MEG Energy shelves oil sands project as economic conditions put proposed projects in doubt

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MEG Energy Corp. has asked the Alberta Energy Regulator for a three-year delay in the approval process for a proposed oil sands project, because of what it called the province’s continuing difficulties.

MEG’s May River project would be a significant addition to the oil sands when fully constructed, able to pump out 164,000 barrels of bitumen daily.

The proposal is just one of a number of projects either waiting on approvals or investors to begin construction.

MEG’s request was made before Teck Resources Ltd. announced on Feb. 23 that it was cancelling its plans to build a large oil sands mine. The federal cabinet was expected to decide before the end of February on whether to give final approval to the project. Alberta Premier Jason Kenney had warned that if Ottawa rejected the Teck mine, it could devastate the provincial economy and intensify Western alienation.

MEG cited Alberta’s economic malaise and a lack of investors in the oil sands, as well as overloaded pipelines, in a letter late last year to the AER requesting a hold on the regulator’s approval. Neither MEG nor the AER has confirmed whether the request for the delay has been approved.

“MEG remains committed to ensuring the responsible development of the May River project in the future and is determined to pursue the required regulatory approvals when appropriate,” chief operating officer Chi-Tak Yee said in a statement to The Globe and Mail.

Unlike Teck’s now-scrapped proposal, a mine that was to use trucks and shovels the size of large buildings to excavate bitumen, MEG’s project would be built with an in-situ process. Such projects inject high-pressure, high-temperature steam underground to soften bitumen and then pump it to the surface. Most of Alberta’s production now uses the steam method.

The May River project would be the second largest in-situ facility in Alberta by emissions, according to the company’s environmental filings, and expected to emit 4.8 million tonnes of greenhouses gases annually at full production. The company had expected construction to last about nine years.

Teck’s Frontier mine would have been larger, digging 260,000 barrels of bitumen out of Alberta soil daily. However, the project would emit just 4.1 megatonnes annually.

Frontier’s approval process had highlighted the struggle Canada faces meeting its climate goals. The federal government has pledged to reach net-zero emissions by 2050.

Ottawa and Mr. Kenney’s government disagree over the province’s 100-megatonne emissions cap on the oil sands. Mr. Kenney has been adamant that the province is far from the cap and that projects such as Frontier and May River could proceed, while federal Environment Minister Jonathan Wilkinson has warned that the cap is quickly approaching.

Mr. Kenney has said the province is emitting about 67 to 68 megatonnes of greenhouse gases, under the definitions set by the cap. The federal government says the province is emitting roughly 87 megatonnes.

Nearly two-dozen projects have been approved and are awaiting investors, according to Ottawa. Mr. Wilkinson has warned that emissions would surpass 130 megatonnes if all approved projects are built.

The cancelled $20.6-billion Teck mine faced many of the same challenges highlighted in MEG’s request to put a hold on its project.

Teck chief executive officer Don Lindsay warned investors in January that the company might not move ahead on the massive mine even if it received federal government approval. “We’ve told the government that for it to be developed, we need three Ps: The first is the pipeline has to be finished, not just started, finished. We need a partner. We need price,” Mr. Lindsay said.

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