Alberta investing $3.7B to move oil by rail, leasing cars

EDMONTON — Alberta Premier Rachel Notley says the province is spending $3.7 billion to move landlocked oil to market by rail — and it isn’t counting on Ottawa to pitch in.

“We must take action today to provide more relief to our energy workers and the families who rely on these good jobs across this province and this country,” she told a news conference Tuesday. “Albertans don’t just stand by. We take action.” Notley said the best long-term solution is for new pipeline capacity to coastal ports, which would enable Alberta crude to be sold to overseas markets and ensure the best price.

Investing in rail is a medium-term stop-gap as pipeline projects such as the Trans Mountain expansion to the West Coast remain in limbo, she said.

The province aims to move up to 120,000 barrels of oil per day by rail by 2020 under deals with Canada’s two major railways, Canadian Pacific and Canadian National. Initial daily shipments of 20,000 barrels are expected to begin as early as July.

Alberta is leasing 4,400 railway cars — more than three-quarters new and the rest retrofitted. It initially thought it would need 7,000 cars, but was able to lower that number because it found better routes to market.

Shipments of grain should not be disrupted by increased oil traffic on the railroads, Notley said.

When the premier first floated the oil-by-rail idea last fall, she urged the federal government to come on board.

She said Tuesday she’s not happy there has been no firm response, especially since an uplift in Alberta crude prices would boost Ottawa’s revenues, too.

The province estimates its rail plan will lead to a $5.9-billion increase in commercial, royalty and tax revenue for a net gain of $2.2 billion.

It also expects the plan will mean a discount for Western Canadian heavy oil versus U.S. light crude to shrink by $4 US a barrel from early 2020 to late 2021.

Last fall, the price gap exceeded $50 at times, prompting Alberta to impose mandatory production cuts as a short-term measure to staunch the bleeding. The production cap was eased earlier this year, and Notley said Tuesday that it shouldn’t stay in place any longer than necessary.

Oil brokerage Net Energy Exchange indicates the heavy oil discount is now at $14.50.