Page 5 - NorthAmOil Week 08

NorthAmOil COMMENTARY NorthAmOil
barrel on February 26. Indeed, the oil price was one of the “three Ps” upon which Lindsay had previously said Frontier’s viability depended – the other two being pipeline capacity and finding a partner.
Some progress on new pipeline capacity out of the oil sands is now being made, with con- struction under way on the Trans Mountain expansion. However, given how difficult it has already proved to build new pipeline capacity in Canada, further delays cannot be ruled out. Finding partners could also prove challenging for oil sands companies, given how the industry is struggling with its public imagine on concerns over the carbon intensity of bitumen production.
What next?
Under these circumstances, while Teck’s volun- tary withdrawal of the Frontier application came out of the blue, the project’s demise may be less surprising. Indeed, initial reactions suggest that the mine is considered unlikely to be revived anytime soon. A Scotia Capital analyst, Orest Wowkodaw, wrote on February 24 that he had ascribed “a very low probability” to the chance of Frontier ever being built. Meanwhile, a National Bank Financial research analyst, Shane Nagle, noted that even if the project were approved, the current economic headwinds made its construc- tion unlikely.
Lindsay did not address the possibility of a revival in a letter to Canadian Minister of Environment and Climate Change Jonathan Wilkinson that explained why Teck was shelving Frontier. However, he said his company strongly supported federal action on carbon pricing and other climate policies, such as legislated caps for oil sands emissions. Lindsay noted that there was disagreement between Ottawa and provincial
governments on these issues, warning that the resultant lack of clarity could deter investment in Canada.
Teck’s decision has made waves among envi- ronmental groups opposed to new oil sands development. Lindsay mentioned the environ- ment and climate issues a handful of times in his letter to Wilkinson. Coupled with Lindsay’s support for a federal carbon tax and Teck’s recent adoption of a net zero emissions goal by 2050, these comments may be seen as a significant vic- tory by environmental groups. This could make it more difficult for future oil sands projects to go ahead without environmental pushback – assuming there is any economic appetite for such schemes.
Alberta Premier Jason Kenney, meanwhile, blamed Frontier’s demise on “federal indecision” during the approval process and “inaction” amid the ongoing rail blockades taking place across the country in protest against a separate energy project.
“We did our part,” Kenney said in a February 23 statement. “But the federal government’s ina- bility to convey a clear or unified position let us, and Teck, down.”
Kenney’s comments come as transport disruptions continue across Canada, with blockades springing up in solidarity with the hereditary chiefs of the Wet’suwet’en First Nation in British Columbia. The chiefs are opposing a natural gas pipeline through their territory.
Police have tried to clear some of the block- ades, but no end to the dispute is currently in sight. Trudeau’s government has called for a peaceful resolution, but the longer the standoff continues, the more the government is likely to be seen as failing to balance environmental, indigenous and energy interests.™
Analysts had previously questioned whether the economics of Frontier made sense.
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