Teck Mine Disregards Low Oil Prices

Teck Resources’ proposed C$20.6-billion Frontier tar sands/oil sands mega-mine in Alberta reflects a “misguided and reckless” disregard for economics, given a review panel’s approval that assumed an unrealistically high world oil price “for years to come”, according to an analysis released this week by the Institute for Energy Economics and Financial Analysis (IEEFA).

federal-provincial Joint Review Panel recommended project approval based on a global oil price of at least US$95 per barrel, write IEEFA Director of Finance Tom Sanzillo and financial analyst Kathy Hipple. But “in a presentation to shareholders last month, Teck Resources lowered its estimates, revealing that oil prices will be in the $60 to $70 per barrel range for ‘decades to come’.”

In their study, Sanzillo and Hipple “found that during its administrative hearings, the JRP ignored, or rejected, ample evidence” that predicted more modest pricing.

“Canada has already seen what occurs when oil projects planned upon faulty assumptions go forward: At best, investors lose money, at worst, Canadian taxpayers pick up the tab,” the report concluded.

But “there is no way that the Frontier Oil Sands [project] can produce the level of revenues estimated in Teck’s application,” said Sanzillo. “As it stands, the project is so economically unviable that there are likely to be fewer and less stable jobs created by this investment than promised.”

In its project application, Teck said the mine would generate $54 billion in royalties and taxes, $11.8 billion in federal corporate taxes, and $68 million in local property taxes, while supporting 2,500 permanent jobs, Sanzillo and Hipple note. It was to produce 260,000 barrels of oil per day, topping out at 3.2 billion barrels over a 41-year project life.

But “the supposed benefits of the project were based on revenues supported by oil prices of $95 per barrel or greater,” they add. “Current trends of fossil fuels under-performing and glutting markets are expected to continue, as fracking and renewables provide steady competition.”

In mid-December, veteran climate campaigner Tzeporah Berman said the federal cabinet’s decision this year to approve or disallow the Teck mine will test the newly-elected government’s commitment to the net-zero carbon target it has promised.

Approving the mine “would effectively signal Canada’s abandonment of its international climate goals,” she wrote, noting that its emissions would land “on top of the increasing amount of carbon that Canada’s petroleum producers are already pumping out every year.” Moreover, “the Teck mega mine would be on Dene and Cree territory, close to Indigenous communities. The area is home to one of the last free-roaming herds of wood bison, it’s along the migration route for the only wild population of endangered whooping cranes, and is just 30 kilometres from the boundary of Wood Buffalo National Park—a UNESCO world heritage site because of its cultural importance and biodiversity.”