Time running out for giant oil sands mine

Canadian government to pass final judgement on Teck project by end of February; strong, not unqualified, First Nations backing

Gary Park

for Petroleumnews

Within two months the Canadian government is scheduled to determine whether there is a road ahead for the Alberta oil sands, or, as suspected by many, it slams the door on that sector.

At stake are plans by mining giant Teck Resources to invest C$20.6 billion on an open-pit operation in northeastern Alberta to extract raw bitumen and convert it into 260,000 barrels per day of synthetic crude, generating 7,000 construction jobs and fulltime work for 2,500, many drawn from neighboring Indigenous communities.

Covering 115 square miles, the Frontier Mine is expected to remove 3.2 billion barrels of bitumen.

To date, Teck has negotiated support and benefits agreements with 14 First Nations. The signatories include the Athabasca Chipewyan First Nation, long an opponent of oil sands development, although Chief Allan Adam accuses Alberta Premier Jason Kenney of refusing to address lingering environmental concerns.

“We won’t let Canada approve this project unless Alberta is at the table fulfilling its environmental obligations, because we are just not going to take hot air anymore,” Adam said.

He said Alberta needs to resolve fears about the loss of fish, bison and caribou habitat and failure to do so will trigger legal action.

Kenney calls it stark choice

Kenney said “this should be a simple federal ratification. This is a net plus for Canada.”

He noted that even if Frontier is built Alberta will remain within the greenhouse gas emissions limit it has set for the province’s largest resource projects of 100 million metric tons a year, partly because of technical innovations that have reduced the carbon intensity of oil sands production in recent years.

Frontier was first announced in 2011 and is unlikely to see mining start before 2026, five years behind the initial plan.

The federal government has set a deadline of Feb. 28 for its cabinet to deliver a verdict on Frontier after receiving the recommendations of Environment Minister Jonathan Wilkinson.

Teck hedging on FID date

The Institute for Energy Economics and Financial Analysis said in late 2018 that Teck appeared “ill-equipped and ill-prepared to take on such a mega-project” and that neither an increase in oil prices, nor declines in production costs were likely to be enough to improve the financial outlook.

Kenney said Frontier could generate C$12 billion in federal taxes over its 41-year lifespan, while Alberta stands to gain C$55 billion and neighboring municipalities C$3.5 billion in property taxes.

In July, a joint federal-provincial environmental review panel said the project should receive the final necessary approval from the federal environment minister because the undertaking is “in the public interest,” even though there could be “significant adverse effects” on the region’s wetlands, old-growth forests and wildlife.

However, the panel noted that, in its experience, the agreement between Teck and Indigenous communities “is unprecedented for an oil sands development of this type.”

Feedback from the communities during the review process led directly to many revisions to Teck’s plans, including reductions in the project footprint, greenhouse gas intensity and water usage.