Alberta Premier Rachel Notley calls for Ottawa to take direct role in railway oil transport

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Alberta Premier Rachel Notley is calling on the federal government to get involved in the shipment of oil by rail, including the purchase of new locomotives and tanker cars to help ease bottlenecks from a lack of new pipelines.

Ms. Notley said an extraordinary intervention by Ottawa into the country’s railroad system, after the federal government’s $4.5-billion purchase of the Trans Mountain pipeline, would be justified by the more than $40-million the Canadian economy is losing daily due to the steeply discounted price American purchasers are currently paying for Alberta’s landlocked oil.

Western Canadian Select, an Alberta heavy-oil blend, sold for US$43.90 a barrel below U.S. benchmark West Texas Intermediate light crude on Monday, according to Net Energy Exchange. The discount, which historically hovered around $10, has exploded in recent months due to refinery maintenance and the lack of new pipeline capacity. The Premier said the steep discount has been “punishing” for her province’s economy.

“Tens of millions of dollars extra per day are being pulled out of the Canadian economy because we can’t get our act together to get our product to market,” Ms. Notley told reporters in Calgary on Monday afternoon after meeting with a number of energy executives.

“The best and only long-term solution to the price gap is building new pipelines,” she said. “One of the things we can do in the short to medium term is increase rail capacity, and I think there is a role for the federal government to play in that effort.”

Vanessa Adams, press secretary to Natural Resources Minister Amarjeet Sohi, said in an e-mailed response that the federal government is seeking to diversify oil exports through pipeline expansion. Her e-mail ignored questions about Ms. Notley’s call for more government involvement in rail shipments.

The Premier evoked the federally owned grain hoppers that once plied Canada’s railroads as a precedent for Ottawa to follow. The now-defunct Canadian Wheat Board, along with the provinces of Alberta and Saskatchewan, purchased thousands of hopper cars over decades and built a government-owned rail fleet to help farmers get their grain to export markets. Ms. Notley called on Ottawa to consider a similar system for the transport of oil.

“At least in the short term,” she said of the rail proposal, which will be sent to Ottawa within days. “They do it for grain, they do it for a number of other things. There are also other things that they can do before they get to that, but really, it needs to happen. … We need more cars, we need to order more locomotives in order to get more cars onto the rails.”

Shannon Greer, a spokeswoman for Ms. Notley, said the Premier’s office wouldn’t provide a number for how much rail equipment they would like Ottawa to buy, but added “at this point, we are suggesting that an investment in two unit trains a day would help alleviate the pressure.” A unit train can contain a number of locomotives pulling more than 100 tanker cars.

Canada’s railroads have struggled over the past few years to keep up with soaring exports of grains and a boom in oil-by-rail shipments. As oil and gas production has increased on the Prairies, producers have turned to the rails as proposed pipelines to B.C. and the U.S. Gulf Coast have been delayed or cancelled due to protests and long government reviews.

Mr. Notley’s call to Ottawa is a move from the leader of an irritated province, said Jean-Sébastien Rioux, a professor at the University of Calgary’s School of Public Policy. “This is more of a gesture to show Alberta’s frustration at the very low prices we are getting because we cannot get our oil to international markets. This is obviously not a good solution to solve our deeper problems,” he said.