Sunday , October 2 2022

Varcoe: Alberta grows testy as Ottawa waves at oil-for-rail plan


Bill Morneau does not aboard Rachel Notley's plan for oil for rails to increase raw transport from Alberta.

But the Federal Finance Minister did not completely dismiss the idea of ​​Tuesday as a short-term way to ease the price rebate that expels Canadian oil producers.

The province is growing testy waiting for an answer.

Alberts premier recently asked the Trudeau government to help with the purchase of railway cars and locomotives in an effort to increase the amount of crude oil moving from the province by train, as existing pipelines are overloaded.

Morneau seemed to dismiss the idea this weekend and said it would take at least nine months to implement such a plan.

Spoken during and after a Calgary Chamber of Commerce luncheon, Morneau was asked several times Tuesday if the federal government was to punch up money for improved rail options.

Just like Prime Minister Justin Trudeau during his visit to Calgary last week, the Finance Minister avoided a direct response that turned to the broader point that Ottawa wants to see its expansion of the Trans Mountain pipeline.

"We do not want to divert our resources into ideas that will not have an important impact," said Morneau at one point.

Talking with journalists later, the finance minister left the door open to consider the concept, but only barely.

"I know the industry here and the county administrative board is talking about other ideas that may have a short and medium term," he said.

"We will be a team member in trying to make sure we are considering all opportunities and what the appropriate federal role can be."

Well, team member, it's time to grab the checklist if Ottawa really wants to deal with the price difference.


Alberta's energy minister Marg McCuaig-Boyd criticized the Provincial legislature Morneau and his federal counterparts to refrain from embracing the idea.

While both provincial and federal governments are pushing for Trans Mountain, the oil price rebate creates a crisis and "we need some solutions," she told Postmedia's Clare Clancy.

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

"It's super disappointing and I think it's very tough. I do not know what to do to push the issue that it's serious here in Alberta and we need help.

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

This means that the province will have to spend millions of dollars and buy railway cars and locomotives to move the plan forward.

The railroad has emerged as a friction point between federal and provincial governments, as they both navigate the problem of Canada's inability to market their petroleum products.

The price differential between Western Canadian Select and benchmark US raw prices was $ 38.19 per barrel on Monday.

Provincial government estimates that the discount costs the Canadian economy up to $ 80 million a day.

No new pipelines are expected later next year – and the future of Trans Mountain expansion and the Keystone XL project in the airline is still one of the few options that can increase transport capacity for additional locomotives and cars can be found.

Registration quantities of raw product already move by train, with an average of 270,000 barrels per day in September.

In the province's proposed Ottawa business plan, the partners see spending $ 350 million on fixed capital costs, together with an estimated operating cost of about $ 2.6 billion over three years, starting in July, according to a government source.

The project that revenue generated from shippers would be about $ 2 billion, while Ottawa would see increased federal revenue of $ 1 million a day from the improved price differential.

Two new unit trains that can move about 120,000 barrels per day out of Alberta can help the situation, but it would take time to order new locomotives.

Industry groups such as Explorers and Producers Association of Canada (EPAC) return the province's proposal.

Buying new locomotives and rail wagons is not a short-term solution to the oil crisis, says Ottawa, as it would take at least one year to get the new trains in place.

Elaine Thompson / Canadian Press / AP

While it would not be online for several months, it would still improve the oil option options in Western Canada in the medium term.

"It's a great idea and is a serious option that should be considered, considering the political issues we have touched," said EPAC President Tristan Goodman.

For non-large-scale manufacturers to sign long-term freight contracts, railway companies will not take more cars or locomotives unless they have any state or state aid.

The issue of rail wagons will boil because the discount on Canadian oil creates chaos for state finances and oil producers' revenues.

The credit rating agency Moody's Investor Service said this week expects the historically significant price gap to lead Alberta to absorb a larger deficit than this year.

"Without the success of the successful government's policy, it may delay its timeline to return to balance," said Adam Hardi, vice-vice president of Moody.

Notley's government project this year's deficit will hit $ 7.8 billion and have insisted that it will return to a balanced budget before 2023-24.

Expect to hear more about the rail options when Prime Minister speaks Wednesday to the Canadian club in Ottawa and to the Toronto Region Trade of Commerce the following day.

The province's oil-to-rail plan still boasts, but slowly, with Alberta hoping to speed up its proposal.

So far, Ottawa seems to let this slow train pass just by.

Chris Varcoe is a Calgary Herald columnist.

[email protected]

Source link