Alberta to buy rail cars for oil

(File photo by Dave Bedard)

Ottawa | Reuters — The Alberta government is in talks to buy rail cars to transport 120,000 barrels per day of crude oil and expects a deal to conclude within weeks, Premier Rachel Notley said Wednesday, as the province takes actions to move oil stuck in the region because of a lack of pipeline capacity.

The added capacity and dedicated service would also ensure grain and other agricultural products “would not be affected by having to compete for space on existing trains,” the province said in a release.

Notley, who says the cars are needed to help deal with stranded oil that has slashed the price of Alberta oil, told a business audience she was disappointed that the federal government was not helping fund the purchase.

Reuters revealed last week that Alberta had proposed a joint purchase of two unit trains and estimated the one-time capital cost at about $350 million. Federal officials are cool to the idea, saying by the time the cars come on line late next year the supply problems will have eased.

The 120,000 bpd of rail capacity is nearly equal to the current amount of stranded supply.

“Alberta will buy the rail cars ourselves to move this oil… we have already engaged a third-party to negotiate and work is well underway. We anticipate conclusion of the deal within weeks,” Notley said in the prepared text of her speech.

The province said Wednesday it can’t release financial details of the rail investment “while negotiations are underway.” The first rail cars from the deal are expected to start moving oil in late 2019.

Notley said last week that the province was willing to buy the train by itself if Ottawa doesn’t back the province’s proposal to split the costs.

Notley, who reiterated her demand for more pipeline capacity, said the cost of buying the cars would be fully recouped through royalties and the selling of shipping capacity.

The Alberta premier said there was “no excuse” for Ottawa not helping and castigated the government of Prime Minister Justin Trudeau for proposing tougher environmental standards she said would make it harder than ever to build pipelines.

The glut “is happening because Canada willfully holds Alberta’s economy and Canada’s economy hostage,” she said, estimating the losses at $80 million a day.

Ottawa denies it is being unhelpful, noting that earlier this year it bought the Trans Mountain pipeline.

Several Canadian crude producers have curtailed production and asked Alberta to mandate cuts for other producers. Notley did not mention this idea in her speech.

Last week Finance Minister Bill Morneau said businesses would be allowed to write off additional capital investments, a measure he said oil industry executives had pressed for.

— David Ljunggren is Reuters’ political correspondent in Ottawa. Includes files from Glacier FarmMedia staff.

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