Alberta-Ottawa MOU negotiations miss first deadline as talks continue

The first major deadline under a four-month-old memorandum of understanding on energy development between Alberta and Ottawa has passed without key agreements being inked on carbon pricing and a flagship oilsands emissions-reduction project.

The agreements are a precondition for the Carney government’s support of Alberta’s proposal to build a million-barrel-per-day export pipeline to the West Coast.

Ahead of the April 1 deadline, both governments were eager to point to progress and downplayed the missed timeline. Prime Minister Mark Carney said he met with Alberta Premier Danielle Smith earlier this week, describing their meeting as a “very constructive conversation.”

“It’s a complex, very important set of negotiations,” Carney said Tuesday. “We’ll get the right agreement at the right time. But I anticipate soon.”

Negotiators have largely settled two of the four key points that were originally due Wednesday under the timeline set out in the MOU, including a draft deal on reducing oilpatch methane emissions and a “one project, one review” approach to streamlining environmental assessments of major projects falling under Alberta’s jurisdiction. The projects are expected to include oilsands developments, carbon capture and storage projects — including the Oil Sands Alliance’s multibillion-dollar Pathways carbon capture project— power generation facilities and pipeline projects within Alberta.

Still to come is a crucial agreement on carbon pricing. Under the terms of the MOU, Alberta — which put a freeze on its industrial carbon tax last May — agreed in principle to ramping up to an effective price for heavy emitters of $130 tonne. Negotiations now appear focused on the timeline for reaching that level, with climate groups urging Ottawa not to delay the agreed-to price beyond 2030.

Alberta’s premier and some industry voices have argued for a slower pace, arguing it layers cost and complexity onto the Canadian market that deters global investors.

“The question is how quickly should it rise and whether or not it’s putting us at a competitive disadvantage,” Smith said Tuesday. “So my conversations with the prime minister are figuring out that pacing, that benchmark, that threshold, because we have to make sure that our industry is strong and healthy. We have to make sure costs for consumers are going to be affordable and we’ve got to get the right balance.”

Currently, the headline carbon price in Alberta is $95 per tonne.

Carbon pricing is also expected to be a key issue in negotiations between Ottawa, Alberta and the Oil Sands Alliance over its proposed multibillion-dollar carbon capture and storage network.

The Pathways mega-project, proposed by oilsands majors Canadian Natural Resources Ltd., Cenovus Energy Inc., ConocoPhillips Canada Resources Corp., Imperial Oil Ltd. and Suncor Energy Inc., would transport captured CO2 from multiple oilsands facilities to a storage hub in the Cold Lake area of Alberta.

Striking a deal on Pathways is required before Ottawa declares Alberta’s proposed pipeline a project of national interest in what has been described as a “grand bargain” by Alberta’s premier.

Oilsands executives have said they are prepared to proceed with the project, provided governments offer sufficient financial support. They argue that without additional incentives, the added costs could undermine the sector’s competitiveness compared to other oil-producing countries that compete for private capital, including the United States and parts of Latin America and Africa.

The group is expected to be looking for the federal and provincial governments to improve on existing tax credits and grants aimed at offsetting the capital costs for carbon capture technologies.

April 1 was originally the deadline to finalize a trilateral MOU between industry and the two governments, but talks are ongoing.

Oil Sands Alliance (formerly the Pathways Alliance) president Kendall Dilling said Monday there was still “some heavy lifting to be done” in the negotiations, but that he remained “optimistic.”

“The intentions from all parties are clearly aligned, and that gives me confidence that we’re going to figure it out and get there.”

• Email: mpotkins@postmedia.com