CP Rail CEO not supportive of Rachel Notley’s crude-by-rail deal

Premier Rachel Notley updates Alberta's progress buying railcars to ship crude

Premier Rachel Notley updates Alberta's progress buying railcars to ship crude

The government will be buying crude oil from producers before loading it onto the cars which will then be shipped to market, allowing for small producers to have their oil shipped when they would not have been able to do so otherwise.

Some producers have complained that the lower differentials make crude-by-rail shipments less profitable.

The Alberta government is moving forward with a medium-term measure as the Trans Mountain pipeline expansion remains in limbo.

"We plan to ensure that outside of election cycles, the best interests of Albertans are taken care of", she said.

The program is slated to cost $3.7 billion and produce $5.9 billion in revenue over three years.

"The investment in crude by rail and the elevation of the amount of crude going by rail comes as a result of successive federal government failings" to get new pipelines approved and built, Notley said Tuesday.

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"We have successfully negotiated deals with the Canadian Pacific Railway and Canadian National Railway to start moving oil by rail this July", Alberta Premier Rachel Notley said Tuesday as she announced the province had signed three-year contracts to lease 4,400 rail cars. That project later suffered a setback when a court ruled that the National Energy Board would have to resume regulatory hearings. An earlier version stated that Notley's plan would move up to 120,00 barrels of oil per day by rail by 2020.

The government says the trains are needed in light of a backlog of oil in the province and lack of pipeline space to export it.

The move is also forecasted to reduce the projected differential between Western Texas Intermediate (WTI) and Western Canada Select (WCS) - the benchmark value for crude oil coming out of the U.S. and Canada, respectively - by US$4 per barrel between early 2020 and late 2021, states the release. The discount of Western Canadian Select shrank to less than $7 a barrel last month.

Much of that crude will head to the Gulf Coast, the world's largest refining market for heavy oil, though Notley said some volumes will go to Canada's West Coast and eastern markets as well.

The rail plan has a few differences from the outline Notley provided in a speech in November.

"We are confident that this will turn out to be a good business decision for taxpayers", she said.

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