Notley calls on Ottawa to buy more rail cars to get Alberta oil to market

Premier Rachel Notley is calling on the federal government to buy more rail cars to transport Alberta oil.

Alberta's premier says "punishing" differential between WTI and WCS is costing Canadians

Alberta Premier Rachel Notley says the federal government needs to increase the capacity to transport oil by rail. (CBC)

Premier Rachel Notley is calling on the federal government to buy more rail cars to transport Alberta oil.

"The best and only long-term solution to the price gap is building new pipelines," Notley said Monday in Calgary after a meeting with local energy industry officials on market access.

"In the meantime, however, we need to take a close look at the tools available to us to close the differential where it's feasible. Like, for example, increasing the efficiency and availability of rail capacity to move our products."

Notley said the differential between West Texas Intermediate and Western Canadian Select, which has vaulted above $50 US a barrel in recent weeks, is a "punishing" number that's costing the federal government tens of millions of dollars a day.

"If it continues, it is going to have a significant impact, frankly, on Ottawa's bottom line," she said.

Notley pointed out that the federal government supports grain transportation by rail, and said it's time to increase the capacity for oil as well.

Railways have struggled to keep up with exports this year, with reports of both grain and rail cars marooned on the Prairies.

Bill C-49, which was passed this year, imposed reciprocal penalties on railways that leave farmers waiting months for grain to be shipped.​

Notley said there are no specific details on the province's request just yet — which could include a call for a number of rail cars and locomotives to be purchased, or a requirement that rail companys' shipments include a certain portion of oil. She said Alberta is in the midst of putting together a specific business case to take to Ottawa. 

She did say the proposal wasn't a suggestion that oil supplant grain shipments on railways.

And, she said, the investment would pay for itself through the economic benefits from increased capacity and by a boost in investor confidence.

"While it's not insignificant, I will say it's significantly less than the $2.6 billion that both the Conservatives and Liberals decided to give Chrysler," she said, referring to a federal loan to bail out the auto company in 2009 during the financial crisis.

"It's something that ultimately will be paid for by the way of increased value to the federal government's own coffers," Notley said.

We should not be importing oil from, you know, a range of countries that are uninterested in human rights, uninterested in combating climate change.- Alberta Premier Rachel Notley

The premier also said it's important Canada stop getting oil from places like Saudi Arabia that have a poor record on human rights.

Foreign Affairs Minister Chrystia Freeland said Monday that the government is examining Canada's relationship with Saudi Arabia following the death of dissident journalist Jamal Khashoggi.

Refineries in Eastern Canada import about 75,000 to 80,000 barrels per day of Saudi Arabian crude, which is just under 10 per cent of the country's total oil imports. Canada exports about 3.5 million barrels a day.

"We should not be importing oil from, you know, a range of countries that are uninterested in human rights, uninterested in combating climate change," Notley said.

"This underlies the absolute ridiculousness of the situation that we have gotten into where we have the most environmentally and, frankly, socially progressive producer of oil and gas.… And yet Eastern Canada is importing from a number of places that don't meet that description and we are doing that at the expense of working people here in Alberta. We're doing it at the expense of Canadians across the country who rely on the revenue that our industry generates."

Not the 'best outcome'

When asked if she was concerned that increasing rail capacity could lead to accidents like the 2013 disaster in Lac-Megantic, Que., she said there's not much choice if needed pipeline projects — like the Trans Mountain expansion from Edmonton to British Columbia's lower mainland — continue to be stalled.

Crude-by-rail shipments in Canada have increased significantly over the past few years. (Matthew Brown/AP Photo)

"We all know pipelines are the safest and lowest-emission means of transporting oil and gas out there. But as a result of years of successive federal governments' inability to move forward on getting these major infrastructure projects.… Putting them on rail I don't believe is the best outcome, but at the same time a $45-per-barrel differential steals tens of millions of dollars a day out of the pockets of Canadians and redirects them south of the border, and that is profoundly unwise," she said.

A stop-gap measure

The volume of crude shipped by rail has spiked in the past eight years since the Trans Mountain pipeline expansion was first pitched, with an increase from 30,000 barrels to 200,000 barrels being shipped per day.

The expansion's approval was rescinded by the Federal Court of Appeal in August, so now the federal government — which has purchased the pipeline from Kinder Morgan — is working to fulfil the court's requirement to consult Indigenous communities and consider the environmental impact of additional tanker traffic to the coast.

Political scientist Duane Bratt said Notley's trying to put pressure on the federal government to get oil to market by pipeline, and that rail is likely more of a stop-gap measure.

"There's also going to be cost issues, there's going to be greater emissions by producing this. So it's all about getting back to the original pipeline. So if you don't want the political problem of rail, if you don't want the threat of a rail disaster like in Quebec, if you don't want additional costs, if you don't want greater greenhouse emissions, maybe you should start working harder on the pipeline issue," Bratt said.