The Government of Alberta is buying rail cars to ship crude oil and wants the federal government in Ottawa to help foot the bill.
Pipeline bottlenecks have the oil industry in Alberta grappling with historic low prices that are resulting in job losses and canceled contracts throughout the province. Now, Alberta Premier Rachel Notley says her government is buying rail cars to ship crude oil to more destinations faster, and adds that the federal government in Ottawa should help cover the cost.
"Don’t mistake me - this is not the long-term answer," said Premier Notley during a speech in Ottawa on Wednesday. "New pipelines are the long-term answer."
Notley’s proposal is one of several put forward by government and industry officials to boost Canadian oil prices by increasing the amount that can flow to refineries in the U.S. and overseas. Some producers have begun to curb output and have asked the government to mandate cuts after prices fell as low as $50 U.S. a barrel below the U.S. benchmark.
Premier Notley’s plan to buy rail cars comes a month after Alberta asked the federal government to buy more locomotives for use in the province. Ottawa was said not to favour that plan, and Notley has said in recent weeks that her administration may buy that equipment on its own as well.
Western Canada Select, a grade of crude produced by Alberta’s prolific oil sands, closed at $13.46 U.S. a barrel earlier this month, the lowest on record, according to Bloomberg data. Western Canada Select’s discount to U.S. benchmark prices widened to about $50 U.S. a barrel last month, also a record low.
Premier Notley said buying two new trains could help transport an additional 120,000 barrels a day and help narrow the oil price gap relative to the U.S. benchmark by around $4 U.S. a barrel. Longer term, the Canadian oil industry is counting on a trio of pipeline projects to help get more of its oil to market. Those include Enbridge Inc.’s (TSX: ENB) expansion of its Line 3 conduit, TransCanada Corp.’s (TSX: TRP) Keystone XL and the Trans Mountain expansion, which was acquired by the Canadian government earlier this year.
