Canada and Alberta have agreed on the regulatory rules for a new pipeline. What might it still take for industry to invest in producing the oil to fill it?
By Peter Nicholson – July 10, 2026
This essay is the second in a trilogy inspired by the original short-form article, A Pipeline Isn’t a Field of Dreams, published June 29, 2026, on SAGE Canada | Substack.
Read part one and part three.
In a June 29th post on SAGE Canada | Substack (“A Pipeline Is Not a Field of Dreams”), I argued that the debate surrounding a new pipeline to the BC coast was missing the key point: Who will produce the new million barrels a day needed to fill it? Although this additional production has been implicitly taken for granted, the industry itself has expressed a very different view.
In a speech on June 9, the CEO of Cenovus, Jon McKenzie, was explicit in stating the skepticism of oil sands producers: “To date, it has been assumed that the Canadian oil and gas producers will invest the tens of billions of dollars necessary to grow production and make the one million barrel per day pipeline a reality. … The reality is that Canadian oil and gas producers are not investing much beyond sustaining capital today. Without a competitive investment regime coordinated by the federal government and the Province of Alberta, the investment required to make this a reality will be challenged.”
But is it still the case that federal environmental and climate policies are what is making the big players in the industry unwilling, so far, to commit to shipping volumes on the proposed pipeline? Is the monkey still on Prime Minister Carney’s back?
Clearly not. The series of agreements between Alberta and Canada dating from November 27 last year, and followed up on May 15 and July 2 this year, demonstrate that both governments are now agreed on the high-level regulatory framework that will govern oil sands production—a framework that includes very significant adjustments by Ottawa—notably:
- removal of the Oil and Gas Emissions Cap;
- delegation to Alberta of the federal methane regulations;
- ensuring that Alberta’s carbon pricing system (TIER) is adapted to the specific circumstances of the oil and gas sector;
- promised amendments to the Competition Act to remove some of the “greenwashing” provisions that are creating investment uncertainty;
- streamlining the regulatory process to achieve a maximum 2-year timeframe for approvals.
At the same time, the tanker ban is no longer an issue now that Alberta has proposed a southern route for the pipeline. Finally, regarding the contentious issue of carbon capture and storage (CCS), the two governments and the Oil Sands Alliance (representing the major producers) have entered into an MOU that establishes a political framework for addressing CCS.
What needs emphasis is that this deal equally implicates both Canada and Alberta, the industry’s champion. It therefore should put to rest the blame game in which Ottawa’s “unreasonable” regulations have been the only thing standing in the way of massive new oil sands investment. Nevertheless, Jon McKenzie—speaking on June 9 well after the May 15 Implementation Agreement between Alberta and Canada, which included all the favourable regulatory commitments outlined above—appears not to have been satisfied: “What is missing and unclear in the MOU is the commitment to regulatory reform that would allow industry to grow production…and fill the million barrel per day pipeline to the West Coast.”
In fairness, there is still a great deal of fine print needed to flesh out the headline agreement between Alberta, Canada, and the industry, especially including many of the financial elements. But it’s already clear that governments—via ownership positions in the pipeline and backstopping indigenous equity participation, as well as through various investment tax credits—are prepared to step up with generous fiscal support for the pipeline itself and for the scaled-back Pathways CCS initiative.
But there is far less transparency regarding industry’s expectation of taxpayer assistance for greenfield oil sands production. The only hint is a reference in the July 2 Pathways MOU to “development of fiscal frameworks to enable substantial oil sands development, production and growth.” This should put the spotlight on an issue that has received surprisingly little public attention: the extent to which industry may expect governments to support not only the pipeline itself but also the new production needed to fill it. That question arises because the business case for such investment appears considerably weaker than for expansion of existing projects, a conclusion broadly consistent with recent projections by both the Canada Energy Regulator and the International Energy Agency of very modest growth of oil demand through 2050.
Now that the regulatory roadblocks have been substantially addressed—as Alberta’s signature on the MOU confirms—construction of the pipeline, and production of the new oil to fill it, comes down simply to a business decision, but that decision may turn on the amount of further taxpayer assistance that will ultimately be put on the table.
Let’s be clear. Despite the political rhetoric, this is not about energy security for Canada. We have abundant sources far beyond our domestic needs. This is all about exploiting a natural resource for profit, an endeavour for which Canadian companies have world-class capability. Taxpayers should not be asked to provide a further financial crutch. And that’s because Canada cannot build a stronger economy by subsidizing investments that private investors, with the deepest knowledge of the industry’s economic prospects, have so far judged to be unattractive. Public policy should correct genuine market failures—not replace the market’s judgment about where scarce capital can be most productively employed.
Three-part series:
Does Canada Need A New Oil Pipeline to the BC Coast?
From Economics to Politics
Carbon Capture and the Pipeline
