Canada Faces Debate Over Energy Jobs, Climate Fight (Corrected)

A canceled oil sands project has prompted national soul-searching over whether Canada can position itself as both a major oil and gas producer and a global climate leader.

Teck Resources Ltd. took nearly a billion-dollar loss when it abandoned the Frontier oil sands mine in Alberta last week rather than continue to navigate fraught political and regulatory hurdles. Its CEO, Don Lindsay, said in a letter that the company found itself “at the nexus of much broader issues that need to be resolved.”

Prime Minister Justin Trudeau’s five years in office have been dominated by spending and new programs meant to strike the perfect balance between energy growth and climate leadership. But oil and gas companies say Canada, the world’s fourth largest oil producer, is struggling to navigate the global transition toward low-carbon fuels.

“There isn’t a shared sense of what the country’s energy future should be in an age of climate change,” said Monica Gattinger, chairwoman of the Positive Energy academic initiative at the University of Ottawa.

The lack of consensus could have significant consequences. Frontier isn’t the first major energy project to be abandoned in Canada in recent years, Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers, noted.

“Nor is it likely to be the last,” he said.

Plans and Politics

Frontier would have produced some of the cleanest crude from the notoriously dirty Alberta oil sands, beat in emissions per barrel by only two comparable mines, according to C.D. Howe, a think-tank.

Teck even pledged to become a carbon neutral company by 2050 in the weeks prior to its decision, putting itself in line with a target many signatories to the Paris Agreement have embraced.

Lindsay said global investors increasingly want jurisdictions to have a framework for reconciling resource projects and climate change. “This does not yet exist here today,” he wrote.

His letter served as a rebuke to Trudeau, who has seen energy and climate proposals become increasingly partisan and conservative leaders make a boogieman out of his favorite policies like carbon taxes.

Trudeau responded to Lindsay’s critique in a speech to a mining conference in Toronto March 2, asking businesses and citizens for help as Ottawa tries to foster a consensus on new climate policies.

“It won’t be easy, but we all know, you all know, that’s where we need to go,” Trudeau said.

Major oil sands producer Cenovus Energy has said the country needs a regulatory system that balances the environment and the benefits of all big projects— whether they’re mines, cement plants, or steel mills.

‘Have to Draw a Line’

But some of the politics stems from tough choices Canada and Alberta, where 82% of the nation’s oil is produced, has yet to make.

Environment Minister Jonathan Wilkinson pointed to Alberta’s reluctance to cap emissions from the oil sands as a negotiating tactic while the two governments tussled over Teck in recent weeks—in part to give the federal government’s own plan some teeth, University of Calgary law professor Martin Olszynski said.

“You do have to draw a line somewhere,” he said.

Wilkinson is under pressure to prove Canada can close a 77-million-metric-ton gap in greenhouse gas emissions between its 2030 target and the latest projections, while also raising the target before the next meeting of Paris Agreement signatories in November.

Canada is working from a position of weakness, Simon Dyer, head of the Pembina Institute, a clean energy think-tank, said. The country’s leaders have left the hard work of cutting emissions undone, as investors take greater account of climate change impacts, he said.

“The oil and gas sector is where we’re weakest,” Dyer said.

Emissions from petroleum production are on their way to doubling to 22% of what Canada wants to produce in 2030, according to the think-tank.

But Olszynski and others cautioned that Frontier’s downfall may not be the best case study for whether oil sands can fit in Canada’s dwindling carbon budget. They pointed to the project’s tough economics and flawed regulatory review as other reasons it may have been shelved.

“It’s not a litmus test for the oil sands in general,” said Andrew Leach, business professor at the University of Alberta.