Canada’s Alberta to Buy Rail Cars; Expects Deal Within Weeks

November 28, 2018 Updated: November 28, 2018

OTTAWA—Canada’s province of Alberta is in talks to buy rail cars to transport 120,000 barrels per day of crude oil and expects a deal to conclude within weeks, Premier Rachel Notley said on Nov. 28, as the energy-rich province takes actions to move oil stuck in the region because of a lack of pipeline capacity.

Notley, who says the cars are needed to help deal with stranded oil that has slashed the price of Alberta oil, told a business audience she was disappointed that the federal government was not helping fund the purchase.

Reuters revealed last week that Alberta had proposed a joint purchase of two unit trains and estimated the one-time capital cost at about C$350 million. Federal officials are cool to the idea, saying by the time the cars come online late next year the supply problems will have eased.

The 120,000 bpd of rail capacity is nearly equal to the current amount of stranded supply.

“Alberta will buy the rail cars ourselves to move this oil … we have already engaged a third-party to negotiate and work is well underway. We anticipate conclusion of the deal within weeks,” Notley said in the prepared text of her speech.

Notley said last week that the province was willing to buy the train by itself if Ottawa doesn’t back the Canadian province’s proposal to spilt the costs.

Notley, who reiterated her demand for more pipeline capacity, said the cost of buying the cars would be fully recouped through royalties and the selling of shipping capacity.

The Alberta premier said there was “no excuse” for Ottawa not helping and castigated the government of Prime Minister Justin Trudeau for proposing tougher environmental standards she said would make it harder than ever to build pipelines.

The glut “is happening because Canada willfully holds Alberta’s economy and Canada’s economy hostage,” she said, estimating the losses at C$80 million a day.

Ottawa denies it is being unhelpful, noting that earlier this year it bought the Trans Mountain pipeline.

Several Canadian crude producers have curtailed production and asked Alberta to mandate cuts for other producers. Notley did not mention this idea in her speech.

Last week Finance Minister Bill Morneau said businesses would be allowed to write off additional capital investments, a measure he said oil industry executives had pressed for.


By David Ljunggren