Canada, Alberta publish agreement-in-principle regarding methane emissions reduction regulation

Law360 Canada (April 27, 2026, 10:49 AM EDT) --

Mardi McNaughton

Alex Sinclair

The Government of Canada and the Government of Alberta published an agreement-in-principle on March 25 outlining an outcome-based methane equivalency agreement. The agreement-in-principle would permit Alberta’s provincial regulatory regime to operate in lieu of federal methane regulations.

Background

The agreement-in-principle is a framework agreement setting out certain key terms that the parties intend to include in a future, final, binding equivalency agreement. This will replace the current Methane Emission Reduction Regulation, which has been in force since Jan. 1, 2020.

The agreement-in-principle is the outcome of the Canada-Alberta Memorandum of Understanding (MOU) and the enhanced regulations (Enhanced Methane Regulations), which were finalized in December 2025. The parties agreed in the MOU to enter into a methane equivalency agreement with a 2035 target date and a 75 per cent emissions reduction target, relative to 2014 levels, which meets the target set in the Enhanced Methane Regulations.

Key commitments under the agreement-in-principle

The agreement-in-principle commits Canada and Alberta to establishing an outcome‑based equivalency agreement under the Canadian Environmental Protection Act (CEPA). Alberta’s provincial methane regulations, designed to deliver equivalent emissions reductions over the life of the agreement, will apply in place of the federal Enhanced Methane Regulations.

The parties have committed to publishing a draft equivalency agreement, conducting a 60‑day public consultation period and finalizing the agreement by the end of 2026. The final agreement will include a force majeure provision permitting adjustments in the event of circumstances beyond the parties’ control, such as natural disasters, armed conflict, pandemics or similar events.

Canada and Alberta have also agreed to jointly select a third‑party expert, with costs shared equally, to undertake methane modelling, assess emissions reductions and evaluate performance against agreed benchmarks. Alberta will publish information describing the methane sources subject to the agreement and the provincial regulatory framework for achieving emissions reductions. These measures are intended to increase transparency regarding how Alberta is reducing methane emissions and where not included in the previous equivalency agreement.

Expected outcomes and operation of the agreement

The proposed equivalency agreement is intended to support a 75 per cent reduction in methane emissions by 2035, relative to 2014 levels. Unlike prior regulatory approaches, the agreement introduces ongoing third‑party assessment and performance monitoring to evaluate whether Alberta is on track to meet its methane‑reduction target. Where assessments indicate that emissions reductions are not being achieved as planned, Alberta has committed to implementing corrective measures. The purpose of this approach is to ensure accountability, adaptive regulation and sustained emissions reductions over the duration of the agreement.

The equivalency agreement is anticipated to come into force on Jan. 1, 2027, and to remain in effect for a 10‑year term. Its implementation is contingent on the enactment of proposed amendments to the CEPA included in the federal Budget 2025 Implementation Act.

Importantly from an industry perspective, the Enhanced Methane Regulations do not impose compliance obligations until 2028. Pending the finalization and coming into force of the new equivalency agreement, the existing Canada-Alberta methane equivalency agreement will continue to govern, providing regulatory continuity. This continuity is important as it provides regulatory certainty, avoids duplicative or overlapping compliance obligations, and allows regulated parties to plan and invest with greater confidence during the transition period.

Looking forward

As Canada’s Enhanced Methane Regulations do not introduce initial compliance obligations until 2028, existing emissions laws will continue to apply until the new equivalency agreement is finalized and in force.

Mardi McNaughton joined BD&P Law as the firm’s first knowledge management lawyer where she works alongside the business law group, focusing on research, writing and training students and junior associates.

Alex Sinclair is an articling student at BD&P Law.

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