What the Teck??

Last week Teck Resources Limited, a Vancouver-based mining corporation, announced its latest financial results. It made mention of its Frontier oilsands project in Alberta, warning that failure by governments to approve the project would cause it to take a write-down in excess of C$ 1 billion.

Meanwhile, even as it faced the rail blockades, the Trudeau government was wrestling with its decision on whether to give Frontier the green light, having promised an announcement by the end of this month. There were media reports that many of Trudeau's parliamentary caucus opposed the deal.

At the start of last weekend, the Alberta government announced deals with two First Nations communities whose lands would be affected by the project, clearing a major stumbling block.

And on Sunday evening.....Teck abruptly withdrew its application for approval for Frontier, effectively killing the project after years of planning. It duly took the C$ 1 billion write-down.

Cue the blame game.  Alberta Premier Jason Kenney was quick to point the finger at Ottawa, citing Trudeau's commitment to emissions reduction -- oilsands mining is notoriously polluting -- and even suggesting that the rail blockades had persuaded Teck that it could not proceed with the deal.  Teck's own reasoning was rather more subtle.  It noted that international investors were looking for energy projects in jurisdictions that had "reconciled resource developments with climate change", something that the Kenney administration has largely (and loudly) refused to do. 

It is quite possible that Teck has done itself, Alberta and Canada a favour here.  Even if approval had been granted this week, the project would have taken years to complete and would have seriously strained Teck's balance sheet. Payback for the investment would have taken decades.  Can anyone seriously suggest that a highly-polluting fossil fuel project that will not pay off until well after the middle of the century is a smart move right now? 

The loss of jobs (7000 for construction of Frontier; 2400 ongoing once operational) and government revenues (projected at C$ 70 billion lifetime) may be a blow.  However, Alberta's oil industry already has huge unfunded back-end costs, with abandoned wells littering the Province. Adding a 270 square kilometre open-cast mine to that burden would seem the height of folly. If Teck's decision forces Alberta and Ottawa to start looking at alternatives to megaprojects such as Frontier, that's a good thing, even if it may not seem that way at the moment.