Mining Company’s Decision Lets Trudeau Off Hook, But Doesn’t Resolve Canada’s Climate Debate

While the cancellation of the tar sands mine, planned for Alberta, was a victory for activists, low oil prices meant the project was unlikely to move forward.

The Syncrude oil sands mine is one of the oldest operating in Alberta. But a declining oil market makes newer projects like Frontier, canceled Sunday, hard to build. Credit: Michael S. Williamson/The Washington Post via Getty Images
The Syncrude oil sands mine is one of the oldest operating in Alberta. But a declining oil market makes newer projects like Frontier, canceled Sunday, hard to build. Credit: Michael S. Williamson/The Washington Post via Getty Images

Share this article

A Canadian mining company’s announcement that it would shelve a major oil project spared Prime Minister Justin Trudeau a difficult decision that had pitted his Liberal Party base and environmental advocates against the country’s powerful oil industry and the Western provinces whose economies rely on it.

The decision Sunday came just days before the government was set to decide whether to approve a mine planned by Teck Resources Limited that would have been one of the country’s largest oil sands operations yet.

But the Frontier mine’s fate may have been sealed more by market economics than by whether Trudeau approved the project or not: It was unlikely to have been built anytime soon, if at all. And by canceling the project before a final regulatory decision was issued, Teck Resources avoided the controversy that would surely have continued no matter the government’s decision.


We deliver climate news to your inbox like nobody else. Every day or once a week, our original stories and digest of the web's top headlines deliver the full story, for free.

In a letter announcing the withdrawal on Sunday, chief executive Don Lindsay said the project had been caught in a larger debate about how to reconcile Canada’s climate and energy policies.

“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,” Lindsay wrote. “This does not yet exist here today and, unfortunately, the growing debate around this issue has placed Frontier and our company squarely at the nexus of much broader issues that need to be resolved.”

Chris Severson-Baker, Alberta director at the Pembina Institute, an environmental advocacy group, said he thought Teck had become fed up with its position in a debate over climate that was consuming national politics.

“There are rumors it was trying very hard to avoid becoming the focal point of this national climate fight,” he said. “I think it was just starting to look like a no-win for them, especially when the economics of the project just aren’t that good.”

In a joint statement, Canada’s environment and natural resources ministers echoed much of what the company said, noting that investors and consumers are demanding cleaner products and that Canada must now develop “a real plan for climate action.”

Chart: Soaring Emissions from Canada's Oil Sands

Energy is set to be a defining challenge for Trudeau’s second stint as prime minister. The nation’s oil industry is struggling to attract investment due to a combination of market forces and growing global concern about its carbon footprint. Meanwhile, protesters have been ratcheting up pressure on the industry and the government: This month, indigenous groups shut down rail service across much of the country in opposition to a natural gas pipeline that’s planned to cross native lands in the West.

Trudeau won reelection last year in part on a promise to chart a path toward net-zero greenhouse gas emissions by mid-century. At the same time, he has argued that Canada can continue to develop its oil sands—also called tar sands—which hold one of the world’s largest stores of oil in a form called bitumen, a thick, gooey hydrocarbon. Extracting and converting the bitumen into crude oil requires large amounts of energy, making the tar sands one of the world’s most carbon-polluting sources of oil.

It’s been a difficult—environmentalists say impossible—balance brought clearly into focus by the Frontier mine application. 

“The real issue isn’t so much this one project,” Severson-Baker said. “We just don’t have a plan for how the oil sands can be developed in a way that’s consistent with Canada’s climate goals. And that’s the bigger problem.”

While Frontier would have been among the more efficient tar sands projects, it still would have emitted about 25 percent more climate-warming gases per barrel than the average for oil production globally, according to data provided by the company, compared to one study of global oil emissions. Teck says the mine would have released 4.1 million metric tons of carbon dioxide equivalent emissions per year—about the same as a coal plant—though environmental groups say the real figure would have been more like 6 million, including indirect emissions such as clearing forests and wetlands.

Already, Canada is struggling to meet its pledges to cut greenhouse gas emissions. While emissions from many sectors of the economy have been flat or declining, those from oil and gas production have grown sharply. The industry is now the largest source of greenhouse gases in the country.

Canada has pledged to cut total emissions to 511 million metric tons by 2030—a 30 percent drop from 2005 levels. The tar sands alone are projected to emit more than 90 million metric tons this year, according to the Pembina Institute, while currently approved but yet-to-be-built projects would push that total up to nearly 150 million metric tons.

Alberta Premier Jason Kenney, a conservative who has launched a government effort to support the oil industry and push back against its environmentalist critics, had been warning that a rejection of the Frontier mine would scare off investors. He argued the project would have brought jobs and billions of dollars in government revenues, and he blamed Teck’s decision on Trudeau’s government.

“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,” he said in a statement.

Severson-Baker said that Kenney shares some of the responsibility for the project’s demise, however, because he has undermined efforts by the federal government to limit emissions from the tar sands.

Canada’s oil sands face a pair of connected challenges: the energy required for their extraction tends to make them not only among the world’s more polluting oil projects, but also the most expensive.

The Frontier project would have cost $15.5 billion in U.S. dollars. Andrew Leach, an economist at the University of Alberta, said turning a profit would have required oil prices to rise much higher than they are today, and to remain there for years.

Since oil prices crashed in 2014, only one major oil sands project—the $2 billion Aspen oil sands project by ExxonMobil’s Canadian affiliate—has advanced, and it’s construction has been delayed. Investment in the sector has shrunk in each of the last five years, though the Canadian Association of Petroleum Producers recently said it expects investment to climb this year.

Increasingly, global investment firms have been reducing or ending their investments in the tar sands in an effort to burnish green credentials, while the inability to complete new pipeline projects to carry the oil to market have scared off many other investors.

Kevin Birn, an analyst at IHS Markit, an energy research firm, said the decision to shelve the Frontier project only confirms the downward trend for growth and investment in oil sands. But it leaves unresolved the larger debate in the country about how to tackle emissions from its large and growing oil industry.

“The issues they found themselves in were bigger than the project itself,” he said.