"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.
With pipelines in short supply, Notley urges Ottawa to boost crude-by-rail
"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.
Dubbed the Impact Assessment Act, the bill would change the rules for project approvals and replace the National Energy Board with a new Canadian energy regulator. It passed in the House of Commons in June and is currently before the Senate.
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.
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 NotleyThe 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."
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.
"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.
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.
CALGARY – Alberta Premier Rachel Notley is proposing Ottawa get into the crude-by-rail business – at least temporarily – so that producers in her province can get a better price for their oil.
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.
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Global News Morning Calgary's Doug Vaessen talks about Premier Rachel Notley's call for the federal government to increase oil-by-rail.
Alberta Premier Rachel Notley is proposing Ottawa get into the crude-by-rail business — at least temporarily — so that producers in her province can get a better price for their oil.
“We are in the midst of putting together a specific business case that we’ll be taking to the federal government late this week, early next week, where we lay out the specific costs,” Notley said Monday following a meeting with energy industry leaders in Calgary.
Notley noted that Alberta heavy oil producers have been dealing with a punishing price gap between their product and U.S. light oil — in the order of around US$40 to US$50 a barrel in recent weeks.
“That means that more money is being taken out of the Canadian economy and sucked into American bank accounts,” she said.
READ MORE: Little hope seen for Canadian oilpatch activity growth as steep price discounts continue
Absent new pipeline capacity connecting Alberta crude to international markets — like the stalled Trans Mountain pipeline expansion to the B.C. coast — Notley said moving oil on rail cars can be a stop-gap measure to help narrow the price discount.
And she said Ottawa should step up to making it happen, noting the federal government won’t be recouping $2.6 billion it loaned to Chrysler in 2009 to keep the automaker afloat and save jobs.
“Surely if Ottawa can write off $2.6 billion in tax dollars paid to the auto industry in Ontario, it can support our oil industry with smart investments to help close the differential and return billions of dollars to the Canadian economy.’
While Notley did not provide a price tag for the proposed federal crude-by-rail investment, she said it would be significantly less than the auto writeoff.
“More to the point, it’s something that ultimately will be paid for by way of increased value to the federal government’s own coffers, let alone to the economy,” Notley said.
Keith Stewart, senior energy strategist with Greenpeace Canada, characterized the idea as “pouring good money after bad to subsidize oil companies.”
“Premier Notley should be working with the federal government to make Alberta the leader in green energy development that it can and should be,” Stewart said in an email.
Notley did not specify what exactly the federal investment might look like, but noted more rail cars and locomotives are needed. She was adamant that she is not suggesting that oil supplant grain shipments on the railways.
She said it’s statistically safer to move crude through pipelines than on railcars, so looking to trains is “not the best outcome.”
But the plan to triple the capacity of the existing Trans Mountain pipeline between Edmonton and the B.C. Lower Mainland is in limbo. Ottawa bought the pipeline earlier this year from Kinder Morgan after the U.S. energy company became frustrated with a litany of political roadblocks.
In August, the Federal Court of Appeal quashed Trans Mountain’s approval and now Ottawa is working to fulfil the court’s requirement to consult Indigenous communities and consider the environmental impact of additional oil tankers off the coast.
In the meantime, Notley said, rail can provide some short-term relief for landlocked Alberta producers.