The Alberta government is appealing for Ottawa’s help to move more of the province’s stranded oil by rail, but Prime Minister Justin Trudeau offered no immediate aid for the industry that he said is in “a crisis” as prices have collapsed.
Alberta Premier Rachel Notley said her government will forge ahead and buy rail cars alone if necessary, adding that there is a good business case for boosting rail shipments of oil. Lack of space on pipelines has created a backup of Alberta oil that has sent prices into a tailspin.
“If Ottawa won’t come to the table, then we will get it done ourselves,” she said on Thursday morning.
Ms. Notley has proposed a three-year plan for Ottawa and Alberta to buy and operate rail cars to ship the surplus oil. The plan would cost about $3-billion and add oil-by-rail capacity of 120,000 to 140,000 barrels a day.
Later, at a Calgary Chamber of Commerce luncheon, Mr. Trudeau said the depressed prices for much of Alberta’s oil are “unacceptable” and “the status quo cannot continue.” But when asked about moving more oil by rail, he said he would listen to the ideas of 11 industry leaders at an afternoon meeting, and described the market issues as “complex.”
He received only polite applause from the business crowd. Outside the downtown hotel where the luncheon was held, about 800 pro-energy demonstrators closed a city block chanting “pipelines now” and “fill that pipe.”
Mr. Trudeau’s visit came a day after the federal government’s fiscal update brought corporate tax cuts but nothing specifically for the oil business. The price of Alberta heavy crude has crashed owing to factors that include a shortage of pipeline capacity and temporary closings at refineries. The price is expected to recover by spring, but Ms. Notley and Mr. Trudeau said the Canadian economy is losing $80-million a day. While the industry is hurting, it is divided: some large oil producers want the Alberta government to force companies to cut production, and others oppose the idea.
In a morning speech to an oil drillers association at Calgary’s Petroleum Club, Ms. Notley said Ottawa should have offered help to Alberta in its fiscal update.
“There are a lot of folks here who would be forgiven for saying, ‘Geez, if there was this kind of economic crisis going on in the manufacturing centre in Ontario, we’re pretty sure it would make its way into the first two paragraphs of the fiscal update,’ " she said.
Mr. Trudeau said the top industry priority is a new pipeline. “I bought a pipeline,” he said of Ottawa’s purchase of the Trans Mountain project in May, adding that the government is working “to ensure that the pipeline gets built in the right way.”
The PM spoke of his government’s support for Alberta: “This is very much a crisis.”
Canadian oil production has surged 7.5 per cent this year to 4.3-million barrels a day from four million in 2017. Of the increase, about half – some 160,000 barrels a day – is heavy oil, which is lower quality and always fetches less than the North American benchmark. But this fall, the price hit record lows. More oil is moving by rail – the National Energy Board says 270,000 barrels a day were shipped by rail to the United States each day in September, double a year ago.
Both major railways in Canada are moving more oil this year. But they are limited by the number of crews and locomotives and track space. Canadian National Railway Ltd. is recovering from network congestion earlier this year brought about by a surge in freight and not enough staff and engines.
“We look forward to further discussions with stakeholders and all levels of government on how rail can be part of the solution for moving Canada’s oil to market,” CN said in an e-mail.
A spokesman for Canadian Pacific Railway Ltd. declined to comment.
The capacity for Ms. Notley’s proposed three-year plan would arrive a year from now. Ottawa has not supported the idea, in part because some new pipeline space is also expected at the same time, and other negative factors are also predicted to abate.
On Thursday afternoon, Mr. Trudeau met with a group that included the chief executive officers of Suncor Energy Inc. and Cenovus Energy Inc., two large firms with opposite views about solutions. Cenovus CEO Alex Pourbaix last week called on the Alberta government to require cutbacks in production. Suncor Energy, which benefits from low oil prices at its refineries, is opposed.
Ms. Notley said Alberta aims to come up with short-term solutions “very quickly,” but on Thursday spoke in general about a “range of options.”
Cenovus, which has reduced its oil sands production, expects the province to favour cutbacks.
“I think they’re coming to a conclusion that a curtailment is probably the only option,” Keith Chiasson, Cenovus’s senior vice-president of downstream, whose job is to get the best price for the company’s oil, said in an interview on Thursday.
Mr. Chiasson criticized integrated producers, which both produce and refine oil, such as Suncor, and Imperial Oil Ltd. The low price for crude allows these companies to make a higher profit on products that they make, such as gasoline. He said they are profiting unfairly from the low price of Alberta oil at their refineries.
“The market is broken,” Mr. Chiasson said. “Those integrated producers are making windfall profits on the back of Albertans, and Canadian taxpayers. The government needs to step in to protect the people of Canada.”
Jason Kenney, Leader of the provincial United Conservative Party, said Alberta should consider ordering production cuts. He also said the Prime Minister on Thursday provided “saccharine words and no action.”
With a report from Eric Atkins and files from Reuters