MRO Magazine

Alberta buying its own rail cars to move oil without feds, Notley says

December 3, 2018 | By Mia Rabson

OTTAWA – Alberta Premier Rachel Notley says her province is buying enough new rail cars to ship another 120,000 barrels of oil a day, without the federal government’s help.

The premier was in Ottawa Wednesday to deliver a speech steps from Parliament. She said she’s disappointed the federal government hasn’t even officially responded to her request to help buy more rail cars to make up for a shortage of pipeline capacity.

“The federal government should be at the table on this,” she said. “There’s no excuse for their absence.”

While she continues to press Ottawa to step up, she isn’t going to wait for that. Alberta has already started talks with a third party to buy enough rail cars and locomotives to put two more oil trains a day on the tracks, Notley said. The details of exactly how many cars, who the negotiations are with to buy them and how much it will cost are being kept secret pending the outcome, but Notley said the deal will be final within weeks.


“Alberta’s energy industry and the hundreds of thousands of Canadians who depend on it deserve nothing less,” Notley said to a receptive audience at the Canadian Club, in a ballroom at the Chateau Laurier hotel.

The price for Alberta crude fell to about $10 a barrel Tuesday, said Notley, which is about $40 less than it should be getting when compared to other world oil prices because buyers are less interested in a product that’s stuck in Canada’s interior. She said a year ago, Alberta was losing about $40 million a day because of that difference. Now, with the price of Canadian oil plunging in recent weeks, that differential has grown to $80 million a day.

A spokeswoman for Natural Resources Minister Amarjeet Sohi said the federal government has made the issue of market access for Alberta oil an “urgent priority,” and pointed to approval or support for three new pipelines or expansions, as well as the recent tax incentives in the fall fiscal update that will allow all manufacturers to write off the full cost of buying new equipment and machinery as soon as it goes into use.

“We are focused on ensuring that every barrel of Alberta oil gets its full value,” said Vanessa Adams, who added the government is still analyzing the oil by rail option proposed by Alberta.

The House of Commons will interrupt its normal schedule later today for an emergency debate on the energy crisis and the plunging oil price.

Conservative Natural Resources Critic Shannon Stubbs said the price difference is “wreaking havoc” on the energy industry and the Canadian economy and putting at risk the funding available for social programs like health care and education Canadians hold dear.

Earlier this week the federal government pledged to do everything it can to help Ontario auto workers being laid off next year when General Motors closes its Oshawa, Ont., factory. Notley said she does not begrudge Ontario that help, but that Alberta has been in a crisis for months as oil prices sink lower and lower, largely due to transportation problems that are keeping producers from getting oil to buyers.

“The federal government needs to understand that this, too, is a crisis,” Notley said.

Notley said Alberta and federal officials are talking and she hopes to speak directly with Prime Minister Justin Trudeau about the issue next week when the premiers and Trudeau hold a first-ministers’ meeting in Montreal.

Notley credited the federal government for buying the Trans Mountain pipeline in an effort to get it expanded and carry more Alberta oil to the B.C. coast, but she said that purchase hasn’t solved the problem yet.

The Federal Court of Appeal overturned earlier federal approvals for the project, citing insufficient consultation with Indigenous communities and a lack of attention to the impact on the marine environment off British Columbia.

Notley said Ottawa has an obligation to Albertans, and to Canadians, to step up and help find other solutions even as it tries to get the Trans Mountain project back on track.

The energy crisis is shaping up to be a major political wedge heading into the provincial election in Alberta next spring.

In Edmonton, Opposition United Conservative Leader Jason Kenney declined to comment on Notley’s rail-purchase plan, saying he needs to look closer at the costs and details.

But Kenney proposed working with Notley’s government to change legislation to implement a mandatory 10 per cent cut in production — about 400,000 barrels per day — which he said would lead to higher prices and help companies avoid layoffs and capital budget cuts in 2019.

“Voluntary reductions are not sufficient to stop the bleeding,” Kenney told reporters.

“Waiting for months for the differential to shrink will likely mean thousands of job losses, bankruptcies and billions of dollars in lost government revenues.

Notley told reporters in Ottawa the government is looking at all options, including cutting production, but she stressed the idea for a mandatory production cut was not coming from her.

Alberta Energy Minister Marg McCuaig-Boyd said opinion in the industry is divided on mandatory reductions.

“We’re in daily contact with our experts and there are solutions, short-term, mid-term and long-term that we’re prepared to do, said McCuaig-Boyd.

“We have not closed the doors on any good ideas,” she said, but added “curtailment is a short-term solution.”

Alex Pourbaix, president and CEO of Calgary-based Cenovus Energy Inc., said Notley’s rail car plan is encouraging, but noted it would take at least a year for new rolling stock to make a difference.

He also praised Kenney’s call for temporary mandatory production cuts to ease price differentials. Cenovus proposed the production cut idea earlier this month.

“Alberta is facing a crisis that requires immediate action,” Pourbaix said in a statement. “A mandatory production curtailment is the only solution that will bring near-term relief to our industry and to Alberta’s economy.

“We believe it should be implemented as soon as possible.”



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