Now that Teck Frontier is dead, is there a future for Canada's oilsands? - Action News
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Now that Teck Frontier is dead, is there a future for Canada's oilsands?

Alberta's oilpatch was dealt another devastating blow this week with Teck Resources'decision to pull the plug on its Frontier project a movethat hassome analysts wondering whether the sector has afuture in the long term.

'A lot of companies are saying, 'Why bother with Canada? We're going elsewhere,' analyst says

Prime Minister Justin Trudeau's government never had to make a decision on Teck Resources' Frontier oilsands mine proposal because the company withdrew its application. (Sean Kilpatrick/The Canadian Press, Kyle Bakx/CBC)

Alberta's oilpatch was dealt another devastating blow this week with Teck Resources'decision to pull the plug on its Frontier oilsands mining project a movethat hassome analysts wondering whether the sector has afuture in the long term.

Beyond Teck, all the major oilsands players have cancelled projects, indefinitely delayedfinal decisionsor dramatically scaled back investments in recent months.

Theindustry is facing a perfect storm of low oil prices, legal challenges, regulatory uncertainty, Indigenous opposition, constrained pipeline capacity and a government in Ottawa seized with stopping and reversing the disastrous effects of climate change.

Oil is still Canada's most valuable export, and the volume this country sells abroad is still growing year-over-year thanks to companies squeezing more from existing operations. But long-term growth prospects arein doubt, analysts say.

"A lot of companies are saying, 'Why bother with Canada, forget it, we're going elsewhere,'" said Laura Lau,who helps manage $2 billion inassets at Brompton Corp. in Toronto.

The Frontier project may very well be the last open-pit mining operation ever pitched in Canada, she said.

'This may be the nail in the coffin'

The only projects likely to move forward now, she said, are expansions to existing operations andthose thatuse steam to extract crude from deep under the earth known as "in-situ" projects.

"This may be the nail in the coffin," Lau said.

Teck reduced the emissions intensity of its operations, committed to going net-zero by 2050 and signed impact benefit agreements with every First Nations in the area and it still wasn't enough to get the project over the line, she said.

"They did everything the federal government asked them to do and it still wasn't good enough. So the question is, what is good enough?" Lau said. "The political risk is just too high for these companies."

Harrie Vredenburg is a professor of global energyat the University of Calgary's school of business. He said persistently low oil prices are partly to blamefor Teck's decision but so too isOttawa's handling of the rail blockades.

"The political morass we're in, it's a mess. What you have are investors or directors of a company like Teck who are saying, 'This isn't the kind of place we want to be investing in,'" Vredenburg said.

He said the headwindsfaced by the Coastal GasLink project which is to carry natural gas, not oil, to the coast for export has also created a chilling effect.

While that project's proponent, TC Energy, has received the necessary provincial permitsand secured agreements with all of the neighbouring elected Indian Act band councils, some hereditary chiefsderailed years of planning by blocking a single roadway,Vredenburgsaid.

Protesters man a rail blockade near Hamilton, Ont., on Feb. 25, 2020, disrupting GO Transit on the morning commute. The protest is in support of Wet'suwet'en hereditary chiefs who oppose the Coastal GasLink natural gas pipeline project in B.C. (Evan Mitsui/CBC)

'Existential crisis'

"Companies comply with all the regulations and in the end it still comes down to a political decision. There's a lot of ambiguity and uncertainty in this country for investment in any type of resource," he said.

"This is a serious existential crisis for this country."

He said federal-provincial "bickering" over the country's energy policy, and how it agrees with a national commitment tolower greenhouse gas emissions and address decades-old questions about Indigenous rights and title, has sent capital fleeing to safer jurisdictions.

Teck's president and CEO, Don Lindsay,cited this uncertainty as reason enough to cancel major capital investments like the $20 billion the mining firm was ready to invest in the Frontier mine.

Lindsay said Teck did not want to be "at the nexus of much broader issues that need to be resolved ... there is no constructive path forward."

Teck's Frontier oilsands project was planned for northern Alberta. The company pulled its application for the project on Sunday. (CBC News)

Alberta has seen foreign investment all but evaporate some $30 billion in foreign capital has fled in the last five years leaving only the domestically owned playersready to invest in the sector.

"If you're on the outside looking in, you're saying, 'Whoa, we'll wait to see if that ever passes.' Canada is all risk, risk, risk,"Vredenburgsaid.

Lau said Teck's decision validates earlier moves by France's Total and Norway's Equinor, among others, to divest many of their Canadian oilsands assets and jump ship for projects elsewhere.

"Oil and gas projects are getting built all over the world right now, everywhere except Canada.Deathby delayis atactic that Justin Trudeau has used for years to kill energy projects that are of nationalimportance," said Conservative MP Shannon Stubbs, the party's energy critic.

Natural Resources Minister Seamus O'Regan said Ottawa isn't abandoning the sector.

"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," he said in a statement after the Teck decision was announced.

But the list of projects that companies say they're willing to build is literally shrinking by the day.

Only days ago, the Alberta Energy Regulator (AER) approved the Meadow Creek West development but the proponent, Suncor, has said it's not ready yet to make a final investment decision. One of the company's most promising developmentshas been deferred. Suncor has said that construction of Meadow Creek if it happens is still years away and wouldn't start producingoil until closer to end of the decade.

Last November, Imperial put its Aspen oilsands project in northern Alberta on hold. The company, owned in part by U.S. giant ExxonMobil, also shelved plans for a $2.4 billion expansion of its existing Cold Lake operation in favour of a much smaller investment in another site.

Imperial Oil president and CEO Rich Kruger prepares to address the company's annual meeting in Calgary on April 26, 2019. (The Canadian Press/Jeff McIntosh)

Cenovus finished a large expansion of its Christina Lake facility early last year but it has yet to pump more oil from the site because Alberta's oil curtailment policy enacted because Canadian oil prices are substantially lower than the going world rate has limited the possibility of profits.

Canadian Natural Resources Limited (CNRL) bought a controlling stake in the proposed Pike development, a project that has secured all of the necessary permits, but the company just isn't ready to commit.

Investors have noticed: Cenvous is trading near five-year lows despite a moderate improvement in oil prices in recent months. Suncor's share price also has been battered. Imperial Oil trades at just half of where it was some six years ago.

In addition to the political and legal risks, the cost of extracting oil from Alberta's oilpatchis higher than it is in other jurisdictions.

Based on estimates reported by the Alberta Energy Regulator (AER) and the Canadian Energy Research Institute (CERI), the break-even price for a new standalone mine like Frontier is currently within the US$7585 a barrel range.

Thebreak-even price for new steamassisted gravity drainage (SAGD) operations, the most commonly used technique for the thermal insitu recovery, is around US$60 a barrel.

West Texas Intermediate (WTI) traded at just US$50 a barrel at close Tuesday.Western Canadian Select, which includes product from the oilsands, changed hands at US$34.50 meaning many projects are simply unviable given the existing cost structures of the Canadian industry.

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