Teck pulling out of oilsands project ‘another straw on the camel’s back’ for Alberta economy: think tank

Click to play video: 'Teck pulling application ‘another straw on the camel’s back’ for Alberta’s economy: think tank'
Teck pulling application ‘another straw on the camel’s back’ for Alberta’s economy: think tank
WATCH: Teck Resources’ decision to pull its application for a northern Alberta oilsands mine has raised concerns for those in the province’s oil and gas industry. As Adam MacVicar reports, experts believe it’s a blow to the sector and changes are needed – Feb 24, 2020

The decision by Teck Resources to pull out of a multi-billion-dollar oilsands project in northern Alberta is “not the end of the world,” according to the Canada West Foundation, though it considers it to be “another straw on the camel’s back in terms of Alberta’s economy.”

In a letter addressed to federal Environment and Climate Change Minister Jonathan Wilkinson on Sunday, Teck’s CEO and president Don Lindsay said the company was withdrawing from the proposed $20.6-billion Frontier mine because of the broader conversation around climate change in Canada.

Marla Orenstein, director of the natural resources centre at the Canada West Foundation, said she agreed with some of the points Teck made in its letter, especially when it comes to having “a common environmental plan” for major resource and energy projects in the country.

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“They were saying that this country really needs to figure out what it wants in terms of an energy policy: how we reconcile energy development, Indigenous rights and climate issues,” Orenstein said.

“Those are our big, thorny, hairy issues that we have problems with and we haven’t figured out how to reconcile them yet. We’re desperately looking for leadership from the federal government on how to move forward so that all these things can progress in tandem, and that hasn’t been resolved, not by a long shot.

“And until that is resolved, future projects are likely to get caught up in the same problem.”

Click to play video: 'Politicians point fingers after Teck pulls out of $20.6B oilsands project'
Politicians point fingers after Teck pulls out of $20.6B oilsands project

Orenstein said many people are disappointed by the end result, both because of the jobs the project was expected to deliver and because the Frontier mine was seen as a project that could reinforce the country’s oil and gas sector as a viable industry. However, she said the company’s decision not to move forward on the project doesn’t mean “oil and gas is finished in Canada.”

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“I think that’s far from the truth. There remains a really strong demand for oil and gas products around the world and as long as there is, there’s going to be companies that need to come forward to provide that,” she said.

For oil and gas company Tundra Process Solutions, the cancellation of the project is another blow to the already struggling industry.

“I saw this as a beacon of hope,” CEO Iggy Domagalisk said. “There were no real projects that were being announced, and to hear that this massive project was being led by a company that has a wonderful environmental record, [and] was going to be built in Alberta for Canada, I thought that was something spectacular.”
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Domagalisk said the most “devastating” part is that it wasn’t the government that backed down, but the company behind it.

“To see not even the government cancel it, but the company itself pull out and say that, ‘We don’t believe that we can get this done,’ I think it sends a message to others that they likely think they can’t get it done either,” he said.

‘Investment craves certainty’

While Teck and its mine were seen by some as a “touchstone” for future oil and gas projects, Martin Olszynski, an associate professor with the University of Calgary’s Department of Environmental and Natural Resources Law, said the significance of the decision is being overplayed.

“How much value it has really depends on our politicians right now, and they should be mindful to not make it sound too gloomy because investors will respond to that as well,” Olszynski said.

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The Frontier mine isn’t the first oilsands project to go through the regulatory process in the past 10 years and not come to fruition, Olszynski said; Shell’s Jackpine mine expansion and Total’s Joslyn North projects were both approved in the early 2010s and remain dormant.

Olszynsky said the federal government’s current regulatory process — the Impact Assessment Act and the Canadian Energy Regulator Act, commonly known as Bill C-69 — “provides a benchmark and a guidepost” for potential investors to align their projects with.

In Teck’s letter to Wilkinson, Lindsay said that “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.”

“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.

Click to play video: 'Teck Resources supports Canada’s climate change action: Trudeau'
Teck Resources supports Canada’s climate change action: Trudeau

Olszynsky said the Alberta government’s environmental regulations are more ambiguous, leading to a policy “back-and-forth” that stood in Teck’s way.

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“I do think that the work the federal government is doing right now actually is the work that Teck seems to be asking for. It says: ‘Show us how these projects are going to work within this broader system,'” he said.

Canada ‘struggling’ with getting major projects done

Tim McMillan, CEO of the Canadian Association of Petroleum Producers (CAPP) said Canada has “positioned ourselves as a country that has struggled to get major projects done,” citing the Northern Gateway and Energy East pipelines which were both cancelled after approvals because of policy inconsistencies across provincial lines.

“I think that puts a cloud over Canada in general,” McMillan said. “Today it’s over the oil and gas sector, but global investors have to look at Canada after announcements like this and ask, ‘Can we build anything here? Is Canada a jurisdiction that wants high-quality projects and capital investment?’

“It’s going to take some work to reposition ourselves for success next time around.”

McMillan said he believes the Frontier mine was viable and that the challenge came when it reached the political stage, adding that stakeholders need to “do some real thinking” about how to move forward with major projects.

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“This is a major undertaking — a very large project in Canada,” he said.

“The communities have been involved in this right from the beginning; Indigenous communities have been involved and had support agreements that would see them benefit from this going forward. The science that goes into how the processes work has been under development for years.

“And to go through the joint review panel and the provincial and federal review agencies and have them say, ‘This is a good project and should be approved’ — this has cost over $1-billion and that now evaporates and becomes a writeoff on a balance sheet.”

Click to play video: 'Teck project environmental deal reached between First Nation and Alberta government'
Teck project environmental deal reached between First Nation and Alberta government

Goldy Hyder with the Business Council of Canada said businesses want a “predictable regulatory regime” and that she believes Canada’s has become less consistent over the past 10 years, instead becoming “very politicized.”

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“Canada has to have the ability to reconcile the environment and the economy,” she said.

“We need to address it and we need to address it together, and that means moving out from the extremes and into the middle to find common ground.

“What would help is if our governments… either get out of the way or make things clear in such a way that they don’t need to be in the process on an ongoing basis. We need to depoliticize our regulatory system.”

— with files from Global’s Adam MacVicar, Adam Toy, Maryan Shah and Mercedes Stephenson

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