Providing coverage of Alaska and northern Canada's oil and gas industry
March 2020

Vol. 25, No.09 Week of March 01, 2020

Teck bails on megaproject, shelves plans for Frontier oil sands mine

Gary Park

for Petroleum News

On the afternoon of Feb. 23 an upbeat Alberta government announced an agreement with two First Nations, giving it the support of all 14 Indigenous nations affected by the Teck Resources’ C$20 billion Frontier oil sands mine.

Two hours later the party mood was shattered when Teck abandoned its project application, which was scheduled for a final verdict by Feb. 29 from the cabinet of Prime Minister Justin Trudeau, ending 12 years of regulatory review.

The result was defeat for the largest oil sands mine in Canadian history that would have generated 7,000 construction jobs and permanent work for 2,500 when the plant started producing up to 260,000 barrels per day of crude bitumen.

The message from Teck Chief Executive Officer Don Lindsay was blunt when he placed Frontier “squarely at the nexus” of growing tensions in Canada over the impact on climate change of natural resource extraction and unresolved First Nations land claims.

“The promise of Canada’s potential will not be realized until governments can reach agreement around how climate policy considerations will be addressed in the context of future responsible energy sector development,” he said in a letter to Trudeau.

“Without clarity on this critical question, the situation that has faced Frontier will be faced by future projects and it will be very difficult to attract future investment, either domestic or foreign,” Lindsay said.

He said Canada lacks a “framework in place that reconciles resource development and climate change.”

Showdown avoided

The shelving of Frontier avoided showdown between the government and First Nations, who were directly and indirectly involved in rail blockades against the Coastal GasLink pipeline to provide feedstock to the LNG Canada liquefaction plant and tanker terminal at Kitimat.

The protesters had blocked rail lines across Canada, virtually shutting down the ports at Halifax, Vancouver and Prince Rupert and halting the movement of freight and passenger trains from coast-to-coast, stranding an estimated C$428 million worth of goods every day.

After days of sidestepping the issue, while trying to negotiate with the protesters, Trudeau finally conceded that no talks were possible if only one side showed up at the bargaining table.

Under pressure from members of Parliament in his own Liberal party and demands from provincial government premiers and industrial leaders who had already laid off thousands of workers and were faced with a critical shortage of materials, including propane gas, he made a demand for the protesters to remove their barricades.

No partner

But the signs from analysts pointed to the collapse of Frontier when Teck was unable to attract a partner and was faced with oil prices well below its US$65 make-or-break level. The company warned on Feb. 21 that a negative decision by the Trudeau cabinet would result in a C$1.13 billion impairment charge following a writedown of C$910 million of production from its 21.3% stake in the Fort Hills oil sands mine operated by Suncor Energy.

However, Lindsay did hold out hope that Teck’s financial returns from Fort Hills could rise over the next couple of years as more export pipeline capacity came online.

A February poll by Angus Reid Institute found that support for Frontier outpaced opposition by 49% to 40%, with Albertans favoring the venture by 78% to 17% (with 5% undecided) and 62% to 38% in Saskatchewan.

Kenney blames Trudeau

Alberta Premier Jason Kenney blamed the Teck decision on “federal inaction” under Trudeau, suggesting the timing was “not a coincidence ... this was an economically viable project, for which the company was advocating (in the last week of February). Something clearly changed very recently.

“It is what happens when governments lack the courage to defend the interests of Canadians in the face of a militant minority,” that shut down the rail system.

He warned Trudeau in a letter that losing the Frontier project will further weaken national unity and fuel the campaign in Alberta for separation from Canada.

Andrew Scheer, leader of the federal Conservative Party, said Trudeau’s “inaction has emboldened radical activists and public safety concerns are now shutting down nation-building energy projects.”

In its last attempt to sway federal decision-makers Teck had promised to reduce carbon emissions from its entire minerals and energy operations to zero by 2050, matching Trudeau’s pledge for all of Canada.


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