Skip to main content

The CEO of Canadian National Railway Co. is calling for an end to oil production cuts imposed by the previous Alberta government and says the company expects to ship more crude this year, even if Premier Jason Kenney follows through with an election promise to end a multibillion-dollar oil-by-rail plan.

Jean-Jacques Ruest said CN is investing in new locomotives, crews and track and is prepared for rail shipments to rebound after they dropped precipitously at the beginning of this year in the face of oil production cuts. The cuts have pushed the price of Alberta crude higher, which makes rail shipments less profitable. Both the previous government and the new one have signalled an intention to pull back on those cuts throughout the year.

“If there was a reduction in curtailment, then Alberta will be able to use more rail capacity and get more product to market,” Mr. Ruest told The Globe and Mail.

Story continues below advertisement

However, CN and its competitor Canadian Pacific Railway Ltd. could soon find themselves at odds with Alberta’s new government. Mr. Kenney has vowed to scrap a $3.7-billion contract inked by his predecessor with the two railways to move an additional 120,000 barrels of crude oil daily. The first of 4,400 rail cars leased by the Alberta government were planned to start moving some of the province’s oil, largely to U.S. refineries, this summer.

Mr. Ruest declined to provide any details about his company’s contracts with the Alberta government or what penalties the province would face if it tried to cancel them.

“We’re in a position to move any and all natural resources, including crude. Whatever happens, we hope that we’ll be able to move more crude for Alberta in 2019,” he said. “In good faith, and with a lot of effort, we’ve worked very hard to create capacity to move more natural resources, including crude. And now we’re in a position to do that.”

Crude-by-rail shipments hit a record level in December, with nearly 354,000 barrels a day moved by Canada’s railways, according to data from the National Energy Board. They have decreased in recent months, largely due to government-mandated oil production cuts that have made rail shipments less profitable as Alberta crude prices increased.

CN Rail’s first-quarter results hampered by ‘cold, bitter winter’

CN Rail breached obligation to provide adequate service to forest product shippers: regulator

CN Rail, Unifor agree to tentative deals on labour contracts

Mr. Kenney’s office said the Premier’s opposition to the oil-by-rail contracts has not changed, but he has not addressed the issue publicly since taking office last week.

“The Premier’s position on oil-by-rail has not changed,” spokeswoman Christine Myatt said in a statement. “Any further comment at this point would be premature.”

The policy was imposed by former premier Rachel Notley’s government with an aim to reduce a massive discount on the price paid for Alberta’s oil. The gap between Alberta’s oil price and international benchmark prices has returned to normal levels since curtailment came in.

Story continues below advertisement

The curtailment policy took effect on Jan. 1 and forced the province’s largest producers to cut production by 325,000 b/d, or about 8.7 per cent. Those limits have been relaxed several times and the total size of the cut is currently expected to be 175,000 b/d by June.

Mr. Kenney has called curtailment a “necessary” policy in the past and has said he doesn’t intend to end it early; the current legislation only allows production cutbacks until the end of 2019.

In her new role as Alberta’s Official Opposition Leader, Ms. Notley called on Mr. Kenney to leave the province’s oil-by-rail program in place: “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.”

Michael Dunn, director of institutional research at Calgary’s FirstEnergy Capital Corp., said many in the oil patch are waiting to see whether Mr. Kenney might discover that the costs of cancelling the contracts would be onerous and might balk. The government has so far declined to disclose how much cancelling the contracts would cost. “I’m not convinced with certainty that he might cancel,” Mr. Dunn said.

CN is working on two projects to get Western Canada’s coal and propane to Asian markets. Speaking to the Calgary Chamber of Commerce on Wednesday, Mr. Ruest said the railway’s $700-million capital investment in Alberta over the past two years “is a sign of confidence from CN on the province’s future.” He said the projects, which will see the products shipped from B.C.’s coast to Asian markets, will help Canadian producers get more revenue for natural resources.

Report an error Editorial code of conduct
Tickers mentioned in this story
Unchecking box will stop auto data updates
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

Cannabis pro newsletter