Friday , May 7 2021

Varco: Notebooks say Alberta will go ahead with buying oil wagons

Bill Morne does not get involved in Rachel Neill's plan for railroad oil to increase the crude shipment from Alberta.

But on Tuesday, the federal finance minister did not completely hinder the idea as a short-term way to mitigate the lowered rebate of Canadian oil producers.

The province is growing in testing, waiting for an answer, and the prime minister on Wednesday signaled that her government is now moving ahead in its plan to buy rail cars to shift more oil from Alberta.

Alberta's Prime Minister has recently asked the Trudeau government to consider helping them buy rail cars and locomotives, in an attempt to increase the brutal movement from the province by train as the existing pipelines are overcrowded.

Morning last weekend rejected the idea, saying it would take at least nine months to complete such a plan.

Speaking during and after Calgary trade, Morne was on several occasions on Monday if the federal government would cancel the money for improved rail options.

As prime minister Justin Trudeau during his visit to Calgary last week, the finance minister escaped a direct response, referring to the broader point that Ottawa wants to see its expansion to the Trans-mountain gas pipeline.

"We do not want to redirect our resources to ideas that will not have a significant impact," Mono said at one point.

Later, speaking to reporters, the finance minister left the door open for consideration of the concept, but only barely.

"I know that the industry here and the provincial government talk about other ideas that could have a short-term and medium-term advantage," he said.

"We will be a member of the team in trying to ensure that we are thinking about all possibilities and what is the appropriate federal role."

Well, a member of the team, it is time to take the check book if Ottawa really wants to deal with the difference in price.


In the province's legislative power, Alberta's energy minister, Marcus McCoog-Boyd, criticized Morneau and his allies for not accepting the idea.

While both provincial and federal governments are pushing for the Trans-Mountain, the rebound in oil prices creates a crisis and "we need some solutions," she told Clay Clancy of Postmodia.

"He does not seem to get it," said the Minister of Energy.

"It's great disappointing and I think it's very deaf to the deaf. I do not know what to do to press the question that it's seriously here in Alberta and we need help.

"But at the end of the day, if feds will forget about Alberta, our government is not."

That means the province is likely to need to spend millions of dollars and buy rail cars and locomotives to move the plan forward.

In a speech on Wednesday in Ottawa, Noti again called on Ottawa to join Alberta for the purchase of more rail vehicles and locomotives, saying the investment would be neutral and serve as a hedge against future delays in the pipeline.

"Alberta will buy rail cars to move this oil and we do not waste time," she said according to the text of her speech at the Canadian club in Ottawa.

"We have already hired a third party to negotiate and work is under way. We expect the contract to be concluded in a few weeks."

The railroad has emerged as a friction point between federal and provincial governments, as both are pointing to the problem of Canada's inability to procure its oil resources in the market.

The price difference between Western Canada's oil prices and US crude oil prices on Tuesday was $ 38.19 per barrel.

The provincial government estimates that the rebate costs the Canadian economy to $ 80 million a day.

No new oil pipeline is expected by the end of next year – and the future of the Transwor and Keystone XL expansion on the aircraft remain one of the few options available to boost transport capacities, if additional locomotives and cars can be found.

Record quantities of raw exports are already moving by train, on average 270,000 barrels per day in September.

The proposed business plan in Potawa for Ottawa will see that partners spend $ 350 million on fixed capital expenditures, together with estimated operating costs of about $ 2.6 billion over three years, starting in July, according to a government source.

He predicts that revenues generated by shippers will be around $ 2 billion, while Ottawa will increase federal revenues in the amount of $ 1 million a day from improved price differences.

Two new unit trains, capable of moving around 120,000 barrels per day from Alberta, could help in the situation, although it will take time to order new locomotives.

Industry groups, such as Canada's Association of Researchers and Producers (EPAC), support the province's proposal.

The purchase of new locomotives and rail vehicles is not a short deadline for removing the oil crisis in part, says Ottawa, as it will take at least a year to get new trains.

Elaine Thompson / Canadian Press / AP

Even though it will not come online for several months, it will still improve the options for transporting oil from Western Canada over the medium term.

"It's a fantastic idea and it's a serious option that needs to be considered, given the political problems we face," EPAS President Tristan Goodman said.

For manufacturers who are not large enough to sign long-term transport contracts, railway companies will not bring more cars or locomotives unless they have some form of support or government support.

The issue of rail cars comes to a boil, because the rebate of Canadian oil creates chaos for government finances and the revenues of oil producers.

Credit rating agency Moody's Investor Service said this week expects a historic wide price differential to point out Alberta to announce a deficit higher than the forecast this year.

"Without successful government policy measures, (it) could delay the time to return to equilibrium," said Adam Hardy, Moody's assistant vice president.

The government of Nootelli plans a deficit this year to reach $ 7.8 billion and insists it will return to a balanced budget by 2023-24.

We expect to hear more about rail alternatives when the prime minister speaks Wednesday to the Canadian club in Ottawa, and to the Trade Board of the Toronto region the next day.

The province's railway oil pipeline plan is still moving along, albeit slowly, with Alberta hoping to get an impetus for its proposal.

However, for now, Ottawa looks pleased to allow this slow train to pass.

Chris Varco is a columnist for the Calgary Herald.

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