Federal Budget 2025: Energy, infrastructure, and Indigenous funding initiatives

Canada’s federal budget, released on Nov. 4, 2025, marked Prime Minister Mark Carney’s first budget as the head of a Liberal minority government. Despite needing two additional opposition votes in the House of Commons, the federal budget is expected to pass.

Energy and infrastructure, with strong Indigenous participation backed by various federal programs, are a key component of Federal Budget 2025. This client update extracts the salient parts of the federal budget related to energy development, related infrastructure, and various federal programs underpinning and encouraging broad Indigenous participation in the Carney government’s national priorities. The federal budget will be implemented through various pieces of legislation, regulations and programs, with further updates to come.

One item that was not in the federal budget, which, on behalf of our utility clients, we were hoping to see, was the loosening of restrictions imposed with respect to funding municipally owned local distribution companies. This issue is Ontario-specific and may still be addressed separately through changes to the federal Income Tax Act. For a summary of the tax implications related to the federal budget, please see our flagship analysis published by BLG’s Tax Group mere hours after budget release.

Budget highlights

We’ve highlighted the impact that Budget 2025 has on several key areas, namely:

• Funding for Indigenous communities with respect to energy and infrastructure;
• Renewable energy;
• Electricity transmission;
• Nuclear energy; and
• Oil and gas.

Funding for Indigenous communities and governments: Energy & infrastructure

Budget 2025¹ continues Canada’s commitment to reconciliation and economic partnership with Indigenous peoples, with a strong focus on enabling Indigenous participation in major energy and infrastructure projects.

Budget 2025 introduces several key measures as relating to Indigenous communities and the energy and infrastructure sectors, namely:

• Major Projects Office (MPO): In connection with the Building Canada Act, the federal government launched the MPO on Aug. 29, 2025, to fast-track nation-building projects that are considered to be in Canada’s national interest. To be considered in Canada’s national interest, there are several criteria that will be considered, including whether a project, if successfully completed, will advance the interests of Indigenous peoples, strengthen Canada, provide benefits to Canada, and contribute to clean growth and address climate change.² Some noteworthy information about the MPO includes that:
  • The MPO is supported by an Indigenous Advisory Council, ensuring Indigenous perspectives are embedded in project selection and development, while also ensuring major projects create opportunities for Indigenous equity ownership and responsible resource management.³
  • The office’s funding of $213.8 million over five years includes $10.1 million (over three years) to Crown-Indigenous Relations and Northern Affairs Canada for the federal initiative on consultation, which will “support the meaningful participation of Indigenous rightsholders in consultation processes throughout the review cycle of national interest projects listed under the Building Canada Act, including through Indigenous-led resource centres and consultation protocols.”⁴
  • As previously announced in August 2025, $40 million (over two years) will be provided to Indigenous Services Canada through the strategic partnerships initiative “to support Indigenous capacity building and consultation on nation-building projects prior to designation under the Act.”⁵
  • Budget 2025 announced the federal government’s “intention to amend the Canada Infrastructure Bank Act to increase the Canada Infrastructure Bank’s statutory capital envelope from $35 billion to $45 billion and to enable the Canada Infrastructure Bank to make investments in any nation-building projects that have been referred to the Major Project’s Office.”⁶
• Indigenous loan guarantee program: The program offered through the Indigenous loan guarantee program has been doubled from $5 billion to $10 billion, which will help enable more Indigenous communities to become owners in major projects (that is, energy and infrastructure).⁷
• Arctic Infrastructure Fund: Budget 2025 proposes $1 billion over four years, starting in 2025-2026 to Transport Canada to create the Arctic Infrastructure Fund, which will invest in major transportation projects in the North with dual-use applications for civilian and military use.⁸ To facilitate the Arctic Infrastructure Fund’s support for northern projects, Budget 2025 also proposes to provide $25.5 million over four years to Crown-Indigenous Relations and Northern Affairs Canada, and $41.7 million over four years to the Canadian Northern Economic Development Agency, to help accelerate regulatory processes in Canada’s North, including consultation with Indigenous governments and organizations, and northern communities.⁹
• First Nations water and wastewater enhanced program: The federal government is proposing to commit $2.3 billion over three years (starting 2026–27) in order to renew the First Nations water and wastewater enhanced program. This funding would aim to support the ongoing approximately 800 active projects, which include those that are focused on ending long-term water advisories while also preventing new water advisories through upgrading at-risk systems.¹⁰
• Indigenous housing and infrastructure: Build Canada Homes, a new federal agency aimed at driving investment and public private cooperation, will work with Indigenous leaders to determine how it can best contribute to Indigenous identified needs and priorities. $2.8 billion is being confirmed for urban, rural, and northern Indigenous housing. The Canada Infrastructure Bank’s target for investments in Indigenous infrastructure that benefit Indigenous communities is also increasing from at least $1 billion to at least $3 billion across its priority sectors.¹¹

Renewable energy: Canada continues its efforts

Budget 2025 emphasizes the federal government’s efforts to position Canada as a leader in the global energy transition with significant investments and incentives for renewable energy development and deployment.¹² Key measures and strategies contemplated in Budget 2025 that will impact the renewable energy sector are:

• Climate competitiveness strategy: The government’s new strategy prioritizes investment in net-zero energy projects, including solar, wind, clean hydrogen, nuclear, and other renewable energy sources, to build a net-zero economy.¹³ A couple of key aspects of this new strategy include:
  • Improving the impact of Canada’s industrial carbon pricing system through: (1) developing a post-2030 carbon pricing trajectory; (2) fixing the benchmark and improving the backstop; and (3) continuing to issue contracts to further improve future carbon price certainty (through the Canada Growth Fund).¹⁴
  • Reaffirming support for the development of the made-in-Canada sustainable investment guidelines by the end of 2026.¹⁵ For further background on this taxonomy, please see BLG’s Insight titled “Canada Targets Net-Zero with a Green Taxonomy and Mandatory Climate Disclosures .”
• Wind West Atlantic Energy: The MPO will develop regulatory certainty to help enable long-term wind resource development in Atlantic Canada. These projects could leverage over 60 gigawatts of wind power potential in the Atlantic provinces. Budget 2025 notes that relevant projects could include “interties between New Brunswick and Nova Scotia, transmission cables between Prince Edward Island and New Brunswick, as well as Québec’s and Newfoundland and Labrador’s further development of Churchill Falls and Gull Island.”¹⁶
• Critical minerals: The federal government is proposing the provision of $2 billion over five years (beginning in 2026-2027) to enable Natural Resources Canada to establish the “Critical Minerals Sovereign Fund.” The purpose of this fund would be to support the acquisition of the essential resources needed for clean energy technologies renewable energy infrastructure (for instance, batteries for electric vehicles, solar panels, and energy storage systems).¹⁷ Budget 2025 also proposes to provide $50 million over five years (also beginning in 2026-2027) to Natural Resources Canada to support the delivery of this Critical Minerals Sovereign Fund.¹⁸ To further support Canada’s ambitions with respect to critical minerals, Budget 2025 also proposes the following:
• First and Last Mile Fund: The provision of $371.8 million (over four years, starting in 2026-2027), to Natural Resources Canada to create the “First and Last Mile Fund.” The purpose of this fund, amongst other objectives, would be to “support the development of critical minerals projects and supply chains at the upstream and midstream segments of value chain chains, with a focus on getting near-term projects into production.”¹⁹ In saying this, this fund would still support transportation, infrastructure, and clean energy projects, as those projects relate to the development of critical minerals.²⁰
• Expanded tax credit eligibility for the critical mineral exploration tax credit (CMETC): Expanding eligibility for the CMETC to include an additional 12 critical minerals that are necessary for defence, semiconductors, energy, and clean technologies.²¹ These additional minerals are: bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin, and tungsten.²²

Electricity transmission: Focusing on a clean and connected grid

Budget 2025 highlights that to support Canada’s growth, a significant increase in energy supply is needed, especially as this demand is driven in part by energy-intensive sectors. However, in order to meet this demand, it is forecasted that annual investment will need to triple. As such, the federal government has emphasized the need to modernize its electricity grids, which will be achieved by attracting continued investments in the energy sector and exploring additional interprovincial electricity grid interties, with a plan to lower costs for ratepayers while promoting grid reliability and stability. These investments will subsequently enable items such as energy storage, infrastructure upgrades, the incorporation of new technologies, and the expansion of wind and solar investments.²³

With respect to refundable investment tax credits, the Carbon Capture, Utilization, and Storage investment tax credit (37.5 per cent to 60 per cent), although available since Jan. 1, 2022, Budget 2025 proposes to extend the availability of the full credit rates from 2031 to 2035, with rates unchanged from 2036 to 2040.²⁴ Further, the incoming “Clean Electricity investment tax credit is a refundable credit equal to 15 per cent of the capital cost of eligible investments in equipment related to low-emitting electricity generation, electricity storage, and the transmission of electricity between provinces and territories.”²⁵ This credit will be retroactively available as of April 16, 2024, for projects that did not begin construction prior to March 28, 2023.²⁶

Several of the measures and strategies discussed in Budget 2025 will also have an impact on electricity transmission in Canada, such as:

• The Clean energy regulations, which are aimed at ensuring Canada’s grid is clean as electricity demand grows, while also aiming to reduce emissions.²⁷
• The previously discussed Wind West Atlantic Energy project, which may include provincial intertie projects as well as other inter-provincial transmission projects.²⁸

Nuclear energy: Canada’s leadership in small modular reactors and the energy transition

Budget 2025 positions nuclear energy to be a major component of Canada’s clean energy transition and industrial strategy. The federal government is proposing to provide $4.2 million (over three years, beginning in 2027-2028) alongside an ongoing $1.4 million to Natural Resources Canada “to maintain capacity to promote nuclear energy exports and strategic engagement in key export markets.”²⁹ Further, the budget modifies the eligibility of small nuclear energy property under the Clean Technology investment tax credit, which would be available retroactively as of March 28, 2023. Building off of the 2024 budget, the federal government is providing additional funding to the Canadian Nuclear Safety Commission (CNSC) in an effort to expedite the CNSC’s review of nuclear projects, streamlining the nuclear licensing process.

Additionally, the federal government is making a significant investment in small modular reactors (SMR) to deliver clean electricity through the Darlington New Nuclear Project (DNNP) in Bowmanville, Ontario. A noteworthy aspect of this project is that it will make Canada the first G7 country to have an operational SMR.³⁰ For further background information on this SMR project, please see BLG’s article “Ontario approves construction of first-of-its-kind small modular reactor.”

As announced in October, the federal government will be investing $2 billion through the Canada Growth Fund in support of constructing the DNNP (which is in addition to the $1 billion investment from the Building Ontario Fund and the early works loan from the Canada Infrastructure Bank).³¹ It is anticipated that the full build-out of the DNNP will include four new SMR units, with the first SMR unit providing 300,000 homes with clean, reliable, and affordable power;³² the full potential of the four SMR units equates to 1,200 megawatts of energy, which is equivalent to 1.2 million homes.³³ The first SMR is anticipated to sustain 3,700 jobs annually and create 18,000 jobs during construction.³⁴

Oil and gas: Maintaining competitiveness by lowering emissions

Budget 2025 acknowledges low and volatile oil prices as a key economic challenge.³⁵ Economic forecasters project that oil prices will increase gradually through 2029, but remain below the US$77 per barrel expected in the 2024 Fall Economic Statement.³⁶ The federal government attributes these lower prices to soft global demand growth, increased production from petroleum exporting countries, and the spillover of tariff uncertainty into oil and gas markets.³⁷

Despite this, Budget 2025 marks a tone shift in Ottawa’s approach to the oil and gas sector. The federal government recognizes the sector’s strategic role in Canada’s economy and shows willingness to invest in associated infrastructure.³⁸

Budget 2025 highlights the importance of lowering emissions to protect competitiveness of the oil and gas sector and appeal to markets that prioritize sustainability.³⁹

Key measures contemplated in Budget 2025 that will impact the oil and gas sector include:

• Oil and gas emissions cap: The federal government signaled openness to lifting the oil and gas emissions cap. Budget 2025 notes that strengthening industrial carbon pricing, and deploying carbon capture and storage at scale, would create conditions under which the cap would no longer be required, as it would have only marginal value in reducing emissions.⁴⁰ Ottawa stopped short of confirming that the cap will be lifted. 
• Methane regulations: In Budget 2025, the federal government confirmed plans to finalize enhanced methane regulations for the oil and gas sector.⁴¹ Since methane emissions are potent greenhouse gas emissions not effectively covered by carbon pricing, this measure is part of Canada’s broader effort to meet global demand for products with low associated greenhouse gas emissions. The federal government intends to work with provinces and territories to negotiate equivalency agreements.⁴²
• Accelerating major infrastructure and natural resource projects: The Major Projects Office (MPO), described in more detail in the section on Funding for Indigenous communities and governments above, will advance major projects in Canada by coordinating federal financing and streamlining federal regulatory approvals.⁴³ Budget 2025 identifies the LNG Canada Phase 2 expansion project in Kitimat, British Columbia as a project that may meet the criteria of being in Canada’s national interest required to qualify for fast-track development through the MPO.⁴⁴ This suggests certain oil and gas projects will fall within the MPO’s scope and benefit from faster federal approvals and coordinated financing. For more information on the Building Canada Act and the Major Projects Office, please see BLG’s article “Federal government plants Major Projects Office in Calgary.”
• Pathways Plus: Budget 2025 highlights the “Pathways Plus” project as a potential nation-building project that will support a strong conventional energy sector while facilitating low carbon exports from the Alberta oil sands.⁴⁵ Pathways Plus is an Alberta-based carbon capture, storage network, and pipeline project at an early stage of development.⁴⁶ Together with the proposed five-year extension of the Carbon Capture, Utilization, and Storage (CCUS) investment tax credit,⁴⁷ described above, this signals federal support for CCUS as a means of maintaining the competitiveness of Canada’s oil and gas sector. Eligibility for the CCUS investment tax credit continues to depend on the end use of the captured carbon dioxide, with qualifying uses including dedicated geological storage and storage in concrete.⁴⁸ Enhanced oil recovery remains excluded.

BLG can assist

For more information on the above key measures, or for assistance with related compliance requirements, please reach out to the key contacts below or any lawyer from BLG’s Indigenous Law, Energy – Power, and Energy - Oil & Gas groups.