Military leaders from the U.S. and Canada have come to an agreement on the nuts and bolts retooling of NORAD, CBC News has learned.

It is a milestone that could end up pitting the next government in Ottawa against both the Trump administration and perhaps even northern Indigenous communities at home.

Now over six decades old, the binational air and maritime defence command — and its associated airfields, radar stations and satellite network — has been in need of a major overhaul in the face of emerging threats such as North Korean ballistic missiles and rapidly advancing cruise missile technology.

Word of the understanding comes as two Canadian CF-18s and two American F-22 Raptors intercepted two Russian Tu-95 Bear bombers, which pressed close to North American airspace, on Thursday.

The agreement of "what's in and what's out" of the new North American Aerospace Defence Command was struck a few months ago, said a defence source in Ottawa who was granted anonymity because of the sensitivity of the subject.

Separately, the Canadian general who is the deputy commander of NORAD confirmed the two countries are on the same page when it comes to the new framework needed to defend the continent, but cautioned there is still a lot of work and negotiation ahead over capabilities and what is affordable.

A CF-18 fighter reflects the setting sun while flying a mission over Bosnia in February 1999. Similar jets and two American F-22 Raptors intercepted a pair of Russian bombers close to North American airspace on Thursday. (Reuters)

"We have established the operational requirements," Lt.-Gen. Christopher Coates in an interview with CBC News.

A binational panel is examining the specifications and will make recommendations to both the Pentagon and the Department of National Defence in Ottawa.

Eventually, Coates said, each government will have to "determine whether or not those capabilities will be provided — or some other option" will be pursued.

Similarly, Defence Minister Harjit Sajjan, in a statement Friday morning, underlined that government-to-government discussions are still pending.

"Talks between Canada and U.S. have not begun," he said. "However, our government remains committed to starting this important work at the appropriate time to ensure North American defence is strengthened and both countries' sovereignty is protected."

And that is where things could potentially get messy, according to defence experts.

James Fergusson, of the University of Manitoba, one of the pre-eminent researchers on NORAD, said the price tag will be substantial.

Replacing the North Warning System chain of radar stations alone could cost as much as $11 billion, he said.

The Liberal government has made much of saying its defence plans are fully costed, but it deliberately did not include the calculation for NORAD modernization in its policy.

There will have to be some negotiation with Washington, even though the cost sharing formula (60-40 split between the U.S. and Canada) has long been established.

A man watches a TV news program showing a file footage of the missile launch conducted by North Korea in June 2018. The Pyongyang's missile tests are among the emerging threats facing NORAD. (Ahn Young-joon/Associated Press)

Steve Saideman, a professor of international affairs at Carleton University in Ottawa, said he can't see any Canadian government being anxious to open negotiations with the Trump administration, regardless of how long standing the arrangements might be.

U.S. President Donald Trump has long complained American allies do not pay their fair share of costs for the NATO alliance, and Saideman said it is not beyond the realm of possibility that government-to-government technical negotiations over NORAD could devolve.

Fergusson disagreed.

If they argue over money, he said, it will likely involve environmental cleanup costs related to the existing, remote north warning radar stations.

When NORAD abandoned its first chain of early warning sites — known as the DEW line — in 1993, the cleanup took 21 years and Canada was stuck with the $575 million bill.

NORAD's DEW Line system of early warning radar sites was abandoned in 1993. (CBC)

More problematic, as far as Fergusson is concerned, is whether NORAD's proposed new capabilities will affect northern Indigenous communities, which — unlike the past — will rightfully expect to be consulted and have a say over what the military does with the land.

"When they [the Canadian and U.S. military] go up there in northern Canada now, they can't simply ignore the Indigenous people," said Fergusson, "And that's a political issue."

CBC News reached out to four northern Indigenous groups this week to ask about their potential concerns. All declined to comment.

Military officials would not say precisely what capabilities they are proposing, but among the biggest open question is whether a re-equipped NORAD will mean an end to Canada's long-standing prohibition on participating in ballistic missile defence. Gen. John Hyten, who has been nominated to be vice chairman of the U.S. Joint Chiefs of Staff, told his confirmation hearing on July 30 that the U.S. cannot do missile defence alone anywhere in the world.

"Missile defence needs to be an international capability," Hyten testified.

"We need to be able to partner with our allies in terms of how we defend ourselves, too."

The Liberal government's defence policy was explicit, saying Canada would not change course on missile defence, but dramatic nuclear and rocket tests by the rogue regime in North Korea have prompted both the House of Commons and the Senate defence committees to recommend a change of heart.