CALGARY – There’s no pipeline without Pathways and no Pathways without a pipeline.
That was the quid pro quo spelled out in a sweeping energy accord signed between Alberta and Ottawa in November.
Alberta is spearheading early planning and regulatory work on a potential new one-million-barrel-a-day pipeline to the West Coast that would provide an outlet for increased oilsands production and boost exports to Asia. But the “grand bargain” with Ottawa to help clear the way for the pipeline calls for a meaningful offset to the carbon emissions it would enable.
Enter Pathways: a multibillion-dollar plan to transport and store 16 million tonnes of carbon dioxide a year from the oilsands by 2035. The project has been in the works for around four years, but the companies proposing it, the province and federal government have yet to figure out how they’ll share the costs and the risks. The Alberta-Ottawa agreement set an April 1 deadline to reach a three-way deal, but the matter remains unresolved.
The Pathways project is being proposed by the Oil Sands Alliance (formerly the Pathways Alliance), which is made up of five major oilsands players: Canadian Natural Resources Ltd., Cenovus Energy Inc., Imperial Oil Ltd., Suncor Energy Inc. and ConocoPhillips Canada.
Carbon capture and storage is “probably the most cost-effective pathway for most industrial decarbonization in Alberta,” said Brendan Frank, vice-president of policy at Clean Prosperity, a climate policy group.
Here is a rundown on the technical and economic aspects of Pathways:
Capture
Pathways members would be responsible for installing carbon capture equipment at their own oilsands sites. Flue gases would be collected from boilers, steam generators and other combustion equipment. A chemical process would separate out the carbon dioxide, which would then be compressed into a liquid. Costs would vary site by site due to the transport distance to the storage hub and how emissions intensive each operation is, Frank said.
Transport
A project overview posted by the Oil Sands Alliance in March says it’s proposing to build a more than 650-kilometre pipeline network to bring CO2 from as far north as the Fort McMurray, Alta., area south to a storage hub in the Cold Lake, Alta., region. It does not account for the investments needed in the individual oilsands plants to capture emissions. The plan includes 16 small lateral segments connecting to 13 oilsands sites, both mines and steam-driven operations. The laterals would feed liquefied CO2 into a wider transportation artery, which would then connect with a distribution line running to the storage hub.
Storage
At the storage hub, the gas would be injected deep underground in the Basal Cambrian Sandstone formation, which sits one to two kilometres below the surface. The spongelike sandstone has spaces that can be filled with CO2. Above that formation is thick, non-porous rock salt that can act as a barrier to keep the carbon dioxide in the ground.
Costs
The overview did not include an updated cost estimate, but in 2022 the alliance said the first phase would include $16.5 billion in investment by 2030.
The project has been in limbo for years as the companies, Ottawa and Alberta try to reach an agreement on how the costs should be shared.
“We can pay for some of Pathways,” Cenovus CEO Jon McKenzie said in an interview in April. “We can’t pay for the entire burden.”
The federal government already offers an investment tax credit for carbon capture projects, which industry players have said is helpful but does not go far enough to defray the cost. Alberta has its own grant program that covers 12 per cent of eligible capital costs.
In Canada, the government’s financial support for carbon capture has been on the capital cost side, helping projects get up and running. In the U.S., by contrast, companies shoulder the upfront construction costs and get generous tax credits for ongoing operations.
Where the carbon price comes in
The capital cost from government help is welcome, said Chloe McElhone, research manager at Clean Prosperity. But at the scale of Pathways, certainty is needed decades into the future.
“You need to be complimented with the ongoing operational support, and that’s what carbon markets are providing.”
The Alberta and federal governments agreed earlier this month to target an effective carbon price — the value carbon credits and offsets go for on the market — of $130 a tonne by 2040. Several environmental groups said that’s too long a horizon.
“This price schedule is not strong enough to spur the necessary near-term private investment to reinvigorate the Pathways carbon capture project,” said Chris Severson-Baker, executive director of the Pembina Institute clean-energy think-tank.
Climate advocates did, however, welcome the inclusion of carbon contracts for difference in the federal-provincial “implementation agreement.” Those act as an insurance policy of sorts, giving clean energy investors certainty in the carbon pricing regime in the years ahead. Should each level of government fail to maintain their commitments or repeal their respective climate policies, each would “assume sole liability” for the contracts.
Analysis from Clean Prosperity found carbon prices between $130 and $150 should be enough to make some, if not all, of Pathways viable, said Frank.
“I’d say the implementation agreement represents material progress toward making the Pathways project economic,” he said.
“It offers a lot more certainty than market actors had previously.”
This report by The Canadian Press was first published May 25, 2026.
Companies in this story: (TSX:CVE) (TSX:IMO) (TSX:SU) (TSX:CNQ)
