Assessing the Teck Frontier Oilsands Projcet

The Canadian federal government has to make a decision on whether to approve the Teck Resources' Frontier oilsands mine project.

This is a controversial project. It will have significant environmental impacts, add to Canada's carbon emissions, and provide significant employment and tax revenue. But do the benefits outweigh the costs?

That's the subject of this article from the CBC, which tries to lay out the costs and benefits, and cut through the significant spin put on the project by both its supporters and detractors. One thing that the article emphasizes, and this is important, is the difference in revenue between what was forecast when the project was proposed in 2011 and what would be realized based on current prices

Moving from a 2011 oil price forecast to a current equivalent would reduce expected revenues from the Frontier project (all else equal) by about a quarter, while reducing taxes, royalties and return on capital each by about a third.

If oil prices follow the $65 plus inflation break-even cited by the Canadian Energy Centre, that would reduce revenues by almost two thirds, and taxes, royalties and returns to investors by about three quarters.

At today's oil prices, plus inflation, revenues would be reduced by three quarters relative to 2011 forecast levels, and taxes, royalties and returns on capital would be reduced by about 95 per cent.

My own take on it: the project should not be approved, and all future oilsands development should be halted.