'Nail in the coffin': Era of big oil sands mines may be over
Canada’s oil sands industry may have already built its last big mine.
© Photo By Jerry Cleveland/The Denver Post via Getty Images Gloved hands hold a sample of freshly mined oil sands at Suncor Energy's oil sands mine and upgrade facility north of Fort McMurray in northeastern Alberta, Canada.
The cancellation of Teck Resources Ltd.’s Frontier project in northern Alberta -- which envisaged producing more crude than OPEC member Gabon -- epitomizes the struggles of an industry that has already seen most foreign investors flee. It’s not clear that any other proposed mine would be able to clear the hurdles that felled Frontier in the years to come, possibly spelling the end of an era of megaprojects that transformed North America’s energy landscape by turning Canada into the top foreign crude supplier to the U.S.
“This may be the nail in the coffin,” said Laura Lau, who helps manage C$2 billion ($1.5 billion) in assets at Brompton Corp. in Toronto. “I would expect some smaller projects would have a better chance going through.”
On top of middling oil prices, a pipeline capacity shortage in Canada and heightened competition from U.S. shale, the oil sands have become a particularly shunned industry in a world of rising concerns about climate change, leading some major funds to divest their holdings. And with speculation oil demand could peak in 10 years or so, companies are growing increasingly wary of committing to multibillion-dollar projects that require decades of operation to pay out.
The oil sands of Alberta have drawn the ire of environmental activists because of the region’s vast open-pit mines that require the clearance of forest, produce massive lakes of wastewater and consume more energy than other ways of extracting oil. Refining the sticky, black bitumen scooped from some mines in so-called upgraders is also very carbon-intensive. Newer, smaller projects, while more efficient, still use a lot of energy to extract the oil with the help of steam.
While attempts to make Canada’s oil sands into an economically viable source of crude have been ongoing for about a century, the industry experienced its heyday in the 2000s and 2010s, when fears abounded that the world may be running out of crude.
Those fears prompted a flood of global investment as nations and international producers rushed to secure supplies. From 2004 to 2014, about C$210.1 billion was invested in the oil sands, according to data from the Canadian Association of Petroleum Producers. Over those 10 years, oil-sands output more than doubled, to 2.2 million barrels a day, and Canada shot up from the world’s eighth-largest oil-producing nation to the fifth-largest.
The industry has struggled since global oil prices crashed from more than $100 a barrel in mid-2014. New pipeline projects were stalled by environmentalist opposition and legal challenges, weighing on Canadian heavy crude prices. International giants including Royal Dutch Shell Plc and ConocoPhillips sold off oil-sands assets. And capital spending in the oil sands fell for five straight years.
The situation came to a head in late 2018, when a wave of new production, the shortage of pipeline space and a heavier-than-normal refinery maintenance season in the U.S. combined to cause a crash in Canadian heavy crude prices. That prompted Alberta’s government to implement mandatory production limits that started in 2019 and may remain in effect for the rest of this year.
© Bloomberg Crude prices have never fully recovered from the 2014 crash
Teck Chief Executive Officer Don Lindsay, in a letter explaining the company’s decision on Frontier, acknowledged that the project raised broader questions over climate change and how countries’ regulatory regimes should balance resource development and emissions reductions.
“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,” Lindsay said. “In that context, it is now evident that there is no constructive path forward for the project.”
But the hard economic reality remains the potentially biggest hurdle. Frontier’s 2011 application relied on long-term oil prices over its four-decade life of about $95 a barrel, a level global benchmarks haven’t seen since 2014. With both West Texas Intermediate and Brent crude prices in the $50-a-barrel range and the U.S.’s Permian Basin continuing to pump more oil, those prices may not return anytime soon.
“This was the last big oil sands mining project advancing in the oil sands,” said Kevin Birn, IHS Markit’s director of North American crude oil markets. “Fully new greenfield ones outside this one, I don’t think there is any.”
Analysts had generally positive reactions to Teck canceling Frontier. Morgan Stanley analyst Carlos De Alba said that despite the C$1.13 billion writedown Teck would take on the project, “it removes overhanging concerns about the company potentially making a significant investment in fossil fuel amid raising ESG focus.”
To be sure, the oil-sands industry is far from shutting down. Major producers are generally profitable and producing free cash flow. Capital spending is even projected to tick up this year. Producers are continually developing new technologies and finding ways to cut costs.
They can still expand existing mines and are able to add output from what are known as in situ projects, which resemble more familiar methods of oil extraction by tapping underground resources through the use of wells. Those tend to be smaller, cheaper and faster to build.
But even those projects are having trouble in the current environment. Imperial Oil Ltd. last year delayed its C$2.6 billion Aspen oil-sands project, which had been approved and was scheduled to start production in 2022, because of Alberta’s production limits.
And with the cancellation of Frontier, there are no major mine projects of the kind that formed the industry’s bedrock. The last big mine to come online was Suncor Energy Inc.’s C$17 billion Fort Hills mine, which started producing in 2018.
Teck is a partner at Fort Hills and is considering getting out of that investment, too.
Kevin Orland and Robert Tuttle --With assistance from Aoyon Ashraf.
The letter Teck sent: A scathing rebuke of government
KENNEY'S GOVERNMENT IN FACT
HE IS NOW RESPONSIBLE FOR THOUSANDS OF LOST JOBS AND HOURS OF WORK
HIS DOGMATIC CLIMATE DENIAL GET IN THE WAY OF THE FOSSIL FUEL INDUSTRY
RACHEL NOTLEY'S NDP GOVERNMENT HAD THE GREEN ENERGY PLAN INDUSTRY SUPPORTED AND KENNEY SPENT THREE YEARS ATTACKING IT PRIOR TO THE ELECTION FIRST THING HE DID WHEN ELECTED WAS TO BLOW IT UP AND REPLACE IT WITH A PUBLIC RELATIONS WAR ROOM ON BEHALF OF THE DIRIEST LAZIEST POLLUTERS, UCP
By Duane Rolheiser
The original application from Teck Resources was made 9 years ago. That almost says enough right there. As environmental regulations changed, the company ‘optimized’ the project to ensure it would remain ‘commercially and environmentally viable’. The work with area First Nations communities was considered ‘ground breaking’ by those communities. Teck had already invested well over 1 billion dollars. But in the end, it appears Teck was not prepared to invest billions more in the environment of hostility toward major resource projects which Canada’s federal government has not been able to control.
Here’s the letter sent by the CEO of Teck Resources to Canada’s Minister of Environment and Climate Change. This letter will do more to stir Western Canadian anxiety than any number of “Buffalo Declarations”.
—————————————
Letter to Minister Wilkinson
Dear Minister:
I am writing to advise that after careful consideration Teck has made the difficult decision to formally withdraw our regulatory application for the Frontier oil sands project from the federal environmental assessment process.
We are disappointed to have arrived at this point. Teck put forward a socially and environmentally responsible project that was industry leading and had the potential to create significant economic benefits for Canadians. Frontier has unprecedented support from Indigenous communities and was deemed to be in the public interest by a joint federal-provincial review panel following weeks of public hearings and a lengthy regulatory process. Since the original application in 2011 we have, as others in the industry have done, continued to optimize the project to further confirm it is commercially viable.
Teck is extremely proud of the work done on this project and the strong relationships that we have formed with local governments, labour organizations, scientists, researchers and many other stakeholders, as well as with affected Indigenous communities. We believe that our agreements with Indigenous communities on Frontier, and very recently the work undertaken by the Alberta government with Indigenous communities in the region, form an important foundation for the future, and we applaud them for this milestone achievement.
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. 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.
Resource development has been at the heart of the Canadian economy for generations. Resource sectors including the Alberta oil sands create jobs; build roads, schools and hospitals; and contribute to a better standard of living for all Canadians. At the same time, there is an urgent need to reduce global carbon emissions and support action on climate change.As a proudly Canadian company for over 100 years, we know these two priorities do not have to be in conflict. Our nation is uniquely positioned with abundant natural resources coupled with strong environmental regulations and a deeply engrained culture of social responsibility. We can build on that foundation and be a global provider of sustainable, climate-smart resources to support the world’s transition to a low carbon future. And yes, that can include low-carbon energy produced from the Alberta oil sands from projects like Frontier, using best-in-class technology, which would displace less environmentally and ethically sound oil sources.
At Teck, we believe deeply in the need to address climate change and believe that Canada has an important role to play globally as a responsible supplier of natural resources. We support strong actions to enable the transition to a low carbon future. We are also strong supporters of Canada’s action on carbon pricing and other climate policies such as legislated caps for oil sands emissions.
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.
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.
Sincerely,
Don Lindsay
President and Chief Executive Officer
Teck Resources Limited
Alberta disputes First Nation's claims about Teck Frontier in letter to federal minister
NDP Leader Rachel Notley says Kenney government hasn't done its job
The original application from Teck Resources was made 9 years ago. That almost says enough right there. As environmental regulations changed, the company ‘optimized’ the project to ensure it would remain ‘commercially and environmentally viable’. The work with area First Nations communities was considered ‘ground breaking’ by those communities. Teck had already invested well over 1 billion dollars. But in the end, it appears Teck was not prepared to invest billions more in the environment of hostility toward major resource projects which Canada’s federal government has not been able to control.
Here’s the letter sent by the CEO of Teck Resources to Canada’s Minister of Environment and Climate Change. This letter will do more to stir Western Canadian anxiety than any number of “Buffalo Declarations”.
—————————————
Letter to Minister Wilkinson
Dear Minister:
I am writing to advise that after careful consideration Teck has made the difficult decision to formally withdraw our regulatory application for the Frontier oil sands project from the federal environmental assessment process.
We are disappointed to have arrived at this point. Teck put forward a socially and environmentally responsible project that was industry leading and had the potential to create significant economic benefits for Canadians. Frontier has unprecedented support from Indigenous communities and was deemed to be in the public interest by a joint federal-provincial review panel following weeks of public hearings and a lengthy regulatory process. Since the original application in 2011 we have, as others in the industry have done, continued to optimize the project to further confirm it is commercially viable.
Teck is extremely proud of the work done on this project and the strong relationships that we have formed with local governments, labour organizations, scientists, researchers and many other stakeholders, as well as with affected Indigenous communities. We believe that our agreements with Indigenous communities on Frontier, and very recently the work undertaken by the Alberta government with Indigenous communities in the region, form an important foundation for the future, and we applaud them for this milestone achievement.
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. 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.
Resource development has been at the heart of the Canadian economy for generations. Resource sectors including the Alberta oil sands create jobs; build roads, schools and hospitals; and contribute to a better standard of living for all Canadians. At the same time, there is an urgent need to reduce global carbon emissions and support action on climate change.As a proudly Canadian company for over 100 years, we know these two priorities do not have to be in conflict. Our nation is uniquely positioned with abundant natural resources coupled with strong environmental regulations and a deeply engrained culture of social responsibility. We can build on that foundation and be a global provider of sustainable, climate-smart resources to support the world’s transition to a low carbon future. And yes, that can include low-carbon energy produced from the Alberta oil sands from projects like Frontier, using best-in-class technology, which would displace less environmentally and ethically sound oil sources.
At Teck, we believe deeply in the need to address climate change and believe that Canada has an important role to play globally as a responsible supplier of natural resources. We support strong actions to enable the transition to a low carbon future. We are also strong supporters of Canada’s action on carbon pricing and other climate policies such as legislated caps for oil sands emissions.
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.
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.
Sincerely,
Don Lindsay
President and Chief Executive Officer
Teck Resources Limited
Alberta disputes First Nation's claims about Teck Frontier in letter to federal minister
NDP Leader Rachel Notley says Kenney government hasn't done its job
Michelle Bellefontaine · CBC News · Posted: Feb 12, 2020
Environment and Parks Minister Jason Nixon wrote his federal counterpart to refute claims about a lack of consultation on the Teck Frontier project made by Chief Allan Adam of the Athabasca Chipewyan First Nation. (Manuel Carrillos/CBC)
Alberta's environment minister is disputing a First Nation's claims that the provincial government's refusal to consult on issues related to the proposed Teck Frontier oilsands mine could derail the project's approval.
Allan Adam, chief of the Athabasca Chipewyan First Nation (ACFN), has gone public this week with concerns that Alberta has failed to address environmental and social issues related to the $20.6-billion project.
The federal cabinet is expected to decide by the end of the month if Teck Frontier will go ahead. A joint federal-provincial environmental panel recommended approval last July.
In a letter Wednesday to federal Environment Minister Jonathan Wilkinson, Alberta Environment Minister Jason Nixon said Adam's claims are not accurate.
OPINION Clearing the air on Teck Frontier: Here are the expected benefits — and harms — of the oilsands project
"We must not get caught up in incrementalism, continually addressing new requests that are peripheral to the project and politicize it unnecessarily," Nixon wrote.
In the letter, Nixon urged Wilkinson to look at how Alberta has made "adjustments" in its approach to the Teck project over the last 10 years. Nixon suggested Adam has an agenda by raising concerns at the 11th hour.
"I note that Chief Adam has now also injected direct financial compensation into his apparent demands, above and beyond funds for environmental mitigation," the letter said.
"This is also in addition to ACFN's commercial agreements with Teck and the potential for an equity stake in projects via Alberta's new Alberta Indigenous Opportunities Corporation."
In the same letter, Nixon took issue with Wilkinson's statements in the media that Alberta's 100-megatonne cap on emissions needs to be set in regulation. He accused the federal minister of "changing the goal posts" because the issue never came up in discussions.
'Sloppy failure'
Premier Jason Kenney met privately Thursday with Alberta chiefs in Edmonton about children in care, and the federal Bill C-92, An Act respecting First Nations, Inuit and Métis children, youth and families, which came into force on Jan. 1.
On Feb. 7, Adam wrote a letter to all chiefs set to meet with Kenney, urging them to confront the premier about a lack of consultation and sharing royalties from resource projects.
He alleged that Alberta prefers to deal with First Nations indirectly through the new Indigenous Opportunities Corporation (IOC) and that government funds earmarked for consultation, court challenges and land claims has been diverted from Indigenous Relations to the IOC.
"AFCN is a supporter of the Teck Frontier project, however, Alberta's refusal to work with us respectfully jeopardizes this project's federal approval, putting jobs and benefits for our Nation (and all Albertans) at risk," Adam wrote.
"Premier Kenney has been vocal in the media blaming Canada for delaying the project, however the truth is that it is Alberta's refusal to co-operate in good faith that puts the project at risk."
Adam said the IOC won't help First Nations unless they have a $20-million up-front payment.
Alberta Indigenous Relations Minister Rick Wilson refuted that claim. He said the IOC will only back projects worth $20 million or more, but the ownership can be shared, as long as 25 per cent comes from Alberta.
Wilson said applicants don't need to turn over their financial information, contrary to what Adam said in his letter.
Alberta NDP Leader Rachel Notley said Kenney and his government have put approval of the Teck project at risk by failing to work with the ACFN and undoing the work she did while premier.
While ACFN signed on to the project in September 2018, Notley said there was still work that needed to be done on environmental mitigation.
"How this relationship could change so quickly is beyond disappointing," Notley said at a news conference in Edmonton on Wednesday. "It is, quite frankly, irresponsible."
Alberta environment minister says First Nations concerns with Teck Frontier are about money
Alberta's environment minister is disputing a First Nation's claims that the provincial government's refusal to consult on issues related to the proposed Teck Frontier oilsands mine could derail the project's approval.
Allan Adam, chief of the Athabasca Chipewyan First Nation (ACFN), has gone public this week with concerns that Alberta has failed to address environmental and social issues related to the $20.6-billion project.
The federal cabinet is expected to decide by the end of the month if Teck Frontier will go ahead. A joint federal-provincial environmental panel recommended approval last July.
In a letter Wednesday to federal Environment Minister Jonathan Wilkinson, Alberta Environment Minister Jason Nixon said Adam's claims are not accurate.
OPINION Clearing the air on Teck Frontier: Here are the expected benefits — and harms — of the oilsands project
"We must not get caught up in incrementalism, continually addressing new requests that are peripheral to the project and politicize it unnecessarily," Nixon wrote.
In the letter, Nixon urged Wilkinson to look at how Alberta has made "adjustments" in its approach to the Teck project over the last 10 years. Nixon suggested Adam has an agenda by raising concerns at the 11th hour.
"I note that Chief Adam has now also injected direct financial compensation into his apparent demands, above and beyond funds for environmental mitigation," the letter said.
"This is also in addition to ACFN's commercial agreements with Teck and the potential for an equity stake in projects via Alberta's new Alberta Indigenous Opportunities Corporation."
In the same letter, Nixon took issue with Wilkinson's statements in the media that Alberta's 100-megatonne cap on emissions needs to be set in regulation. He accused the federal minister of "changing the goal posts" because the issue never came up in discussions.
'Sloppy failure'
Premier Jason Kenney met privately Thursday with Alberta chiefs in Edmonton about children in care, and the federal Bill C-92, An Act respecting First Nations, Inuit and Métis children, youth and families, which came into force on Jan. 1.
On Feb. 7, Adam wrote a letter to all chiefs set to meet with Kenney, urging them to confront the premier about a lack of consultation and sharing royalties from resource projects.
He alleged that Alberta prefers to deal with First Nations indirectly through the new Indigenous Opportunities Corporation (IOC) and that government funds earmarked for consultation, court challenges and land claims has been diverted from Indigenous Relations to the IOC.
"AFCN is a supporter of the Teck Frontier project, however, Alberta's refusal to work with us respectfully jeopardizes this project's federal approval, putting jobs and benefits for our Nation (and all Albertans) at risk," Adam wrote.
"Premier Kenney has been vocal in the media blaming Canada for delaying the project, however the truth is that it is Alberta's refusal to co-operate in good faith that puts the project at risk."
Adam said the IOC won't help First Nations unless they have a $20-million up-front payment.
Alberta Indigenous Relations Minister Rick Wilson refuted that claim. He said the IOC will only back projects worth $20 million or more, but the ownership can be shared, as long as 25 per cent comes from Alberta.
Wilson said applicants don't need to turn over their financial information, contrary to what Adam said in his letter.
Alberta NDP Leader Rachel Notley said Kenney and his government have put approval of the Teck project at risk by failing to work with the ACFN and undoing the work she did while premier.
While ACFN signed on to the project in September 2018, Notley said there was still work that needed to be done on environmental mitigation.
"How this relationship could change so quickly is beyond disappointing," Notley said at a news conference in Edmonton on Wednesday. "It is, quite frankly, irresponsible."
Alberta environment minister says First Nations concerns with Teck Frontier are about money
Environment minister doesn't rule out deferring a decision on the Teck oilsands mine
She said ACFN told the federal government in December that they couldn't get Alberta back to the table after reaching out after the provincial election which brought Kenney and the United Conservative Party to power.
Subsequent discussions the following month between ACFN and the Alberta government in January went nowhere, she said.
Notley said Kenney needs to listen to the chiefs he is meeting with, and take action.
"If this project ultimately does end up in jeopardy, the majority of blame can be laid squarely at the feet of Jason Kenney and the UCP for engaging in an arrogant and disrespectful and frankly, sloppy failure to do their job," she said.
Treaty 8 chiefs, including Adam, walked out of the meeting over concerns about the children in care and demanded a separate meeting on Feb. 27.
At a news conference afterward, Wilson downplayed the walkout. He said the chiefs wanted a separate meeting to deal with their own issues and denied there was an issue.
"There's no friction. One hundred per cent, " he said, adding that Adam told him there are discussions underway about air and water quality mitigation issues around the Teck project.
Watch
Treaty 8 chiefs walk out of meeting with premier
14 days ago
Treaty 8 Grand Chief Arthur Noskey calls on government to honour constitutional obligations.
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