Notley opts for crude-by-rail amid UCP push to cut output
EDMONTON Alberta’s political leaders are pushing different plans to combat the oil price differential clobbering energy producers, with Premier Rachel Notley opting for crude-by-rail and Opposition leader Jason Kenney championing mandatory industry cuts.
“We need the federal government at the table, treating it like the crisis it is,” Notley said Wednesday in a speech she delivered at the Canadian Club of Ottawa.
She announced Alberta will buy trains to move an additional 120,000 barrels per day out of the province, starting in late 2019.
The full complement of rail cars would ship out in 2020.
Notley had asked Prime Minister Justin Trudeau to boost rail capacity to provide relief, but the federal finance minister hinted that Ottawa was leaning away from that option.
Minister Bill Morneau, who was in Calgary on Tuesday, said it would take at least nine months to increase rail capacity, though he didn’t flat-out reject the idea.
The price differential between Western Canadian Select and West Texas Intermediate has fluctuated in recent weeks, peaking at around $45 a barrel.
The province pegs the losses at around $80 million per day, though estimates vary.
The Canadian Association of Petroleum Producers estimated that the oil differential cost Canada at least $13 billion in the first 10 months of 2018.
Crude-by-rail shipments already increased to a record in September — nearly 270,000 bpd — but the differential continued to grow.
UCP Leader Jason Kenney called for 10 per cent government-mandated production cuts across the board to curb the oil glut.
“Now we are virtually giving away ... our oil and gas,” he said at a Wednesday news conference.
His views as a free market conservative have changed in the last two weeks, he said.
“I believe government intervention in markets should generally be avoided, which is why I was initially opposed to the idea,” he said. “Voluntary production cuts are not sufficient to stop the bleeding.”
Kenney said the crude-by-rail proposal isn’t an immediate solution, taking a similar position to the Alberta Party.
“The premier is talking about (buying) rail cars, which is maybe a solution ... a year from now,” said Alberta Party house leader Greg Clark.
“They’re scrambling.” He added his party called for mandatory oil curtailment 11 days ago — “I’m glad to see Jason Kenney finally joined the party.”
Kenney outlined a plan Wednesday that included amending the Mines and Minerals Act before the end of the fall sitting, slated to finish next week. He said by defining crude bitumen as petroleum under the legislation, Cabinet could then use its authority to reduce production
I believe government intervention in markets should generally be avoided, which is why I was initially opposed to the idea.
by about 400,000 barrels per day.
He also said curtailment regulations should include a one-year sunset clause.
Clark said he’s not sure amendments to legislation are necessary.
Earlier this month, the province told Postmedia that instituting a quota system would be complicated due to free trade agreements and integrated oilsands operations.
Alberta Energy Minister Marg McCuaig-Boyd said industry players are “extremely divided” on production cuts and wouldn’t say whether the NDP will consider a legislative change.
The province hasn’t closed the doors on any good ideas, she told reporters Wednesday.
Cenovus Energy Inc. CEO Alex Pourbaix said the public investment in rail cars is encouraging.
“However, it will likely take at least a year for these new rail cars to fully come online,” he said in a statement.
Pourbaix said a “growing chorus of voices” have joined Cenovus in calling for temporary mandatory production cuts as a short-term solution.
The Alberta Petroleum Marketing Commission (APMC) is negotiating with rail manufacturers and suppliers, and financial details of a deal won’t be released during talks, said a government news release.
The added rail shipments would narrow the oil price gap by up to $4 per barrel. The plan wouldn’t affect agricultural products as there would be no added competition for space on existing trains, said the release.
“With the current pipeline construction schedule, this investment would be revenue neutral,” it said, noting a minimum threeyear contract.
Notley, who is also slated to speak in Toronto Thursday, isn’t scheduled to meet with Trudeau during her Ontario trip.