Will Cabinet Approve New Oilsands Mine Despite Trudeau’s ‘Net-Zero’ Promise?

February 12, 2020 Updated: February 12, 2020
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OTTAWA—The federal government’s looming decision on whether to green-light a massive new oilsands development will be a test of Ottawa’s pledge to improve relations with Alberta.

Standing in the way of approving the $20.6 billion Teck Frontier mine project is Prime Minister Justin Trudeau’s promise to make Canada a net-zero carbon dioxide producer by 2050.

Alberta Premier Jason Kenney told an audience in Washington, D.C., last week that a rejection of the project “won’t just be very serious in Alberta, but I think it would be very serious in global capital markets.”

“It’s hard to overstate the response of Albertans, not just our government, but Albertans broadly, if this project were to be rejected,” he said.

But last week in the House, Liberal MPs urged Trudeau to reject the project, saying it would undermine the government’s net-zero commitment.

Jack Mintz, an economist and School of Public Policy fellow at the University of Calgary, says plans to convert Canada into a net-zero carbon emitter by 2050 “are based on hope and prayer we’ll get the technologies to get us there.”

Kenney said in his speech that the mine, which would be capable of producing 260,000 barrels a day and have a 40-year lifespan, “represents a path to the future. … Over the next decades as we go through the energy transition, we all know there will be continued demand for crude.”

Daily global consumption of oil is only slightly less than the average daily production of around 100 million barrels/day; transportation consumes approximately 60 percent of this supply.

“So to Kenney’s comment, there’s still going to be significant demand over the next 30 to 40 years, and Canada can either be part of that or not part of that,” Mintz said.

Last April, Canada approved Equinor’s Flemish Pass Exploration Drilling Project located east of Newfoundland and Labrador, in the North Atlantic, while the public comment period has expired on a similar nearby drilling proposal by China National Offshore Oil Corporation.

Mintz noted that Norway and the United Kingdom are developing new offshore oil projects as well.

“If you look at Norway, they’re dealing with decarbonization and developing a major new field. … The U.K. government on one hand is talking about zero-net emissions, but on the other hand they’re pushing a major new development in the North Sea for oil and gas,” he said.

“So if we’re not part of this [supply side], we’ll be stranding our assets when other people aren’t. So I think as a country we need to balance those two things just like everybody else is … and not try to be doing something much more aggressive, which could avoid an irreparable split.”

The Canadian Association of Petroleum Producers showed Canada lost more than 116,000 energy-related jobs between 2015 and 2017, according to a February 2019 article by CityNews Edmonton.

With the energy sector bleeding such a large number of jobs since Trudeau was first elected, the Liberals lost all the seats it held in Alberta and Saskatchewan in the 2019 election. There was talk of western separatism, and frustrated westerners took up #Wexit as a social media hashtag in the spirit of U.K.’s Brexit.

After the election, Trudeau promised to work to address the anger of people in those provinces and repair relations between Ottawa and the West, and tasked Deputy Prime Minister Chrystia Freeland with that job.

If the Teck mine goes ahead, it could generate a total of $55 billion in royalties and create 2,500 permanent jobs—something Alberta sorely needs.

But even Liberal backbenchers like Nathaniel Erskine-Smith are against the project. The downtown Toronto MP told Toronto Star that “there’s no way” the mine can go ahead because of the Liberals’ net-zero carbon emission.

Adding more uncertainty is Environment Minister Jonathan Wilkinson, who said “none of the options are off the table” for the project, which has been in regulatory machinations since 2012.

“Cabinet has the ability to approve with conditions, it has the ability to reject, and it has the ability to defer,” Wilkinson said in a CBC interview on Monday, where he promised “a fulsome discussion and we’ll be taking into account all the relevant information.”

News emerged this week that if the project is nixed, the federal government is preparing an aid package for Alberta to soften the blow.

That didn’t go down well with Alberta’s Environment Minister Jason Nixon, who told media that “Alberta is not looking for a Justin Trudeau handout.” He said the project should be approved, noting that a federal-provincial panel found that the mine would be in the public interest, despite its impact on the environment.

Cabinet is set to make a decision about the mine by the end of the month. Alberta Conservative MP Shannon Stubbs has said that if it’s not approved, “it will be perceived as a final rejection of Alberta by Canada.”