Teck Resources withdrew its application to build a huge oilsands project in Alberta.
The company decided to withdraw its application after a board meeting. The announcement came hours after the Alberta government announced it reached a deal with two First Nations over the proposed project.
Teck issued a statement Feb. 23 and said that CEO and President Don Lindsay has written to the federal Minister of Environment and Climate Change outlining the reasons for the withdrawal. The letter is available here and included below.
As a result of this decision Teck will write down the $1.13 billion carrying value of the Frontier Project.
Sunday night Premier Jason Kenney issued a statement and said Teck’s decision is a “grave disappointment to Albertans.”
“Alberta has lost the opportunity for 7,000 jobs and Canada has lost the opportunity for $70 billion of dollars in new tax and royalty revenue that could have funded our generous social services over the next four decades. The project would also have produced oil cleaner than half the barrels in North America.
“Teck’s decision is disappointing, but in light of the events of the last few weeks it is not surprising,” said Premier Kenney.
“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 timing of the decision is not a coincidence: Teck’s allusion to ‘public safety’ concerns makes that clear,” added Premier Kenney. “This was an economically viable project, as the company confirmed as recently as this week, so something clearly changed very recently. The project would also have shrunk the emissions intensity of oilsands production, with oil cleaner than the average barrel of North American oil.
“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.
“Today’s announcement must be especially disappointing for all 14 of the proximate First Nations who have called on the government to approve the Frontier project. In the last 48 hours, the Mikisew Cree First Nation and the Athabasca Chipewyan First Nation both signed historic agreements with the Government of Alberta, which would have made them partners in the prosperity of the Frontier project, bringing hundreds of jobs and tens of millions of dollars to their remote communities.
“The Government of Alberta believes that partnership in resource development is one of the most promising paths to reconciliation, and this week’s agreements with the Mikisew Cree and Athabasca Chipewyan First Nation show how it can be done. Those agreements should have been models for the rest of Canada, but that can only be possible if resource projects are actually approved and built. As long as the federal government undermines confidence in the future of our resource sectors, that path to economic reconciliation will be shut off.
“The factors that led to today’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 oilsands 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.
“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,” said Premier Kenney.
The federal government was expected to make a decision by the end of February on whether the $20.6-billion project will go ahead. It would have produced about 260,000-barrels of bitumen per day, which will be transported via pipeline.
Earlier this week Teck Resources warned the Liberal government the company will be hit with an impairment charge of about $1.13 billion if the government doesn’t approve the proposed Frontier oilsands mining project in northern Alberta.
According to Investopedia an impairment charge is a new term used to describe writing off worthless goodwill. In 2002 companies adopted new accounting rules and disclosed huge goodwill write-offs.
The Frontier project would have directly employed up to 7,000 workers during construction and up to 2,500 workers during operation.
Frontier would have contributed about $55 billion in provincial royalties and taxes and an estimated $12 billion in federal income and capital taxes.
Frontier was a proposed truck-and-shovel oil sands mine between Fort McMurray and Fort Chipewyan in northeast Alberta.
Prime Minister Justin Trudeau issued a statement Sunday night about Teck’s decision.
Trudeau said he reaffirmed the Government of Canada’s commitment to working with Alberta and the resource sector to keep creating good jobs and to ensure clean, sustainable growth for Canadians.
The Prime Minister and Premier Jason Kenney today briefly discussed the railway blockades and the impacts they are having across the country on Canadians and the economy, and they affirmed their desire for a quick and peaceful resolution.
Teck’s Letter to Minister Wilkinson
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.
President and Chief Executive Officer
Teck Resources Limited
Updated Feb. 23 7:37 p.m., 8:43 p.m.
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