Teck Resources (TSX:TECK.A,TSX:TECK.B,NYSE:TECK) has withdrawn its application for the Frontier oil sands project in Northern Alberta amid divisive debate across Canada.
In a letter addressed to Canada’s minister of environment and climate change, President and CEO of Teck Don Lindsay said that there is no constructive path forward for the project, as it is in the middle of a raging social and political discourse on climate change, land rights and reconciliation.
Lindsay said investors and customers increasingly want jurisdiction to have frameworks in place that reconcile resource development and climate change, and noted that “this does not yet exist here today.”
“Unfortunately, the growing debate around this issue has placed Frontier and our company squarely at the nexus of much broader issues that need to be resolved,” he said.
“Questions about the societal implications of energy development, climate change and Indigenous rights are critically important ones for Canada, its provinces and Indigenous governments to work through.”
The company said that it will be writing down the C$1.3 billion carrying value of the project.
Government ministers in Ottawa had been expected to meet to discuss the application for the C$20.6 billion project on Tuesday (February 25) — a meeting which will now not go ahead.
Vancouver-based Teck expected Frontier to directly employ up to 7,000 workers during construction, and as many as 2,500 workers during operation. Frontier would have produced 260,000 barrels of oil per day when at full production.
The Canadian federal government has been under pressure in recent weeks, with Canadian rail transport blockaded by protestors across the country who are acting in solidarity with the Wet’suwet’en hereditary chiefs, who are disputing the construction of a natural gas pipeline across their territory in Northern BC.
The economic impact of the blockades has been felt by communities far and wide, with rail operators laying off workers and various industries counting the cost of the hold up in their supply chains.
While the Frontier project is not directly related to the pipeline (which is owned by TC Energy (TSX:TRP)), protestors, commentators and legislators have been drawing lines between the blockades and broader Canadian energy policy.
Responding to the announcement from Teck, the Canadian Association of Petroleum Producers (CAPP) called it a “sad situation for Canada.”
“Our global reputation as a reliable, productive, nation that welcomes high-quality projects and capital investment has been further damaged,” said CAPP CEO Tim McMillan.
He believes Frontier is unlikely to be the last project to be abandoned in the face of a regulatory system that he alluded to as unsympathetic.
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“This is the result of a system where — after nearly a decade of work in the permitting space, unprecedented consultation, support and agreements with Indigenous communities, and recommendations to approve from a joint review panel — a company feels it has no choice but to withdraw its application,” he said.
“The decision speaks to the ongoing inability of major Canadian projects to succeed.”
Teck’s decision triggered a round of finger pointing from the premier of Alberta, Jason Kenney, who took less ambiguous aim at the system in a swipe at his federal counterparts.
“This decision is clearly the result of federal regulatory uncertainty and the current lawless opposition to resource development,” he said.
“Teck’s decision is disappointing, but in light of the events of the last few weeks it is not surprising. It is what happens when government lacks the courage to defend the interest of Canadians in the face of a militant minority.”
Kenney added that the blockades have created further uncertainty for investors looking at Canada.
“Teck’s predicament shows that even when a company spends more than C$1 billion over a decade to satisfy every regulatory requirement, a regulatory process that values politics over evidence and the erosion of the rule of law will be fatal to investor confidence.”
The federal government had been warning Alberta that its decision on the Frontier project would factor in the province’s greenhouse gas emissions — with Ottawa formally requesting that Edmonton enforce its legislated but not enforced 100 megatonne cap on emissions from the oil sands industry.
On February 12, the Angus Reid Institute, a Canadian pollster, released results from a poll showing that a slim plurality of Canadians were in support of Frontier at 49 percent, with 40 percent opposing it.
Divisions across the country were the most stark when broken down provincially: 78 percent of respondents in Alberta supported the construction of the mine, with only 17 percent against.
In Quebec, 57 percent opposed the project compared to 29 percent in support.
Quebec and BC were the only two jurisdictions where most respondents opposed the project, while Saskatchewan, Manitoba and the Maritimes had the most support.
With Monday’s (February 24) news from the owner of the project, the level of support across Canada is now academic.
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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.
