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The cancelled Frontier oil sands mine highlights the need for Prime Minister Justin Trudeau to clarify the role of the oil and gas sector as his government aims to slash greenhouse gas emissions, according to a former executive in the energy industry.

Responding to Teck Resources Ltd.’s surprise decision over the weekend to pull the application for the massive oil sands mine just days before Mr. Trudeau’s cabinet decided its fate shows the need for more clarity and the transparency from Ottawa on the sector’s future, Dennis McConaghy said.

The company said in a statement Sunday that Canada needed to establish clear climate policies that addressed the role of the resource development industry before projects like the Frontier mine could reasonably be decided on.

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Mr. McConaghy called it an incredible letter that put a spotlight on a central shortcoming of Canada’s climate policies.

“This country can’t go on in terms of having a climate policy that is unclear on whether it will tolerate incremental growth in hydro carbon production,” Mr. McConaghy said. Until 2014 he was the executive vice-president of corporate development and strategy at TransCanada Corp., now TC Energy Corp.

Political leaders in Alberta and the federal Conservative party slammed the company’s decision and levelled blame for it at the feet of the federal Liberals, some of who had been publicly arguing for the mine’s rejection.

Teck’s share price slipped more than seven per cent when the Toronto Stock Exchange opened Monday morning, but analysts cautioned that the entire energy sector was in freefall as COVID-19 continued to spread around the globe, creating market and demand uncertainty.

But the hit to Teck stocks compounded a 15 per cent drop Friday after the company released its annual results, including a $900-million dollar writedown on the Fort Hills heavy oil mine in Alberta. Teck incurred the charge due to lower expectations for the price of crude oil.

Martin Pelletier, a portfolio manager with TriVest Wealth, said Friday’s slide indicated the unlikelihood of the Frontier project going ahead had already made a dent in stock prices.

“People weren’t expecting this transaction to go through,” he said.

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Industry participants, and the company itself, had cited numerous barriers to building the multibillion-dollar Frontier megaproject. It seems as though the project is on ice indefinitely, after Teck chief executive Don Lindsay told a presentation in Florida Monday that his company has no timeline to resubmit the oil sands mind for regulatory approval.

Mr. Lindsay said in a speech last month that Teck needed “three Ps” – a materially higher oil price, sufficient pipeline capacity and a partner to shoulder the cost – before proceeding on Frontier.

Those aren’t the only impediments. A very early stage study done in 2014 pegged the capital cost of building Frontier at $20.6-billion, but that study did not look at whether Teck could make a return on the project.

“On the economics of the project, Teck hasn’t put anything in the public domain,” Canaccord Genuity Group Inc. analyst Dalton Baretto, said in an interview last week.

“We really have no idea.”

Mr. Baretto’s net asset value on Frontier was $0.

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On Friday, Teck talked up the potential economics of Frontier but offered no hard data, saying in a statement that because of technological and operational improvements, the miner believes Frontier will be “technically feasible and commercially viable.”

It’s also clear that Teck’s existing oil sands mine hasn’t performed well.

On Friday, the company took $900-million dollar writedown on the Fort Hills heavy oil mine in Alberta. Teck incurred the charge due to lower expectations for the price of crude oil.

Teck is a junior partner in Fort Hills with a 21.3-per-cent stake. Suncor Energy Inc. is the majority owner and operator with a 54.1-per-cent stake. Total SA of France owns 24.6 per cent.

Teck will now also take a $1.1-billion writedown on the Frontier heavy oil-mine proposal in light of its decision to withdraw the mine application over the weekend.

Adding to the unlikelihood of the Frontier project moving ahead - even if it had received Federal approval - is Teck’s weak financial condition. Over the past year, its shares have lost more than half of their value, amid tepid prices across much of its core business lines, such as coal, zinc and copper. Late last year, Teck committed to shaving $500-million off its capital budget for this year.

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And in terms of big capital projects, Teck already has its hands full. Hoping to diversify away from coal, the miner is in the midst of building a US$4.7-billion copper project in Chile. However, on Friday, Teck flagged that its construction costs are likely to climb as it grapples with “social unrest” in the South American country.

Jack Mintz, president's fellow of the School of Public Policy at the University of Calgary, wasn’t surprised by the hit to Teck stocks over the past few days given the Fort Hills write-down and the Frontier decision. Risks in the resource sector around climate change and government policies have “gone up considerably,” he said.

“I think there was some surprise [Frontier was cancelled] but nobody seemed confident it was going to go ahead anyway,” he said.

Conservative Leader Andrew Scheer is blaming the Liberal government over Teck Resources' decision to suspend plans for a major new oil sands mine. Prime Minister Justin Trudeau says the Conservatives do not understand that building the economy and fighting climate change go hand in hand. The Canadian Press

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