Jordan: There’s no way to solve an energy issue in Canada right now without making some part of this country very, very angry. And now that the price of oil no longer guarantees a huge payoff in return for that anger, some companies are wondering if it’s even worth attempting new projects.
News Clip: Teck Resources announcing its withdrawing its application for the Frontier Project. This comes just hours after the Alberta government announced it struck a deal with it to Northern Alberta First Nations.
Jordan: Of course, you also can’t just walk away from an energy project in Canada today without some people also getting very, very angry, but at least they won’t be angry at you.
News Clip: There is absolutely no doubt that this decision was taken in large part because of regulatory uncertainty and endless delays created by the national government.
Jordan: By now, no one should be shocked to learn that there’s a lot of resentment of the federal government in Alberta. It’s always been this way and it feels like it’s getting worse. And this time, Alberta probably has a point. Whatever side of the debate over climate policy versus energy policy you might sit on, it’s clear that there’s no big framework when it comes to approving or denying energy projects like the one Teck has walked away from. These projects seem right now to be handled on a case by case basis. Can Canada really continue to do business that way? And if it does, how will companies like Teck choose which projects they push, or when? And what comes now for the province of Alberta without a mine they were counting on for thousands of jobs? Are we reaching a tipping point in the ever frayed relationship between the province and Canada’s capital, or at least the government that currently sets there? I’m Jordan Heath Rawlings. This is The Big Story. Jason Markusoff is the Alberta correspondent for Maclean’s and also occasionally for us. Hi, Jason.
Jordan: Why don’t you start, for Ontarians and East coasters, maybe and everybody who hasn’t had quite so much of an economic stake in this, by just sketching out what is Teck Resources and what was, I guess, the Frontier Project?
Jason: Teck Resources uh, everybody should remember, is actually not an oil company. You see, it’s oil companies who develop oil sands, but this is actually a mining company. Their specialty is coal mines. Uh, other mineral mines. Uh, they had dabbled a bit in oil sands being a junior partner in one project, and on this one, they were trying to propose this one all on its own. Um, this would have been an oil sands mine quite far North of Fort McMurray, the one most remote from the actual city of Fort McMurray in Northeast Alberta. And this was one of the big classic mining projects where they basically dig up the muck, the oil sands muck and refine it into bitchumen and keep refining it and keep refining until it eventually becomes oil. That’s the classic oil sands project. A lot of the oil sands projects that have been developed in the last, uh, five, six years, um, have been smaller projects where they actually just shoot a bunch of steam and, uh, chemicals and minerals it to the oil sands well, and dig it up. And those are smaller projects. This was going to be a big mega project. 260,000 barrels a day at full completion, $20.6 billion to construct this project. Of course, though it was very hypothetical because what they needed to develop a mega project was. Around $70- $75 a barrel oil. Right now we’re at $50 we have it around $50 for quite a long time. And they needed a pipeline. You know, ones are coming, but it’s not clear that there would necessarily be capacity if Trans Mountain and other projects don’t come to be. And they needed another partner to get this done. A big oil sands company or oil player to help them develop and finance this project. And over the last five years we’ve been talking about companies leaving the oil sands. Nobody wants to invest because it’s high risk, you know, intense carbon footprint, very controversial projects. So it was always very unlikely that this project might have ever been built. We were always debating hypothetical emissions, hypothetical jobs. But in Alberta, of course, people are very excited by those hypothetical jobs.
Jordan: Right, but what killed it finally this week?
Jason: Oh, a few things, different things killed it. Um, uh, the first would be, uh, the decision point it had a facing– staring it in the face. Um, the cabinet was opposed to, it’s deadline was this week, whether it would approve the project, reject the project, or maybe give it some kind of deferral or delay.
Jordan: That’s the cabinet in Ottawa.
Jason: That’s the, yeah, the federal cabinet, Justin Trudeau’s cabinet. And for many reports, a lot of cabinet ministers and certainly a backbench MPs were very split on this project. There was a lot of opposition. A lot of these MPs are from, you know, none of them are from Alberta. They’re all from other provinces, mostly in the East, and those are places where they’re not handled by this prospect of a 7,000 potential oil sands jobs. They think more about the, the natural disturbance in an area that’s actually in a bison range, very close to a UNESCO world heritage site, um, national park, the Wood Buffalo national park, on the border with Northwest Territories, and they would have seen this potential for 4.1 mega tons of carbon emissions in the future, uh, per year. You know, as we’re looking to reduce our carbon emissions. Now, normally, and this is what Teck, and this is what other governments were used to, this approval process, this cabinet decision making process was pretty much a rubber stamp. If the technical review and the federal and provincial panels, say this project’s okay with conditions, that’s what the federal government said. Liberal and Conservative in the past, they all approved it. That’s why we have so many oil sands projects and a whole bunch more that are approved but not built yet. It’s different. Times are shifting. Um, the public, public attention is shifting. Investor mood is shifting. And so it’s quite natural that a Liberal government would shift with those times and be hesitant on whether to approve this or not. With this hesitation, clearly Teck thought, maybe we’re not going to get this. Maybe our lease is going to have a big fat rubber No stamp on it, instead of a rubber stamp saying, Yes, go ahead. So, they decided rather than risk losing this project, they pulled it.
Jordan: So what would be the rationale behind that as opposed to just letting the process play out one way or another?
Jason: I mean, there are a couple of theories out there. One is that a company wants to save face. It doesn’t want all of its good intentions, all of it’s efforts to project a good project with good environmental credentials, all of its support for First Nations in that region. They don’t want all that to be faced with a rejection. That’s a kind of a corporate smudge, that basically what you did is not good enough for the federal government. Even though this is the de facto message like that, still that’s a, that’s a reason you want to put this, you want to reject this. You want to leave on your own terms. You want to be able to say what you say rather than Ottawa having its say on you. Another possible rationale for this is that, one of the reports out there is that they were feeling, they were fearing that this was going to be delayed. And they’ve sunk so much money into this, they sunk more than a billion dollars into this planning and consultation process thus far, the project is valued at basically nothing in the markets according to a good Globe and Mail report from their mining reporter, and they just want to perhaps cut their losses. Another theory, and this is one that I, uh, partially hold, is that, but what they had right now was the oil sands lease. They had a piece of land up in Northeast Alberta with the proposed mine on it. If they had an approved mine on it, approved mine project on this land, it’s worth a bit more. You can sell it. You can more likely to find somebody else to take it forward if this mining company didn’t want to take this forward. If they have a rejected mine on it, this land is good for bison and nature and not much else. If they have a, if they have a pulled, a withdrawn agreement on this proposal, on this land, there’s still the potential for somebody maybe someday in the future, under some different government or some other different perspective with a different proposal, maybe with different terms to pick this up again. So it could potentially salvage value in this lease. Um, although I would suggest that it’s probably pretty nil at this point.
Jordan: So, I know you said that, uh, in Alberta, it’s kind of been a hypothetical, uh, for a long time, but there were at least a lot of hypothetical jobs, uh, and revenue there. So how has Alberta, or maybe just the leaders in Alberta, because I don’t want to paint the whole province with a brush, but how has the Alberta government been taking the news?
Jason: The Alberta government, like much of you know, is very aligned with a lot of the investor community in Alberta, the oil sands sector, and a lot of the populace in oil producing regions like Fort McMurray. And at least it was the idea that there could be jobs in the future. The oil sands rests on two separate separate entities. I mean, this whole oil sands boom was two things. It’s operations, actually produce the oil sands, and growth, expanding oil sands. And actually the big, the big source of jobs are in constructing these oil sands projects and developing these oil sands projects. And for years and years and years, the big growth up at Fort McMurray was not the people who actually mined the product, it’s people who build those mines and build those giant wellsites and build the camps and all the supporting structure around those. The big boom ended because nobody was putting forward more projects to keep expanding. Back in, uh, 2018 Fort Hills Mine, which is the closest mine up to this where Teck was going, it opened. A big mine owned by Suncor and actually partially owned by Teck resources. It was called, at the time in 2018, probably the last big oil sands mine. And that’s because no other company was putting them forward except for Teck Resources’ big long shot project that may never be built. But there was excitement in the oil sands community and in the government and in the sector, because the potential, the idea that another mine could be built is a job’s Bonanza. The sort jobs Bonanza we were used to in Alberta that developed this province as this screaming, beaming, you know, economic superpower, but that we haven’t had. So the idea that there could be another big mine on the books or when oil prices potentially rose again and it was approved and it had the green light from Ottawa, despite all our climate talk, uh, that was exciting. That the potential is snuffed out is a major disappointment here in Alberta.
Jordan: Who are they blaming for that disappointment? Because one thing I will note is that this wasn’t killed by Ottawa. Or was it almost killed by Ottawa even if they didn’t rubber stamp it?
Jason: It was almost killed by Ottawa. Um, that was certainly the sense. You know, largely Ottawa, Ottawa was the decision maker in this point. And if Teck was very confident that this was going to get to an approval, they would have just let that happen, and it would have been fine, and Alberta would have been generally pleased that this was at least a potential project that could go forward. You know, and do people here think uh, Ottawa killed it? Of course they do. This is the resource sector, uh, and a Trudeau government and Jason Kenney and Justin Trudeau, you know, they are predisposed to blaming and directing scorn almost entirely at Justin Trudeau for something. And in this opportunity, they have a lot of, they have a lot of evidence that argues in their favour that had there been a Conservative government, or had there been a more classical government that just rubber stamps these projects and doesn’t really take into account all the cumulative impact of oil sands development and climate liability and climate risk that this project would have gone ahead.
Jordan: The last time we talked to you was kind of right after the election and there was a lot of anger and Alberta. Had that mellowed at all before this? Uh, is this just the, the latest phase? How is Alberta feeling about the rest of the country right now?
Jason: As goes with almost any emotional response, it’s most acute immediately after an offending result or outcome. After the election, rage was very, was very hot because there was a potential that we could have gone the other way. It has died down. It hasn’t gone away. There’s still people talking about it. And, uh, Jason Kenney setting up, uh, this quote unquote fair deal panel to have public discussions about, um, different ways Alberta can seek autonomy from Ottawa, like taking it’s own pension, creating its own pension plan, collecting its own federal, its own income taxes. Uh, these were keeping this discussion alive to some extent, but largely the real acute frustration had died down. When the dust settled this Wexit movement we’ve talked about, and its own leaders, didn’t have much going, didn’t have a big constituency. Separation talk is largely obscure, academic and fringe. This rejection is a fresh provocation, the first major provocation from Ottawa, uh, that we’ve seen. So obviously, you know, the temperature goes up. Uh, Kenney is now, once again, talking with more enthusiasm about measures to seek autonomy from Ottawa. Whether there’s going to be any action on that, we’re not sure. But certainly the, uh, the temperature after, in the immediate aftermath of these, uh, type of provocations or Alberta feeling spurned by Ottawa, uh, will inherently rise.
Jordan: Is there any way, um, that Ottawa could have prevented some of this blow back? One of the things that I note that you wrote about at Maclean’s is the sort of lack of any overarching guidance on what gets approved and what doesn’t. And I wonder if, if there was maybe some more clearly defined rules, we wouldn’t be in the blame game?
Jason: There was a really interesting letter written by Don Lindsay, the CEO of Teck Resources, to the Environment Minister, Jonathan Wilkinson, on Sunday as they were withdrawing this project. And one of the things that, this, he said he was disappointed. He wished he didn’t have to pull this project, but he said that this project is landing in the middle of this debate and forming the nexus of this debate over energy and climate change. And you know, it would be great if there was some sort of framework that determined what the expectations are of oil sands development for climate, for investment in this country without such a framework, it’s very hard for this to go ahead. As I said earlier, the framework for the longest time under Liberal and Conservative federal governments, has been we approve these. It’s simple as that. But the times have changed. That is no longer the process. But Ottawa doesn’t know what the process is. Ottawa doesn’t have a plan. They don’t have a policy on oil sands, how much oil sands development is enough. They don’t have a real policy on how future oil sands projects, or current ones even, fit into their expectations of how much– how much tonnage or mega tonnage of carbon emissions can come from the oil sands. There is a hundred mega ton cap that’s been legislated by the Alberta government on oil sands, but there’s not even a consensus on where we are right now and how much room there is under that cap for future projects. So I mean, I think in theory, yes, Don Lindsay is right. There should be a framework. This shouldn’t be up to the whims of the varying opinions of different cabinet ministers based on where they’re from and who’s talking to them. There should be a process this slots into, if we’re not going to just rubber stamp what, you know, what the technical reviews come to. But I would recommend the oil patch, be careful what they wish for in that regard. Any sensible review or framework would take into account that there are dozens, or more than a dozen, oil sands projects still on the table still, with approvals, just waiting for the economics or the construction time to go up. And that is 2.1 million barrels, I believe, of potential oil sands development. This mine was just 260,000 barrels, and so there’s a lot of, a lot of potential jobs, a lot of potential oil sands developments still to come, and there’s a lot of, uh, carbon footprint still to come in what’s already on the books as approved for oil sands projects. And I imagine if they look, take, take into account all that in this framework, looking at climate change, looking at economics, they might not look too kindly on having another rubber stamped project for down the road when the economics work for Teck Frontier Mine.
Jordan: About those projects that are kind of already sitting there waiting for the economics to improve, how confident or hopeful even are people in Alberta, in the government, that the economics will actually get to the point where these things can go forward? Or are we kind of trying to wrap our head around, you know, a new way that, uh, the oil sands work in Canada?
Jason: Different projects have different economic points and not all projects are created equal. There are again, two different types of oil sands projects. There are the oil sands mines, these giant open pit developments, the classic oil sands projects that are huge, um, that take years to develop, um, and have, you know, several decades worth of oil sense to exploit. And those are just, you know, basically the size of the size of small cities, those developments. And then there are the thermal projects or also known as SAGD, these smaller projects where they drill wells and, and develop a bit-by-bit the oil. Uh, smaller projects, um, have different economics. They’re often more affordable to build. They don’t have the same. Uh, expansion or growth, growth, spending, the capital spending, and they’re smaller, you’re, you’re putting less risk and you’re investing less money into it. You’re putting up less risk capital if you’re developing those. Those are a lot of the projects that we have and some of those, because of their geology, because of where they are and who’s proposing them, a lot of those are looking for different oil prices as well, but those ones are more likely to go ahead because they are smaller. Nobody else had been proposing a mega mine. After the Fort Hills mine opened, they’re very large. They cost a lot of money. The last time there was a mine proposed, uh, Shells’ Pierre river mine, that application was pulled as well back in 2015 when Harbor was still around. Nobody was proposing these. A lot of people were surprised that Teck Resources was still going with this until they pulled their project.
Jordan: Given that there might not be another mega mine in store, what else is there, uh, I guess so to speak in the pipeline, that might push the Ottawa-Alberta relationship closer to a breaking point?
Jason: Well, the next big thing, and this has been a busy, busy news week. Sunday Teck Frontier pulled their mine. On Monday afternoon just as that reporters in Edmonton were waiting for Jason Kenney to speak about the Teck Frontier mine decision, there came a ruling from the Alberta court of appeal. Because Alberta was also, like other provinces, Saskatchewan, Ontario, had challenged the federal carbon tax in court. Said it was unconstitutional. Saskatchewan lost last year. Ontario lost late last year. Alberta won. Uh, the judges ruled four to one agreeing with Alberta that the federal carbon tax is unconstitutional. This is all going to the Supreme Court for a hearing next month, next month. Um, so the Supreme Court of Canada is going to a referee, um, on these three split court decisions on whether the federal carbon tax is going to stay. If the feds win that one, um, Alberta is just going to have to lump it, it seems. If the feds lose that, they’re going to have to do some kind of negotiation or some kind of reckoning on what sort of consumer carbon tax there is in Alberta, if other province and other provinces. That’s going to be a very tricky one. I’m not sure what Ottawa is going to be able to do to make this one up for Alberta. Alberta relies on this continuous horizon of growth projects in the oil sands. Um, for the, you know, this is not quite a no, this isn’t Ottawa drawing a red line saying this is the end of world sense grow, but this was pretty close to it. And it seems like eventually, uh, any government that’s serious about climate change is going to have to do that unless we suddenly magically start getting emissions-free oil sands, which we’re not getting, let’s keep in mind. This is a fresh wound, and I’m not sure how Ottawa or any nice words Ottawa says are going to make this one feel a whole lot better.
Jordan: My last question is maybe more asking for your opinion, but just given everything this week from, uh, the Teck Mine decision, to the court ruling in Alberta, to protests happening across the country, it feels like the energy industry versus climate policy debate in this country is kind of coming to a head all at once. And you’re kind of at ground zero for that as the Alberta reporter. What do you see?
Jason: I see a lot of frustration on both sides of it. Because the Liberal government doesn’t know where it stands on this. Um, you know, I think back to where the Harper government was and they were big fans on drawing clean, firm lines on things, making things sound very simple. We’re going to make this decision for the present, for the future, and if we need to figure it out, figure it out later, we’ll figure it out later. Ottawa, Trudeau’s Ottawa is much more unsure about things. Look at how they handled the Wet’suwet’en-related blockades. They were firmly opposed to, you know, saying we need the blockades lifted at first, and then after not seemingly much changed, they changed tact a few days later. Um, their hesitation seemed almost worse than their, uh, than anything else on the Teck Frontier Mine project. They don’t have an oil sands policy. They don’t have any clear, they haven’t given anybody any clarity on how they actually expect to get to 2050’s net zero promise, or for that matter, um, their Paris climate targets, which are much more sooner down the road. Alberta is, you know, looking– is having to deal with a budget shifting goalposts. And they, again, they want things clear. They want things, especially to be things the way they used to, under a Conservative government. What they want in terms of predictability is constant yeses. They want investor confidence, which means constant approval, constant growth, uh, that money keeps flowing in, um, and that they manage somehow the carbon impact with technology, not, not with penalties, not with steep carbon taxes or phased outs of oil sense projects. Um, so that’s the tension. Um, it’s especially a big tension because Ottawa under the Liberal government hasn’t decided exactly where they stand on these points.
Jordan: Yeah. The old rules are gone, but we have no idea what the new rules are.
Jordan: Thanks for joining us, Jason. Jason Markusoff, the Alberta correspondent for Maclean’s magazine. That was The Big Story. If you would like more, you can find us at thebigstorypodcast.ca. You can also find us always ready to engage in dialogue on Twitter at @thebigstoryFPN and you can find our podcast and all of the other Frequency podcasts in your favourite podcast player, whether that’s Apple or Google or Stitcher or Spotify or Podcast Republic. Thanks for listening. I’m Jordan Heath Rawlings. We’ll talk tomorrow.
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