Canada and Alberta Agree on Oil Sands Production Growth Linked to Carbon Capture
The governments of Canada and Alberta have established an agreement linking oil sands production growth to carbon capture investment. The accord requires definitive decisions and fiscal clarity for full implementation.
A trilateral Memorandum of Understanding (MOU) was established in July 2026 between the Government of Canada, the Government of Alberta, and five major oil sands producers. This agreement creates a framework where the expansion of production capacity is tied to historic investment in carbon capture technology and new export infrastructure.
Under the MOU, Canadian Natural Resources, Suncor Energy, Cenovus Energy, Imperial Oil, and ConocoPhillips Canada have committed to developing the Pathways Carbon Capture and Storage project. This initiative aims to capture approximately 6 million tonnes of carbon dioxide annually by 2035, with a goal to increase this to 16 million tonnes per year by 2045.
Industry observers note that the July MOU represents conditional commitments, not executed projects. Definitive, binding agreements are expected to be signed by November 15, 2026, which will determine if fiscal conditions make expansion economically viable for producers. Alberta currently produces around four million barrels per day, and the provincial government has publicly stated an aspiration to double this output within a decade.
Growth remains contingent on favorable economic conditions, specifically the allocation of costs for carbon capture and storage (CCS), the treatment of carbon prices, and available subsidies. Final investment decisions on production expansion are not anticipated until late 2027 or early 2028, once fiscal arrangements are clarified.