Cancelled Teck oil sands project underscores global climate-energy policy tension

WINNIPEG, Manitoba/OTTAWA (Reuters) – Teck Resources Ltd’s surprise decision to cancel a planned C$20.6 billion ($15.6 billion) oil sands mine in northern Alberta, citing uncertainty about Canada’s climate policy, underscores a global struggle to balance energy growth with environmental concerns.

The Frontier project became the latest casualty in oil-producing countries with robust environmental movements agitating to cut fossil-fuel development due to global warming. Pipeline and drilling projects in the United States and Canada, the largest and fourth-largest oil producers in the world, have been halted or delayed due to opposition to energy development.

Teck on Sunday withdrew its application to the Canadian government to build Frontier.

“The world is changing .. you can no longer build a strong economy if you are not fighting climate change at the same time,” Prime Minister Justin Trudeau said in Ottawa’s House of Commons.

Delays in building new pipelines have forced the Alberta government to curtail oil production. Protests by indigenous groups linked to a planned gas pipeline have disrupted railways.

On top of those challenges, Frontier required higher prices, expanded pipeline capacity and a partner, Teck Chief Executive Don Lindsay said last month.

At an investor conference in Florida on Monday, Lindsay said Frontier landed in a national debate about energy development, indigenous issues and climate change.

Those concerns have motivated opposition to TC Energy Corp’s Keystone XL pipeline running through both the United States and Canada, which has been in development for a decade.

“Literally over the last few days, it has become increasingly clear that there is no constructive path forward,” Lindsay told investors in a speech.

On Monday, Oklahoma-based energy giant Williams Companies Inc cancelled a natural gas pipeline that had been in development for eight years, in part due to ongoing opposition.

CLIMATE CHANGE PLAN NEEDED

Teck’s withdrawal highlights the need for a credible climate plan for Canada to become carbon-neutral by 2050, Environment Minister Jonathan Wilkinson and Natural Resources Minister Seamus O’Regan said in a statement late on Sunday.

Teck shares fell 2.7% on Monday and have lost 18% of their value since Wednesday.

“Investors are feeling terrible about the (Canadian energy) space,” said Tim Pickering, chief investment officer of Calgary-based Auspice Capital Advisors, an asset and fund manager.

“The political climate and lack of cohesive agreement on how to address energy policy and climate (are) scaring investors away from Canada.”

An Alberta source directly familiar with the matter said Teck’s board had recently expressed concern that Frontier could become a protest target, which would draw attention to its coal business.

A Teck representative declined to comment.

Teck’s decision is a “wake-up call” to Alberta Premier Jason Kenney for not drafting a plan to lower the province’s overall emissions, a person familiar with the project said.

Kenney, speaking to supporters in Edmonton, Alberta, said Frontier’s approval should have been “automatic” after nine years of regulatory review.

“This decision was taken in large part because of regulatory uncertainty, endless delays created by the national government as well as the general atmosphere of lawlessness that we have seen take hold of parts of our country and much of our economic infrastructure in the past three weeks,” he said, referring to protests.

Pickering said he blames Ottawa for industry fears of abrupt policy changes. Frontier was approved by a joint Canada-Alberta regulatory panel, but Trudeau’s cabinet was divided on whether to give final approval this week.

($1 = 1.3220 Canadian dollars)