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UPDATE 2-Cancelled Teck oil sands project underscores global climate-energy policy tension

Rod Nickel and Steve Scherer

policy tension@ (Adds quote from PM Trudeau, details on Constitution project in New York state, background)

WINNIPEG, Manitoba/OTTAWA, Feb 24 (Reuters) - Teck Resources Ltd's surprise decision to cancel a planned C$20.6 billion ($15.6 billion) oil sands mine in northern Alberta, citing uncertainty about Canada's climate policy, underscores a global struggle to balance energy growth with environmental concerns.

The project became the latest casualty in oil-producing countries that also have robust environmental movements agitating to cut fossil fuel development due to global warming. Numerous pipeline and drilling projects in the United States and Canada, the largest and fourth-largest oil producers in the world, have been halted or killed due to activists or local governments opposed to energy development.

Teck on Sunday withdrew its application to the Canadian government to build the Frontier project.

"The world is changing .. you can no longer build a strong economy if you are not fighting climate change at the same time," Prime Minister Justin Trudeau said in Ottawa's House of Commons.

Opposition to building new pipelines has delayed those projects for years, forcing the Alberta government to curtail production. Protests by indigenous groups linked to a planned gas pipeline have disrupted railways, leading police to clear an Ontario blockade.

At an investor conference in Florida on Monday, Teck Chief Executive Don Lindsay said Frontier landed in a national debate about energy development, indigenous issues and climate change.

Those concerns have motivated protests against TC Energy Corp's Keystone XL pipeline running through both the United States and Canada, which has been in development for more than a decade.

"Literally over the last few days, it has become increasingly clear that there is no constructive path forward," Lindsay told investors in a speech.

In a letter to shareholders, Lindsay said "investors and customers are increasingly looking for jurisdictions to have a framework in place that reconciles resource development and climate change."

On Monday, Oklahoma-based energy giant Williams Companies Inc canceled a natural gas pipeline that had been in development for eight years, in part due to ongoing opposition from New York state lawmakers and local activists.

CLIMATE CHANGE PLAN NEEDED

Teck's withdrawal highlights the need for a credible climate plan for Canada to become carbon-neutral by 2050, two Canadian ministers said.

"We need to work together across jurisdictions and in partnership with industry," Environment Minister Jonathan Wilkinson and Natural Resources Minister Seamus O'Regan said in a statement late on Sunday.

On top of those challenges, Lindsay said last month that Frontier required higher prices, expanded pipeline capacity and a partner.

Teck shares were down 2% on Monday afternoon and have lost 17% of their value since Wednesday.

"Investors are feeling terrible about the (Canadian energy) space," said Tim Pickering, chief investment officer of Calgary-based Auspice Capital Advisors, an asset and fund manager.

"It's pretty clear that the political climate and lack of cohesive agreement on how to address energy policy and climate is scaring investors away from Canada."

An Alberta source directly familiar with the matter said Teck's board had recently expressed concern that Frontier could become a protest target, which would draw attention to its coal business.

A Teck representative declined to comment.

Teck's decision is a "wake-up call" to Alberta Premier Jason Kenney for not drafting a plan to lower the province's overall emissions, a person familiar with the project said.

An Alberta representative was not immediately available to respond.

Pickering said he blames Ottawa for industry fears of abrupt policy changes. Frontier was approved by a joint Canada-Alberta regulatory panel, but Trudeau's cabinet was divided on whether to give final approval this week. ($1 = 1.3220 Canadian dollars) (Reporting by Rod Nickel in Winnipeg, Manitoba, and Steve Scherer and David Ljunggren in Ottawa Editing by Matthew Lewis and Marguerita Choy)