The Alberta government has started talks with the private sector about Canadian oil producers taking over crude-by-rail contracts signed by the previous government, Premier Jason Kenney said on Tuesday.
The talks follow a campaign promise from the recently elected United Conservative Party to scrap the former New Democratic Party government’s $3.7 billion crude-by-rail deals, which Kenney has slammed as poor value for taxpayers.
“There are confidential conversations going on between our government and private sector actors. Our strong preference is that the private sector take over those contracts,” Kenney told reporters after giving a speech to kick off the Global Petroleum Conference in Calgary.
The NDP had planned that the crude-by-rail program would start up in July.
Alberta is Canada’s main crude-producing province and home to the country’s vast oilsands but a lack of pipeline capacity leaves oil bottlenecked, adding to the price discount on Canadian barrels versus U.S. oil.
That discount hit record levels in late 2018, prompting the former NDP government to curtail oil production.
Earlier this year, the NDP also signed deals to lease 4,400 rail cars that would transport Alberta crude to market, before being ousted in an April election.
The two largest contracts signed were with Canadian National Railway and Canadian Pacific Railway to move the rail cars. The program was meant to start transporting 20,000 barrels per day next month, ramping up to 120,000 bpd by mid-2020.
Alberta is so far encouraged by suggestions that CN and CP would be willing to discuss the contracts, he added.
The chief executives of Husky Energy and Cenovus Energy previously talked about the possibility of the private sector taking over the government crude-by-rail deals.
Neither company immediately responded to requests for comment.