Alberta Premier Rachel Notley said today her government is only weeks away from finalizing a purchase of rail cars to move oil and help close massive price gaps that have short-changed government coffers and Canadian oil producers.
She also said she wants the federal Liberal government to contribute financially to the plan.
“We’re not wasting any time,” Notley told a Canadian Club luncheon in Ottawa Wednesday, formally announcing the rail car purchase. “Alberta’s oil is going to flow one way or another — if not by pipelines, then by rail or by truck.
“Don’t mistake me — this is not the long-term answer … But until pipelines are built, we need to move more oil by rail.”
Notley said her government will buy two new unit trains that can transport an additional 120,000 barrels a day, increasing the amount of oil being moved by rail in Canada by a third.
Coca-Cola sells sugar-flavored water for more. We are essentially giving our oil away for free.– Alberta Premier Rachel Notley
The amount of oil moving on Canada’s railways has reached record highs already, thanks to a bottleneck in pipeline capacity connecting Alberta’s oilsands to foreign markets.
With the Trans Mountain expansion stalled and the Northern Gateway project shelved, Alberta’s producers have been forced to accept prices far below world levels for their oil.
Ninety-nine per cent of Canada’s oil is destined for the U.S. American refineries have been offering lower prices for that oil, knowing that Alberta producers have few options and are desperate to unload excess product.
Western Canadian Select, which includes product from the oilsands, trades at just $11.56 US — less than a quarter of the $51.49 that West Texas Intermediate (WTI), the U.S. gold standard, fetches on the open market. (These prices were current as of Wednesday.)
“Coca-Cola sells sugar-flavored water for more. We are essentially giving our oil away for free,” Notley said.
This price gap is costing the Canadian economy roughly $80 million a day, she said.
A BNSF Railway train hauls crude oil west of Wolf Point, Montana. Crude-by-rail shipments in Canada have seen an eight-fold increase since the Trans Mountain expansion project was first announced in April 2012. Much of the crude is destined for U.S. refineries. (Matthew Brown/AP Photo)
Notley said that while Prime Minister Justin Trudeau and the federal Liberals should be commended for buying the Trans Mountain project in a period of investor uncertainty, Ottawa now needs to partner with Alberta by helping to finance the rail car purchase.
“The federal government should be at the table on this. There’s no excuse for their absence. Either way, we will not allow delays to continue,” she said.
Notley said Alberta would go forward with the purchase even if the federal government decides not to help.
Notley said the additional oil-by-rail capacity would narrow the price gap by about $4 a barrel, generating an additional $1 million a day in federal revenue — suggesting the purchase price would be “fully recouped” through increased royalties and by selling shipping capacity to producers.