion barrels — when Alberta only produces about three million barrels a day right now,” said Mike Verney, executive vice-president at McDaniel & Associates, which earlier this year updated the province’s oil and gas reserves on behalf of the Alberta Energy Regulator.

Already fourth in the world, the assessment found Alberta’s oil reserves increased by seven billion barrels.

Verney said the rise in reserves despite record production is in part a result of improved processes and technology.

“Oil sands companies can produce for decades at the same economic threshold as they do today. That’s a great place to be,” said Michael Berger, a senior analyst with Enverus.

BMO Capital Markets estimates that Alberta’s oil sands reserves could maintain current production rates for more than 140 years.

The long-term picture looks different south of the border.

The U.S. Energy Information Administration projects that American production will peak before 2030 and enter a long period of decline.

Having a lasting stable source of supply is important as world oil demand is expected to remain strong for decades to come.

This is particularly true in Asia, the target market for oil exports off Canada’s West Coast.

The International Energy Agency (IEA) projects oil demand in the Asia-Pacific region will go from 35 million barrels per day in 2024 to 41 million barrels per day in 2050.

The growing appeal of Alberta oil in Asian markets shows up not only in expanded Trans Mountain shipments, but also in Canadian crude being “re-exported” from U.S. Gulf Coast terminals.

According to RBN Energy, Asian buyers – primarily in China – are now the main non-U.S. buyers from Trans Mountain, while India dominates purchases of re-exports from the U.S. Gulf Coast. .

BMO said the oil sands offers advantages both in steady supply and lower overall environmental impacts.

“Not only is the resulting stability ideally suited to backfill anticipated declines in world oil supply, but the long-term physical footprint may also be meaningfully lower given large-scale concentrated emissions, high water recycling rates and low well declines,” BMO analysts said.