Lberta unloads crude by rail contracts signed under former
Calgary: Premier Jason Kenney says Alberta has completed a deal to get out of the oil-by-rail business, but at a loss of $1.3 billion a debacle he blames on the former NDP government. Kenney says his United Conservatives have unloaded crude-by-rail contracts that will save $500 million on a project that was on track to losing taxpayers $1.8 billion.
“This is entirely on the NDP. They never should have made this deal,” Kenney told reporters Tuesday.
“The private sector was willing to move this crude by rail and has done so.”
“We, however, have managed to limit the damage, reduce the damage, by $500 million.” The decision fulfils a promise made by Kenney before he won the spring 2019 election over then-premier Rachel Notley and the NDP.
Just before the election, Notley announced a $3.7-billion plan to lease more than 4,000 rail cars from Canada’s two major railways, Canadian Pacific and Canadian National, to transport more crude to the U.S. Gulf Coast and from there to markets abroad.
Notley said it was an extreme but necessary and profitable move to reduce a pipeline bottleneck and subsequent widening price differential that was crushing profit margins for Canadian oil.
Notley’s government estimated the three-year program, which would ultimately see 120,000 barrels shipped per day, would yield a net $2.2-billion profit.
The cars were to have begun moving last July but Kenney’s government, after it took over in April, announced it was cancelling the deal because its number crunching showed that once the cars were leased and the oil bought, the expected $2.2-billion profit would actually be a $1.8-billion loss.
Kenney’s UCP set aside $1.5 billion in the October 2019 budget to cover the losses, and he said recent increased oil-byrail exports prove that market forces are in the best position to determine profits and losses. “We negotiated the best terms over the past months to get Albertans out of this tough situation,” Kenney said. “Industry is better able to manage the financial risk associated with the ebbs and flows of the marketplace.”
Kenney said details of who is buying the contracts and on what terms are not being released yet because of commercial confidentiality.