Calgary

Notley says Kenney's plan to cancel oil-by-rail deal would cost Alberta $2.2B

NDP Leader Rachel Notley says rather than saving Alberta $3.7 billion, UCP Leader Jason Kenney's plan to cancel the province's railcar deal would cost $2.2 billion in lost revenue.

NDP signed deal to lease 4,400 railcars, which would move an additional 120,000 bpd

NDP Leader Rachel Notley speaks to the media Monday in Calgary. (Mike Symington/CBC)

NDP Leader Rachel Notley says rather than saving Alberta $3.7 billion, UCP Leader Jason Kenney's plan to cancel the province's railcar deal would cost $2.2 billion in lost revenue.

"He is wrong," she said during a press conference held outside a Calgary rail yard on Monday.

"Not only will moving oil-by-railcar clear the backlog, reduce the [price] differential, save jobs and make a considerable profit, it sends the right signal to investors around the world. It says we will not strand our oil, we will not leave it in the ground as Mr. Kenney is proposing."

In February, the NDP signed a deal to lease up to 4,400 railcars, which would move an additional 120,000 barrels per day.

Notley said this is expected to generate $5.9 billion, or $2.2 billion in profit for the province over three years, and that Kenney failed to account for that lost revenue.

"The economic consequences of restricted market access are bad enough but we do not need to be doing it to ourselves."

Kenney's plan to cancel the railcar deal was announced as part of the UCP's platform unveiled on the weekend. The party says if it's elected, it will produce a $715-million surplus by 2023 — getting the province out of debt one year earlier than the NDP has projected.

"What we'll be doing here is taking low-priority and wasteful spending, reducing that and retargeting it to high-priority spending. That makes fiscal sense," Kenney said on Saturday.

The UCP leader criticized Notley's plan as something that could be resolved by the private sector, a comment she disputed.

"He's right and wrong. There's no question the private sector will continue to do some of this work … but they were doing that when the differential blew up this fall," she said.

"On its own, it didn't work, and small and medium producers were being squeezed."

On Monday, Kenney criticized Notley's remarks, calling the NDP's plan irresponsible.

"Of course, we do need to move more oil, but we don't need to do it at taxpayer expense. This nearly $4-billion expenditure equals the equivalent of four major hospitals or nearly 200 new schools," he said during an Edmonton press conference.

The additional oil-by-rail shipments are set to begin in July, and will reach the 120,000 bpd capacity by mid-2020.

Revenue estimate could change

Notley said the railcar deal will help bring an end to the oil production curtailment and do so without affecting shipments of agricultural goods.

The curtailment, which has split opinions within the industry, was intended to be a temporary measure to reduce the price discount on oil produced in Western Canada. 

In January, Canada exported 325,499 barrels of crude-by-rail per day, which was down about 25,000 from the previous month but still more than double the amount shipped in January 2018.

The railcar leases were another way the NDP plans to ease the glut, but the revenue breakdown isn't a sure thing — it's based on internal estimates and forecasts, and could change depending on the market.

Notley has said the railcars are a short- to medium-term solution, with pipelines remaining the long-term goal. 

The cost of shipping by rail versus by pipeline is about $9 to $12 US more per barrel, according to a recent government estimate.

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