Alberta Politics
Teck Resources Ltd. President Don Lindsay (Photo: Teck Resources Ltd.).

What really happened to the Teck Frontier oilsands mine? It’s the market, stupid!

Posted on February 25, 2020, 1:34 am
10 mins

So what really happened to the Teck Frontier oilsands mine?

Hint: It wasn’t anything Justin Trudeau did or didn’t do. That’s pure United Conservative Party gas lighting, a game a career politician like Alberta Premier Jason Kenney just can’t make himself stop playing.

Alberta Premier Jason Kenney (Photo: David J. Climenhaga).

It probably didn’t have had all that much to do with the Kenney Government’s abandonment of the preceding government’s social license strategy either, although tearing up Rachel Notley’s Climate Leadership Plan certainly didn’t help.

That was the former NDP premier’s argument yesterday, in the wake of Teck Resources Ltd. President Don Lindsay’s Sunday announcement his Vancouver-based corporation was pulling the plug on the project Mr. Kenney wants us all to think was the lynchpin to Alberta’s future economic prosperity, the better to undermine Prime Minister Trudeau’s Liberals in Ottawa.

No, it’s the market, stupid!

Teck Resources Ltd. has understood this for at least a couple of years now, probably longer. The market for fossil fuels is in decline, and all the War Rooms in Alberta and all of Premier Jason Kenney’s public tantrums and bizarre conspiracy theories can’t do much to change that reality.

Former Alberta premier Rachel Notley (Photo: David J. Climenhaga).

Concern about earth’s rising temperatures, and bankers’ and insurers’ inevitable responses to that, just makes the market that much worse.

Everything else considered, the price of oil is just too low, and too likely to stay that way, for the Frontier mine to make any sense to develop, now or later — as the company has been hinting for weeks with talk that even if the $20-billion development was approved by Ottawa as had been expected this week, they might never get around to actually building it.

As energy economist Andrew Leach and environmental law professor Martin Olszynski wrote for the CBC earlier this month, “while some have argued that the investment could be viable if average oil prices are above $65 WTI (assuming very small discounts on heavy crude oil), that still positions the project as a multibillion-dollar bet on pipelines being built and oil prices being much higher than we see today for most of the next 50 years.”

So if you were really paying attention, you knew the only real question was when Teck would tell Alberta the news — right away, after the company saw what the federal government would do about approving the project, or in a couple of years.

They had to know they had little hope of a deal like the trick Kinder Morgan Inc. pulled off when it managed to sell its aging pipeline through to the Pacific to the federal government for $4.5 billion, far more than it was worth, in 2018.

Energy economist Andrew Leach (Photo: David J. Climenhaga).

Teck’s political problem, it’s said here, was that Mr. Kenney had used his bully pulpit* as premier to make the proposed mine a cause célèbre, thus making it potentially risky for the company just to walk away from a plan beloved by a politician known to keep a long enemies list.

So, for Teck’s top executives, arguably, the hyperbolic national “crisis” of the past couple of weeks was a wonderful opportunity to get out of Dodge with their corporate reputation largely intact.

“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,” Mr. Lindsay said in his letter to federal Environment Minister Jonathan Wilkinson, accurately enough. Significantly, and also accurately, he added, “this does not exist here today.”

“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,” Mr. Lindsay or a skilled PR person in his employ wrote, making the only sensible business decision available to a company that’s already sunk more than $1 billion into the scheme out to be an act of national altruism. “Ultimately, that should take place without a looming regulatory deadline.” (So don’t expect us to be back with this anytime soon, he might as well have added.)

Deputy Prime Minister Chrystia Freeland (Photo: David J. Climenhaga).

Mr. Kenney and Andrew Scheer, his lame duck sock puppet in Parliament, made outraged noises, but this was mostly canned heat, directed at the prime minister — who increasingly looks like a deer caught in the headlights as he endures the relentless barrage of Conservative trollery.

But that, as the Bard of Avon reminds us, “is a tale told by an idiot, full of sound and fury signifying nothing.”

Still, while Canadians owe Mr. Trudeau a debt of national gratitude for toppling Stephen Harper, the time may soon be coming when he decides to make way for someone tougher in the Liberal party’s leadership. The name most often heard in this regard is that of Deputy Prime Minister and Intergovernmental Affairs Minister Chrystia Freeland.

The dice roll Jason Kenney’s way in the Alberta Court of Appeal

The best news for Premier Kenney yesterday was the decision of the Alberta Court of Appeal that Ottawa’s carbon tax does not fall within the federal government’s power to legislate on matters of national concern.

If the state of the environment in a world rapidly heating up isn’t a matter of national concern, it’s hard to imagine what the court thinks would be, but this is a question for legal scholars, not a humble blogger who sort of wondered if Ottawa’s lawyers weren’t hanging their powdered wigs on the wrong constitutional argument anyway.

Theodore Roosevelt, 26th president of the United States (Photo: Public Domain).

Since two other courts of appeal in Saskatchewan and Ontario have ruled to the contrary, one also has to wonder if there’s something in the water here in Alberta. With appeals flying hither and yon, the matter is destined to come before the Supreme Court of Canada soon.

The Globe and Mail quoted Ottawa law professor Amir Attaran, who represented the Athabasca Chipewyan First Nation in the case, saying that when it does he doesn’t expect the Alberta court’s reasoning to be well received by the Supremes.

“In law school you’re taught to avoid slippery slope arguments and this is the paradigm of a slippery slope (argument),” Dr. Attaran told the Globe’s reporter. “It’s unserious and that will be to Alberta’s detriment at the Supreme Court.”

That said, as any seasoned trial lawyer will tell you if you ask nicely, it’s almost always a crapshoot when you come before a judge, which is why it’s always prudent to try to bludgeon your opponent into an out-of-court settlement. So we shall see.

* A bully pulpit is a position or office that commands attention. The term is said to have been coined by Theodore Roosevelt, 26th president of the United States. It does not have anything to do with bullying, notwithstanding the conduct of the current occupant of that office or the occupants of some others.

20 Comments to: What really happened to the Teck Frontier oilsands mine? It’s the market, stupid!

  1. Dave

    February 25th, 2020

    Many corporate executives would not be eager to write off a multi billion dollar investment sooner than necessary, so it is not surprising Teck dragged it out this long. Perhaps in early 2019, when oil prices were rising there was still faint hope they might rise enough to make this project viable. However, that was before the Trump trade war with China put a chill on economic growth, before Greta and before the coronovirus just chilled it even more. At some point you have to be realistic and not foolishly hopeful.

    The surprise is that they did it before the Liberals had to make a decision. I am sure Mr. Kenney with his enemies list pressed them hard to delay so he could stick it to his politicsl opponent. However, we already somewhat gather that this supposed big fish in the little pond does not have much clout with international financial markets and probably not that much with international corporations either. The benefit to Teck is by doing it this way, their reputation is more intact and they didn’t get a no, so it leaves the door open if markets do eventually improve and they want to try this again in a few years.

    If so, hopefully by then Canada will also have its climate change act more together. I am sure Teck did not appreciate if Kenney tried to make them his political pawn, hence the very clear slam against governments in Camada that that are not working together in a coordinated way. It also is actually hard to convince the world our oil sands are good with the war room and Kenney shooting themselves in the foot and just seeming belicose and beligerent all the time.

    Of course that is not how Kenney will try to spin this to the folks at home. He actually could save millions in his communications budget by training a few monkey just to cut and paste “it’s Trudeau’s fault” as that seems to be his response to everything. That seems to still play in parts of Alberta, but will not convince the rest of Canada or the world. The small pond will keep getting smaller for the big fish.

    Reply
  2. John McManus

    February 25th, 2020

    Teck waited till the last moment to run away. It looks like they were afraid of getting approval. Maybe the managers , needing someone else to blame, were looking for a failure that didn’t implicate them. They misread the market disasterously and risk the ire of their investors.

    Their salaries, bonuses and golden parachutes depend on a constant flow of new cash from investors. They must think a new mantle as environmentally aware will help lure the sheep.

    Reply
  3. Geoffrey Pounder

    February 25th, 2020

    “They had to know they had little hope of a deal like the trick Kinder Morgan Inc. pulled off when it managed to sell its aging pipeline through to the Pacific to the federal government for $4.5 billion, far more than it was worth, in 2018.”

    Think again.

    “‘Kenney also said that while his government believes in free market solutions, it would look at ways to directly invest in the energy sector due to ‘existential threats.’
    “He did not provide details.
    “‘We will, as a government, be assessing in which ways we may need to ensure future investment in the Canadian energy sector to ensure an economic future for this province. There will be news in that sense to come.’
    “When asked if that could mean an investment in the Frontier mine, Kenney said, ‘We’re ruling nothing out.'”
    “Kenney promises new law to protect ‘critical infrastructure’ after Teck Frontier withdrawal”
    https://www.cbc.ca/news/canada/calgary/teck-fontier-oilsands-mine-reaction-1.5473986

    While Kenney believes in free market solutions, he also believes in subsidizing the fossil fuel industry.
    Classic doublethink.
    The gaggle of UCP geese will line up behind Kenney without a murmur.

    Reply
  4. Farmer Dave

    February 25th, 2020

    Premiers Jason Kenney, Scott Moe and current conservative leader Andrew Scheer negative comments blaming the Federal Government on the Teck Frontier oil sands project withdraw are the very reason for western alienation that this group is promoting. It’s time that this group of stooges started promoting Canada instead of blaming the Federal Government and Eastern Canada. Hopefully voters will see through this negativity this group promotes.

    Reply
  5. Farmer Brian

    February 25th, 2020

    Canada has 3(4 if you include Northern Gateway) large energy infrastructure projects proposed in a similar time frame that were abandoned by private investment. The one, TMX, has almost doubled in cost since it original inception. The problem in Canada is the extremely long timelines from when the projects are first proposed until they are finally approved to be built. If I was looking at building in Canada I would look at both TransCanada and Teck Resources and see companies that have spent a billion dollars each and have nothing to show for it. This will in my opinion have many long term negative side affects. The reality is that everybody can’t work for the government, somebody has to create wealth so that taxes can be collected to fund the services we require, something I get the impression that those on the left forget from time to time.
    Canadian governments at all levels need to pull their heads out of their butts and come together with one united voice and decide where they want economic developement to go in this country.
    The carbon tax decision did come as a bit of a surprise but a welcome surprise. I look at it this way, there have been 3 challenges heard by a total of 15 judges, 8 have sided with the federal government, 7 have sided with the dissenting provincial governments. Looks like a crap shoot to me.

    Reply
    • Anon

      February 26th, 2020

      You once mentioned your land is littered with gas wells. The oil captured government changed the law so you could not say “no” and now your are stuck. Nobody wants that crap on their land now. The state and its regulatory stooges are just the hired muscle of oil and gas.

      Reply
    • Murphy

      February 28th, 2020

      Loved how you slid that absurd old wives’ tale about the indispensible private sector creating wealth into your post. Hilarious as always. It embodies the three fundamentals of Kon-thought, those being superstition, ignorance and greed. I heard the ethically-challenged dunce Ric Mciver make that same non-factual claim on the University of Calgary’s radio station a few years ago. I couldn’t imagine anyone else being obtuse enough to repeat it, so thanks again for the lulz.

      Reply
  6. Bruce Turton

    February 25th, 2020

    Almost every comment from every direction on the radio and TV discussions came to the one true conclusion about Teck’s decision: the price now and into the foreseeable future does not warrant going ahead with the project. All the other stuff, to my little mind, is political fluff. How can anyone image that the price of dilbit at $35 U.S. will magically expand to either $75 or $95 U.S.? And if it ever did get there, who the hell could afford it?
    As for the carbon tax decision, which will surely go before the Supreme Court soon, I for one have been opposed to it as a burden especially on rural people in Canada. I figure that if the fossil fuel people and “economists” like carbon taxes, then the rest of us should be leery of them (call me an old conspriacist if you like!). However, the other necessary part of the policy are the “promises” made by the federal Liberals (among many others around the world) to stop subsidizing fossil fuels – this is not forthcoming. The latter is the foremost method to “reduce” (an oldy from the 1970’s – forgotten by most!) fossil fuel use and thus concomitant pollution from the waste. Imagine some $3+ Billions going toward other less polluting energy sources!

    Reply
  7. Murphy

    February 25th, 2020

    The decisions of the Court of Appeal are entirely consistent with the other fruit of the apparatus of kooks and cronies and con-artists that passes for Alberta society. The judges come from a pool of entitled politically connected shysters, and a two-minute perusal of the Google makes it painfully clear that there is something seriously wrong with the amygdala-frontal cortex balancing system in the members of our judiciary. If we want to reduce carbon emissions, perhaps we can just keep our knees together.

    Reply
  8. Bill Malcolm

    February 25th, 2020

    Normally after a court rules, the “loser” is supposed to hop to it and abide by the decision. Should we expect the feds to end the carbon tax today based on the Alberta Court of Appeals judgement? Those judges are paid for by the Feds after all, as are all the superior court judges across this land. Given that harper used to argue the toss with SCC decisions, one doesn’t suppose that Trudeau will cast more than a bleary eye at this lower level court one. He looks worn out, but then listening to Scheer blarting* all day long would do that to me too. There’s a man of few redeeming features – a complete lack of brainpower topped off with a complete lack of knowledge. You can’t fix stupid. The epitome of the current CPC paradigm indeed, inventing “laws” on the run, assuming politicians are in charge of police response etc., and it’s looking more and more likely the paradigm will be extended at the leadership level by my local nitwit, Peter MacKay, who is doing his level best to summon up the energy to Woof Woof like a heartfelt Western Con. I’m not convinced he is that unintelligent at heart, but he’s no Brain like kenney, more like Pinky.

    I read part of the Alberta carbon tax decision by some bloke name of Wakeling quoted in the Calgary Herald: “If the (federal) Act is a valid law then, “Tomorrow Parliament could pass a law prohibiting Albertans from heating their homes above sixteen degrees Celsius, driving gasoline-powered motor vehicles, raising cattle – the source of not only meat and dairy products but methane, a greenhouse gas that is particularly harmful to the environment, and any other activity that the federal government believes contributes to greenhouse gas emissions and global warming.”

    Blah blah blah. Right. Sure. Somehow this paragon of illogic got to be a judge of The Alberta Court of Appeal. Reductio ad absurdum must be his party trick, his stock-in-trade, along with thought transference and little knowledge of the separation of federal and provincial jurisdictions. Can I have his job? His statement is so patently stupid, ridiculous and Scheer-like, one wonders how the Supreme Court judges reading it will react before rendering their carbon tax decision on appeal from the mummified gherkin minds of the Con-administered provinces, where even the preserving brine was past its sell-by-date decades ago. Surely what’s being debated is whether the feds have a right to apply a tax across Canada, not merely to the Alberta the learned judge lives in. Wakeling might be surprised to discover he’s been paying federal income tax – the feds could and did levy it upon Alberta residents.

    Upside down is right way up these days. It’s disheartening to be fed constant nonsense. For the record, I heartily disapprove of Freeland for PM – her record as head of the Lima Group supporting new dictators in Latin America is beyond dispute. She is a stooge for our mining and banks overseas, and we’ve been fed donkey poo on the matter when it actually gets MSM attention. No wonder we won’t get a Security Council seat at the UN – we parrot corporate and US policy, and count on our citizens not to notice. But countries do.

    The Teck decision? Well, you’ve got that covered in detail, Mr Climenhaga. Good stuff. As sure as the sun will rise tomorrow, anyone paying attention would know that kenney would blame Trudeau merely as a reflex action. Woof Woof.

    * “blarting” is my term for a politician blurting nonsense, usually right wing, and mind farting all at the same time. For a practical example, see Scheer, A.

    Reply
  9. Hana Razga

    February 25th, 2020

    Teck withdrew their application because of the price of oil, not having someone with deep pockets to finance the project and not enough pipeline capacity. Then they couch it in political, economic and/or regulatory uncertainty to save face…..

    Reply
  10. Just Me

    February 25th, 2020

    Kenney’s end zone dance will be short lived.

    The issue with the federal carbon tax is no different than the GST thirty years ago. Then the Supreme Court quashed all provincial challenges in their final decision. Kenney’s midget brinksmanship is a mere paper tiger loaded with a lot of hot air.

    As for Teck, their position is no different than all other companies that having to deal with shareholders’ concerns over Climate Change strategies. The preference is for a unified approach and Kenney cannot deny that. For the very long term oil prices are in the tank. No amount of wishful thinking for pilfered pension funds will change that.

    Ken-Doh’s crime spree of lies and conspiracy theories will change the real world. But as he builds his nonsense reality in Alberta, the evidence that Albertans are the stupidest people alive will become overwhelming. No amount of grooming c/o Kenney & Co. will change that.

    Reply
  11. John Reader

    February 25th, 2020

    David
    I’ve enjoyed your blog for years and generally find myself mostly in agreement with your perspective. Recently I have found a growing gap in our views especially as they relate to energy and energy infrastructure matters, and I feel compelled to make a few remarks.

    I am certain that Teck did not take its decision to withdraw its application because of a short term view on commodity prices. Why would this be relevant to a business decision on a project that has a 50 year life even before perhaps a decade of construction? Furthermore, the market for fossil fuels is not, as you say, in decline. In fact, global demand continues to rise between half and one percent per annum, just as it has for the last 20+ years.

    In my sleepless nights, I worry about the embedded 40% decline of modern North American conventional drilling projects (as opposed to oil sands production), leading me to be concerned about energy security rather than oversupply. Global energy starvation is probably a much greater risk posed to humanity than any likely outcome due to climate change, and it isn’t going to be avoided with a bunch of windmills and solar panels.

    No, I’m afraid that the Teck decision had more to do with institutional investor’s growing discomfort with the woeful state of affairs inflicting Canada with an inability to approve and support large industrial projects. Without financial support, a $20B project just can’t be executed, and that support has been withdrawn by global capital markets due to the utter vapidness of our federal leadership, and its continued catering to wokest of the woke, as well as a plethora of minority agitators.

    The situation is embarrassing and aggravating to most Canadians. It’s so bad that I find myself agreeing with both Jason Kenney and Andrew Scheer, and that’s a first for me. Unfortunately we are going to find the impacts of this uniquely Canadian ailment hitting the Canadian pocket books as our economy slumps, our employment lags, our dollar devalues, and our energy costs rise over time.

    Reply
    • Magda

      February 26th, 2020

      It was not a “short term view on commodity prices”. It was a long term view to the far horizon and over that led to the withdrawal. Financial analysts have been pessimistic about this project coming to fruition from the beginning; it was only when Kenney needed another do-or-die cause that many Albertans even heard of Teck/Frontier.

      I’m amused that you think a for-profit multinational corporation would discount commodity prices but would react to “vapid” leadership concerns as if international investors haven’t been moving away from large projects like this ALL OVER THE WORLD. A company that depends on the market reacted to the market. Period.

      Reply
    • Murphy

      February 28th, 2020

      “Wokest of the woke”? The only way you could have topped that, MAGA boy, was with a “snowflake” or “cuck”. Don’t like the “vapid leadership”? Wouldn’t it be great if you and Harpo could tickle the ivories and belt out “those were the days”?

      Reply
  12. mike

    February 25th, 2020

    It is the Court of Appeal of Alberta rather than the Alberta Court of Appeal.

    Reply
  13. alan

    February 25th, 2020

    Hey kids! Hey! Hey! Hey! Everything is coming up roses. https://www.youtube.com/watch?v=LNwLxwZHMOw

    Now, that is entertainment, but not quite as entertaining as:

    “Premier Jason Kenney is suggesting the provincial government may financially back an oil and gas project. ”

    And:

    “A lack of access to capital was met by bold leadership and public participation — Albertans bought shares. It wasn’t just a government-owned enterprise, it was a publicly-owned enterprise,” he said. “As we see decisions like that, as we see delays and frankly hostile policy-setting from Ottawa, we will not surrender, we will not be passive, we will do what is necessary.”

    https://calgarysun.com/business/energy/do-what-is-necessary-kenney-hints-at-investment-in-major-oil-and-gas-project/wcm/989c0fe5-ad12-4e95-85e9-7f7e2c771718

    Yet, the obvious questions remain,

    1. Why is it not ‘socialism’ when Special K and the UCP clown posse muse openly about interfering directly in the ‘free market’?

    2. Why does the free market need so much government intervention?

    3. Are Special K, et al., going to buy the mine and then give Alberta taxpayers the shaft in the usual way of privatizing profits, for the few, and socializing the costs and losses for the many?

    Reply
  14. camjournal

    February 28th, 2020

    Chrystia Freeland would make us wish for Harper back.

    Reply
    • David Climenhaga

      February 28th, 2020

      You’re probably right, Camjournal. DJC

      Reply

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