Shell's Quest Hits 9 Million Tonnes as Alberta's CCUS Fiscal Stack Takes Shape and Oil Sands Alliance's C$16.5-Billion Hub Awaits FID

Alberta sits at the centre of Canada's most ambitious — and most contested — experiment in industrial carbon capture, with a layered fiscal architecture of provincial carbon pricing, federal investment tax credits, and direct government grants that together represent billions of dollars in support for carbon capture, utilization, and storage (CCUS) technology. As the Oil Sands Alliance's C$16.5-billion sequestration hub awaits a final investment decision and Shell advances a second major CCS project at its Edmonton-area complex, the economics and the politics of Alberta carbon capture have never been more complex or consequential.

Quest CCS: Nine Million Tonnes and a Controversy

The foundational piece of Alberta's CCUS infrastructure is Quest, operated by Shell Canada at the Scotford Upgrader complex near Fort Saskatchewan, 40 kilometres northeast of Edmonton. Commissioned in October 2015 as the world's first commercial-scale CCS project applied to oil sands operations, Quest captures CO2 produced during hydrogen manufacturing at the upgrader and injects it into the Basal Cambrian Sands formation approximately two kilometres underground.

By May 2024, Quest had stored a cumulative 9 million tonnes of CO2 — the highest total of any onshore CCS facility with dedicated geological storage globally. Annual capture in 2023 reached 1.003 megatonnes, with a capture efficiency of approximately 75 percent against a design target of 90 percent. Shell reports the facility is operating at roughly 35 percent below its originally projected operating cost.

The project has not been without controversy. In May 2024, Greenpeace Canada released a report alleging that Shell registered 5.7 million TIER credits not linked to proportional real-world CO2 reductions between 2015 and 2021, netting more than C$200 million. The allegation stemmed from a 2008 agreement with the Alberta government that permitted Shell to register credits at twice the volume of actual CO2 avoided. Combined with approximately C$777 million in direct government grants to Quest, critics calculated that taxpayers covered 93 percent of the project's costs. Shell disputed the "phantom credit" characterization, describing the structure as a transparent innovation incentive. No illegal activity was found, but the episode intensified scrutiny of carbon credit accounting integrity in Alberta.

Shell Polaris and Atlas: A Second Scotford CCS Project

Shell took a final investment decision on June 26, 2024, for two new adjacent projects at its Scotford complex. Polaris will capture approximately 650,000 tonnes of CO2 per year from the Scotford Refinery and Chemicals Park — equivalent to up to 40 percent of the facility's Scope 1 emissions. Atlas, developed in partnership with ATCO EnPower, will provide the underground CO2 storage hub for Polaris-captured volumes, with expansion capacity well beyond the Phase 1 requirements. Both projects are expected to be operational by the end of 2028. Deputy Prime Minister Chrystia Freeland visited the Polaris site in August 2024 to highlight the federal CCUS Investment Tax Credit as a catalyst for the FID.

The Alberta Carbon Trunk Line

The Alberta Carbon Trunk Line (ACTL), operated by Wolf Midstream with CO2 sourcing from Enhance Energy, has been in full operation since June 2020. The 240-kilometre pipeline carries CO2 from industrial emitters in the Industrial Heartland northeast of Edmonton to the Clive oil field in central Alberta, where it is used for enhanced oil recovery and permanently sequestered underground. The ACTL has a design capacity of 14.6 million tonnes per year, making it one of the largest CO2 pipeline systems in the world by nameplate capacity.

In September 2023, the Alberta Energy Regulator approved the ACTL Edmonton Connector extension, designed to carry 3.0 million tonnes of CO2 per year from Air Products' Net Zero Hydrogen Energy Complex in Edmonton into the ACTL mainline. Together, Quest and the ACTL had stored more than 16 million tonnes of CO2 on a combined basis as of mid-2024.

TIER: Alberta's Industrial Carbon Price — and Its Freeze

Alberta's Technology Innovation and Emissions Reduction (TIER) regulation applies to any industrial facility emitting more than 100,000 tonnes of CO2 equivalent per year. Facilities must reduce their emissions intensity to a sector performance benchmark or purchase TIER compliance credits at the regulated price.

The TIER carbon price reached $95 per tonne in 2024. However, on May 12, 2025, the Alberta government announced an indefinite freeze of the TIER Fund credit price at $95 per tonne, abandoning the previously scheduled escalation to $110 in 2025, $120 in 2026, and $170 per tonne by 2030. Premier Danielle Smith's government cited industrial competitiveness concerns amid U.S. trade tariff uncertainty as the primary rationale.

The freeze created a notable complication: while the compliance price is $95 per tonne, TIER market credits have traded far below that level — around C$18 per tonne through most of 2025, rising to approximately C$25 per tonne in December 2025. The gap between the compliance price and the market credit price reflects an oversupply of lower-cost credits (from offset projects and efficiency improvements) that undercuts the financial case for expensive CCS investment.

In late November 2025, Premier Smith and Prime Minister Mark Carney signed a memorandum of understanding committing to negotiate a pathway to C$130 per tonne by April 1, 2026. Days later, the Alberta government introduced Order in Council 369/2025, amending TIER to allow facilities to meet up to 80 percent of compliance obligations through qualifying capital investments rather than credit purchases — a provision critics at the Canadian Climate Institute argued would flood the TIER market with new credits and contradict the MOU's intent.

Federal CCUS Investment Tax Credit: 50 Percent of Capital Costs

The federal government's CCUS investment tax credit, first announced in Budget 2022 and enacted when Bill C-59 (the Fall Economic Statement Implementation Act, 2023) received Royal Assent on June 20, 2024, provides the following refundable credits:

• 60 percent of eligible capital costs for direct air capture (DAC) equipment
• 50 percent for CO2 capture equipment in all other industrial CCUS projects, including oil sands, refining, and petrochemicals
• 37.5 percent for CO2 transportation, storage, and use infrastructure

The Parliamentary Budget Office estimated the CCUS ITC will cost the federal government C$5.7 billion between 2022-23 and 2027-28. Under Budget 2025, the government proposed extending the full credit rates by five years (covering 2022 through 2035). Under the November 2025 MOU, Ottawa also committed to extending ITC eligibility to projects involving enhanced oil recovery, a significant broadening of the original 2022 scope.

Alberta Carbon Capture Incentive Program: A 12 Percent Direct Grant

The provincial Alberta Carbon Capture Incentive Program (ACCIP) provides a direct grant of 12 percent of eligible new CCUS capital costs, paid in three installments over three years starting after the first year of operations. The program applies retroactively to qualifying capital expenditures from January 1, 2022 — aligning with the federal CCUS ITC's effective date. Alberta has allocated C$3.2 billion to C$5.3 billion to ACCIP through 2035, projecting the program will support C$35 billion in new investment and up to 21,000 jobs.

When layered with the 50 percent federal CCUS ITC, the combined provincial and federal support can offset 60 to 65 percent of capital costs for qualifying CO2 capture equipment — a subsidy depth that has moved previously marginal projects into economic viability for large industrial emitters with sufficient scale to absorb the remaining capital requirements.

The Oil Sands Alliance's Big Bet: C$16.5 Billion, No Shovel Yet

The most ambitious CCUS project proposed for Alberta is the Oil Sands Alliance hub (rebranded from Pathways Alliance in February 2026), backed by Canadian Natural Resources, Cenovus Energy, ConocoPhillips Canada, Imperial Oil, Suncor Energy, and MEG Energy. The project envisions a 400-kilometre CO2 pipeline connecting 20 or more oil sands facilities to a central injection and storage hub near Cold Lake, targeting 10 to 12 million tonnes of CO2 per year by 2030 at a Phase 1 cost of approximately C$12 billion within a total C$16.5-billion envelope.

As of early 2026, no final investment decision has been taken and no construction has begun. The project is contingent on what the alliance describes as "sufficient fiscal and policy support and regulatory approval." With the federal CCUS ITC and ACCIP now enacted, the remaining barriers are regulatory approval timelines, the weak TIER credit market, and the challenge of securing long-term CO2 transportation agreements with individual oil sands facilities.

Environmental groups including Environmental Defence and the Institute for Energy Economics and Financial Analysis (IEEFA) have questioned whether the project will ultimately be built, noting that the six member companies spent substantially more on advertising and government relations than on actual engineering and development work during 2021 through 2025. A December 2025 analysis by Canada's National Observer also raised concerns about the project's water consumption requirements.

The policy architecture is in place. Whether the steel follows is the defining question for Alberta carbon capture in 2026 and beyond. For related coverage, see Alberta's July 1 Deadline for the Pacific Corridor Pipeline and Canada's Energy Comeback at CERAWeek 2026.