Alberta unloads crude-by-rail contracts signed under former NDP government

CALGARY — Premier Jason Kenney says Alberta has completed a deal to get out of the oil-by-rail business, but at a loss of $1.3 billion — a debacle he blames on the former NDP government.

Kenney says his United Conservatives have unloaded crude-by-rail contracts that will save $500 million on a project that was on track to losing taxpayers $1.8 billion.

“This is entirely on the NDP. They never should have made this deal,” Kenney told reporters Tuesday.

“The private sector was willing to move this crude by rail and has done so.

“We, however, have managed to limit the damage, reduce the damage, by $500 million.”

The decision fulfils a promise made by Kenney before he won the spring 2019 election over then-premier Rachel Notley and the NDP.

Just before the election, Notley announced a $3.7-billion plan to lease more than 4,000 rail cars from Canada’s two major railways, Canadian Pacific and Canadian National, to transport more crude to the U.S. Gulf Coast and from there to markets abroad.

Notley said it was an extreme but necessary and profitable move to reduce a pipeline bottleneck and subsequent widening price differential that was crushing profit margins for Canadian oil.

Notley’s government estimated the three-year program, which would ultimately see 120,000 barrels shipped per day, would yield a net $2.2-billion profit.

The cars were to have begun moving last July but Kenney’s government, after it took over in April, announced it was cancelling the deal because its number crunching showed that once the cars were leased and the oil bought, the expected $2.2-billion profit would actually be a $1.8-billion loss.

Kenney’s UCP set aside $1.5 billion in the October 2019 budget to cover the losses, and he said recent increased oil-by-rail exports prove that market forces are in the best position to determine profits and losses.

“We negotiated the best terms over the past months to get Albertans out of this tough situation,” Kenney said.

“Industry is better able to manage the financial risk associated with the ebbs and flows of the marketplace.”

Kenney said details of who is buying the contracts and on what terms are not being released yet because of commercial confidentiality.

NDP finance critic Shannon Phillips said Notley, when in government, had to take immediate action as the widening price differential threatened thousands of jobs.

“The crude-by-rail contracts that we executed at the time were profitable for the government when they were signed,” Phillips said. 

“We had external advice and advice from public officials that proved the business case was sound.”

Phillips challenged Kenney to provide details to back his accusation that the contract sell-off was making the best of a very bad situation.

“I’m not prepared to believe any of the claims made by this government until we see the documents,” she said.

“We have seen this government more broadly, and this premier specifically, take liberties with the facts and with truth when it comes to communicating with Albertans.”

Also Tuesday, Finance Minister Travis Toews announced the 2020 budget will be introduced on Feb. 27.

— By Lauren Krugel in Calgary and Dean Bennett in Edmonton

This report by The Canadian Press was first published on Feb. 11, 2020

The Canadian Press