Teck’s withdrawal signifies a major turning point in the struggle between forces opposing a fundamental shift in the use of fossil fuels and governments and industries resisting a transition.
The company’s signalling that Teck would have to write off $1.l billion of its spending on the Frontier project, foreshadowed the difficult corporate decision.
The immediate political fallout: in Ottawa a sigh of relief. In Alberta: instant anger but also a slow realization, a coming to terms that the “last boom” was indeed the last boom. It is now time for the adults in the room to come to terms with a new tomorrow.
It will be especially painful for the Kenney government which had placed so much attention on the project, demanding “Ottawa” approve the project. But the tone was irrelevant and tone deaf to the fact that capital is leaving the oilsands for pragmatic reasons. The oil and gas sector will continue to bleed, as institutional investors head for the exits.
Teck Message
In a letter to the federal Environment Minister, Don Lindsay CEO and President of Teck wrote:
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.…
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 letter concluded:
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.
Kenney statement
In contrast, Premier Kenney sought to use this disappointing news to ante up the attacks on Ottawa.
Premier Kenney termed the decision a “grave disappointment,” but “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.
The statement reiterated the usual litany of benefits – jobs, tax and royalty payments to Alberta, agreements with 14 First Nations, including the last minute agreements with the Mikisew Cree and Athabasca Chipewyan First Nation “show how it can be done.”
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.
What was breathtakingly remarkable about this statement was the insistence that the project was “economically viable” in contrast to Teck’s recognition of adverse capital markets and the need to transition to a low carbon future.
Another interesting comment in the Kenney statement was the acknowledgement that the new tax and royalty revenue “could have funded our generous social services over the next four decades.” Unfortunately, the math doesn’t work even if one accepts the $70 billion figure. Narrowly defined social services is a $6 billion per annum item, suggesting the hyperbole was a tad bit exaggerated. Yet, it underlined a common view in certain circles that only energy can pay for “generous” social services.
Kenney’s tone also contrasted dramatically to Teck’s view that recognizes the climate agenda is in ascendancy in both Ottawa and the global financial community. The UCP now is in the uncomfortable position of promising new jobs and investment while maintaining the quality of essential public services. Does the UCP have any strong voices to challenge the current vision of low taxes and more investment?