OILSANDS MEGAPROJECT
Frontier mine in the public interest, panel says
CALGARY A federal-provincial panel says a proposed northeastern Alberta oilsands mine would be in the public interest, even though it would be likely to significantly harm the environment and Indigenous people.
Vancouver-based Teck Resources Ltd. aims to build the $20.6-billion Frontier mine near Wood Buffalo National Park in two phases.
Its total capacity would be 260,000 barrels of oil a day and Teck has said it aims to start producing oil in 2026.
The panel’s report includes several dozen recommended conditions for Teck and the federal and provincial governments.
They include mitigating harm to wildlife, monitoring pollutants and taking feedback from nearby First Nations into account.
The federal cabinet has until the end of February to make a decision.
“While the panel has concluded that the project is in the public interest, project and cumulative effects to key environmental parameters and on the asserted rights, use of lands and resources for traditional purposes, and culture of Indigenous communities have weighed heavily in the panel’s assessment,” said the report.
It said the project would likely result in significant adverse effects to wetlands, old-growth forests and biodiversity, as well as to Indigenous people in the area.
“The proposed mitigation measures have not been proven to be effective or to fully mitigate project effects on the environment or on Indigenous rights, use of lands and resources, and culture.”
But the panel also said that over the project’s projected lifespan of 41 years, the federal government could expect to reap $12 billion in taxes and Alberta could rake in $55 billion, with another $3.5 billion in municipal property taxes.
Given the mine’s long life, environmentalists have raised concerns about who would pick up the tab for the eventual cleanup in the event Teck couldn’t pay for it.
To that end, the panel recommended Alberta complete its review of a mine financial security program to ensure taxpayers wouldn’t be left on the hook.
Environmental groups have also questioned how allowing the mine would square with Canada and Alberta’s plans to cut greenhouse gas emissions. Teck estimates the mine will emit 4.1 megatonnes of carbon dioxide a year.
Oilsands megaprojects have fallen by the wayside in recent years as the industry deals with low oil prices, high costs and uncertain prospects of new export pipelines.
CALGARY Regulators have recommended the federal government approve Teck Resources Ltd.’s massive new oilsands mine that could help reverse a trend of declining investment in the heavy oil formation, though analysts have been skeptical new mining projects can ever be built in the play given emissions limits and stringent regulatory reviews.
The Canadian Environmental Assessment Agency and the Alberta Energy Regulator announced late Thursday they were recommending Environment and Climate Change Minister Catherine Mckenna approve Frontier, a massive new oilsands mining project by the Vancouver-based miner, with the capacity to produce 85,000 barrels of oil per day by 2026, with future phases taking total output to 260,000 bpd by 2037.
While the two agencies determined the project was in the public interest, they also withheld approvals for parts of the project on Big Creek, a waterway in the area, and made its approval contingent on 62 different conditions.
A statement from Mckenna’s office said that if the minister decides the new oilsands mine will result in significant adverse environmental impacts, then she would refer a decision on the project to the wider Liberal cabinet.
That could be a likely outcome given the CEAA and AER joint-review panel recommended the project be approved despite finding “there will be significant adverse project and cumulative effects on certain environmental components and Indigenous communities.”
The environmental think tank Pembina Institute pointed out in a release the mine would contribute six metric tonnes of new carbon emissions annually in Alberta, where current emissions sit at 80Mt and there is an existing 100Mt emissions cap in the oilsands, though United Conservative Party Premier Jason Kenney campaigned on scrapping that cap imposed by former NDP premier Rachel Notley.
“We asked the panel to ensure regulations are in place to credibly enforce the 100 Mt limit before another project puts a shovel in the ground,” Pembina Institute’s Alberta director Duncan Kenyon said in a note.
The project is large by any measure and analysts have speculated that Teck, which has a market cap of $15.7 billion, could seek other partners on the estimated $20.6-billion Frontier mine — the first greenfield mining project to break ground in Canada since the oil price collapse of 2014 and subsequent long decline in investment in the sector.
Teck was recently a joint-venture partner alongside Suncor Energy Inc. and Paris-based Total SA on the $17-billion Fort Hills oilsands mine, which started last year but had received the green light well before the oil price decline of 2014.
At the time, Fort Hills was speculated to be the last greenfield oilsands mining project built in the play.
“Any further decisions on the project will depend on factors including our review of the Joint Review Panel report, the outcome of the regulatory process, which is not expected to be completed until the first quarter of 2020, market conditions, and other considerations,” Teck spokesperson Chris Stannell said in an email.
If Teck proceeds with the Frontier mine, it would provide new data on how far capital costs have been reduced in the oilsands mining business since the oil price collapse, said IHS Markit vice-president Kevin Birn, noting that he expects to see lower capital cost figures.
“They learned a lot from Fort Hills,” said Birn, who authored a report for IHS Markit in April showing that capital costs in oilsands mining have declined 35 per cent.
Now, a greenfield oilsands mine can provide a return at US$65 per barrel West Texas Intermediate oil prices, compared with US$100 per barrel in 2014.
In addition, he said the macro economic outlook for heavy oil demand — and the oilsands in particular — has improved since 2014 as traditional sources of heavy oil such as Venezuela and Mexico have seen production declines, the Canadian dollar has deflated relative to the U.S., and the value of oilsands input costs such as natural gas has fallen.
As a result, Birn expects to see additional oilsands production from mining projects, though it’s still unclear if any company will undertake the risk of building a greenfield mine.
“Will mining output increase over time? I think so,” he said.
Last week, the AER also approved an extension of the Mildred Lake oilsands mine, operated by Syncrude Canada Ltd., to replace the declining reserves of the company ’s current North Mine, which may be depleted by the mid-2020. The extension project, consisting of two new open pit mining areas, would expand the life of the Mildred Lake mine by 14 years.
Syncrude, a joint venture led by Suncor and Imperial Oil Ltd., is one of the original oilsands mining operations in the area and is not looking to expand its production within the project.