Teck Resources Limited announced Sunday it was withdrawing the $20.6 billion Frontier Project from the regulatory review process.
And it will write down the $1.13 billion carrying value of the Frontier Project in northeastern Alberta.
In a letter to federal Environment Minister Jonathan Wilkinson, Teck CEO and President Don Lindsay said the project had the potential to create significant economic benefits for Canadians.
“However, global capital markets are changing rapidly and investors and customers are increasingly looking for jurisdictions to have a framework in place that reconciles resource development and climate change, in order to produce the cleanest possible products. This does not yet exist here today and, 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,” wrote Lindsay.
“In that context, it is now evident that there is no constructive path forward for the project. 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.
“I want to make clear that we are not merely shying away from controversy. The nature of our business dictates that a vocal minority will almost inevitably oppose specific developments. We are prepared to face that sort of opposition. Frontier, however, has surfaced a broader debate over climate change and Canada’s role in addressing it. It is our hope that withdrawing from the process will allow Canadians to shift to a larger and more positive discussion about the path forward. Ultimately, that should take place without a looming regulatory deadline.”
The federal government was scheduled this week to make a decision on the Frontier Project.
According to Teck, the Frontier Project would have 40 plus years of anticipated production and economic contributions while adding 7,000 jobs during peak construction and 2,500 jobs during on-going operations as well as generating $70 billion in revenues to governments to pay for services like health care and education.
Over its lifespan, it is estimated that Frontier would have contributed $55 billion in provincial royalties and taxes, $12 billion in federal corporate income and capital taxes, and $3.6 billion in municipal property taxes.
In a joint statement, Wilkinson and federal Minister of Natural Resources Seamus O’Regan said the federal cabinet will no longer be making a decision on this project as a result of Teck’s announcement.
“Important parts of Canada’s economy have been built on our natural resource sector and the workers across the country who have powered it for generations. Our government is committed to developing our natural resources sustainably and to creating good, middle class jobs. A strong economy and clean environment must go hand in hand,” they said.
“As Teck has rightly pointed out, and as many in the industry know, global investors and consumers are increasingly looking for the cleanest products available and sustainable resource development. We agree with Teck and leading industry groups that all orders of government need a real plan for climate action now and to reach a net zero economy by 2050.”
In a statement, Alberta Premier Jason Kenney called Teck’s decision a “grave disappointment” to Albertans.
“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 governments lack the courage to defend the interests of Canadians in the face of a militant minority. The timing of the decision is not a coincidence. This was an economically viable project, as the company confirmed this week, for which the company was advocating earlier this week, so something clearly changed very recently,” said Kenney.
“Weeks of federal indecision on the regulatory approval process and inaction in the face of illegal blockades have created more uncertainty for investors looking at Canada. Teck’s predicament shows that even when a company spends more than $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.”
Kenney said the factors that led to Sunday’s decision further weaken national unity.
“The Government of Alberta agreed to every request and condition raised by the federal government for approving the Frontier project, including protecting bison and caribou habitat, regulation of oil sands emissions, and securing full Indigenous support. The Government of Alberta repeatedly asked what more we could do to smooth the approval process. We did our part, but the federal government’s inability to convey a clear or unified position let us, and Teck, down,” he said.
“This news deepens our government’s resolve to use every tool available to fight for greater control and autonomy for Alberta within Canada, including reinforcing our constitutional right to develop our natural resources, ensuring a sustainable future for our oil and gas industries, and restoring Canada’s reputation as a reliable place to do business.”
In a statement, Ron Quintal, President of the Fort McKay Métis, said: “Teck’s decision is understandable, if devastating. The political treatment this proposed project received has been nothing short of deplorable. This decision is damaging to the Alberta and Canadian economies, and to the economies of Aboriginal peoples around the project area who would have seen enormous long-term, sustainable benefit. I fully understand Teck’s reasoning, but it is deeply regrettable. This is a black eye for Canada. This is a blow to Canada’s global investment competitiveness and to the energy industry that is doing its best to continue to power the entire Canadian economy.”
In his letter to the federal Environment Minister, Lindsay said 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,” he said.
“Teck has not taken this decision lightly. It is our hope that the decision to withdraw will help to create both the space and impetus needed for this critical discussion to take place for the benefit of all Canadians.”
In a tweet, Alberta Energy Minister Sonya Savage said: “This is devastating news for Alberta. Teck’s withdrawal falls squarely at the feet of the Trudeau government. They’ve undermined national unity, investor confidence and our economic interests all at the same time. This is not only regulatory dysfunction, it is a national disgrace.”
Also in a tweet, Andrew Scheer, leader of the federal Conservatives, said: “This is devastating news for Alberta and our entire country. “Political unrest” has killed 7,000 jobs. Justin Trudeau’s inaction has emboldened radical activists and public safety concerns are now shutting down nation-building energy projects.”
In a statement, Tim McMillan, President and CEO of the Canadian Association of Petroleum Producers, said: “This is a sad situation for Canada, and the Canadian Association of Petroleum Producers (CAPP) is disappointed Teck Resources has officially withdrawn its application to build the Frontier project. Our global reputation as a reliable, productive, nation that welcomes high-quality projects and capital investment has been further damaged.
“This is not the first major project to be abandoned, nor is it likely to be the last. 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.
“This is bigger than one project; it is a pattern of projects. The decision speaks to the ongoing inability of major Canadian projects to succeed. Aside from yet another blow to Canada’s oil and natural gas sector, we just ask ourselves about the implications for Canadian industries as a whole. This time it was an energy project, but the next time it could affect a manufacturing, aviation, forestry or agriculture project.”
Sandip Lalli, President and CEO of the Calgary Chamber, said Teck’s decision is a clear signal that more anger and louder voices are not in the best interests of Calgarians.
“The political rhetoric, on all sides, that has engulfed our province, especially around climate change, has only served to further entrench the damaging perception that governments are, at best, incapable of adapting to changing expectations from stakeholders and global capital markets, or at worse unwilling to,” she said.
“In order for our province and our country to thrive, we can and we must be able to lead in natural resource development andsolve climate change through innovation. Canadian businesses know this, and the global marketplace is demanding it, yet the rhetoric by political leaders is severely hindering any future progress.
“The ones who bear the brunt are the companies who are trying to grow and the families they employ, who are working harder and harder to keep their households and kitchen tables healthy. If Teck – a Canadian company that is over a century old and was recognized as one of the 2019 Global 100 Most Sustainable Corporations – could not move a project after nine years of work to demonstrate commercial viability, unprecedented support from Indigenous communities, and strong social and environmental commitments, then future projects are unlikely to fare any better.”
Mario Toneguzzi is a business reporter in Calgary.
The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.
