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New York (CNN Business)Canadian miner Teck Resources announced it will drop plans for its controversial Frontier oil sands project in Alberta, Canada. The project gripped the Canadian public for months, sparking a heated debate about the economy and the environment.
With debate about the oil sands project consuming Canada, Teck decided to abandon its plans. The company will take a charge of 1.13 billion Canadian dollars, or $850 million, as a result.
“We are disappointed to have arrived at this point,” said a letter to the Canadian federal government from Teck CEO Don Lindsay. He said the proposal was both socially and environmentally responsible and had support of indigenous people in the region. But he said that both the debate over the project and the economics forced it to move on.
Teck Resources’ (TECK) stock fell 4% Monday.
The project was estimated to have cost 20.6 billion Canadian dollars, or $15.6 billion. Teck had promised it would create 7,000 construction jobs and 2,500 ongoing jobs to operate the mine and generate 70 billion Canadian dollars in tax revenue during its lifetime.
The Canadian economy
But some questioned whether the project made economic sense, despite Teck’s instance that it did. Crude produced from oil sands typically does not fetch the price of other forms of crude traded on world markets, and it is much more expensive to extract. Teck wanted a not yet approved pipeline to get the oil sands oil to market economically.
And the global pressure to reduce carbon emissions could also hurt the economic and regulatory viability of the plans.
Canadian Prime Justin Trudeau’s party has pledged a path to reach net zero greenhouse gas emissions by 2050. Alberta Premier Jason Kenney issued a scathing attack on the Trudeau government following Teck’s announcement.
“Teck’s decision is disappointing, but in light of the events of the last few weeks it is not surprising,” said Kenney’s statement. “It is what happens when governments lack the courage to defend the interests of Canadians in the face of a militant minority.”
In the past few weeks, indigenous people and their supporters who are opposed to a separate energy project, a natural gas pipeline planned in British Columbia, created a blockade of Canadian rail lines. Trudeau has stated that the blockades must end and the rule of law must be followed, but his critics charge he’s not done enough, despite multiple arrests.
“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,” said Kenney. “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.”
But Teck CEO Lindsey’s letter specifically said it was 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,” he said. He said the debate over the project had sparked 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,” Lindsey said. “Ultimately, that should take place without a looming regulatory deadline.”
Trudeau’s office said that he had called Kenney on Sunday and they had “agreed on the importance of Canada’s natural resource sector to our economy. They discussed their commitment to developing our natural resources sustainably and creating jobs.”
Jonathan Wilkinson, the Canadian minister of environment and climate change, and Seamus O’Regan, the minister of natural resources, put out a joint statement saying that they appreciate that Teck made a difficult decision.
“Important parts of Canada’s economy have been built on our natural resource sector and the workers across the country who have powered it for generations,” they said. “As Teck has rightly pointed out, and as many in the industry know, global investors and consumers are increasingly looking for the cleanest products available and sustainable resource development. We agree with Teck and leading industry groups that all orders of government need a real plan for climate action now and to reach a net zero economy by 2050.”
But business leaders in Canada said that Teck’s decision is a very bad sign for investment and economic growth in Canada.
“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,” said Perrin Beatty, the CEO of the Canadian Chamber of Commerce, in a tweet Sunday. “This news and the blockades, send a terrible message to global investors.”
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