Taxpayers deserve the truth about crude by rail
Figures from UCP and NDP so far apart that Albertans don’t know who to believe
A $2.2-billion bonanza or a $1.5-billion boondoggle?
Depending on who you ask at the Alberta legislature — or when you ask — the crude-by-rail deal conceived by the former NDP government is either a windfall, or a huge weight around the neck of the provincial treasury.
Back in February when the Notley government announced the scheme, Alberta Energy officials assured the media and the public that getting the province into the oil transport business would be a profitable venture: a $3.7-billion investment that would bring in $5.9 billion in revenue over three years.
Four months later, that ministry, now under control of the UCP, is offering a much different analysis: the deal was based on grossly inflated figures and would actually lead to a substantial loss.
Energy Minister Sonya Savage says her government is now in the process of getting out of the “devastating” agreement, some details of which are expected to be announced Thursday.
In effect, this is a nearly $4-billion difference of opinion.
To begin, let’s get the obvious out of the way.
Politics is playing a huge role in how this whole issue is being framed.
It’s no secret that there is a wide philosophical difference between the two parties when it comes to the idea of government intervention in the market.
While the NDP was eager to portray itself as a take-action administration ready to protect energy jobs, the UCP has been insistent such challenges are best left to private industry — and has an interest in continuing to cast Rachel Notley’s crew as lousy financial managers.
As such, it is not surprising to see the rival parties tout different figures to justify their respective positions.
Yet having figures in this case that are so widely disparate is both perplexing and disturbing, raising questions about the politicization of the public service and leaving the average Albertan in a bit of a pickle as to what to believe.
If you remember, the arrangement was announced a few weeks before the provincial election was called.
Curtailment had already been implemented as an interim measure to reduce a supply glut and improve prices, but the Notely government decided more rail capacity was also going to be needed until new pipelines arrived.
The NDP said it would commit funding to lease up to 4,400 new rail cars, fill them with Alberta oil, and then ship the resource to refineries in the United States, where it could be sold for a profit.
Asked Wednesday to look back at the decision-making process, Notley said the deal was put together after “many hours and days” of scrutiny, advice from energy and finance officials, the work of a government task force, and consultations with oil and gas experts and independent economists.
“We said, ‘Let’s not do it if it’s not a thing,’” Notley said.
“They (ministry officials) proposed it could be done. So we tested them over and over again on their numbers,” she continued.
“To date the UCP have provided no explanation as to why those numbers would have changed so dramatically.”
So far, the Kenney administration has offered only a top-ofthe-waves answer to that question, suggesting the disparity lies in how the different governments account for various factors.
According to the UCP, the NDP government’s projected profits were largely based on “artificial” estimates of upticks in royalty revenue, tax revenue and commercial benefits — rather than just fetching better prices in the U.S.
The new government’s position is that much of that revenue could be realized anyway through natural industry activity, and it is unfair to list that income as a product of the oil-by-rail scheme. By itself, the deal is a money loser, they say.
Determining exactly how much of a loser is complicated, and the government now admits $1.5 billion is a somewhat fluid figure, in part due to fluctuations in market conditions.
Complexity also surrounds the UCP’s negotiations to extricate the province from the deal.
It’s been presumed the agreements with the railways come with hefty cancellation fees, but the government is hoping to avoid those by off-loading at least some of the leases to a private company. What terms the province might get from the firm, especially when it has already declared the leases to be unprofitable, is a big question mark.
For me, I always had some skepticism about the deal, in part because I didn’t understand the NDP’s urgency, and in part because I felt that if extra rail capacity were so badly needed by oil companies, those producers should likely be making their own deals with rail firms.
Regardless, neither of those concerns explains why there is such a disparity in projected profits, or addresses the unseemliness of a single ministry offering a completely contradictory take on the same deal, separated by just four months.
The whole thing has forced Albertans into a game of who do you trust more — the energy ministry from February or the energy ministry from June.
Taxpayers instead deserve real answers with access to verified numbers and contract details, allowing us to judge for ourselves how big a bonanza or a boondoggle this deal really is.