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Crude oil and other petroleum products are transported in rail tanker cars on a Canadian Pacific Railway train near Medicine Hat, Alta., on Sept. 6, 2018.

Larry MacDougal/STRLMD

The Alberta government is less than halfway through offloading a series of oil-by-rail contracts from its books onto the private sector, a process it was planning to have done by the end of March, the month after Canadian crude exports via rail hit a record high.

Since then, those shipments have plummeted. The province has already paid $866-million to the private sector to offload the contracts, signed as part of a $3.7-billion deal in February, 2019, under the then-NDP government. Alberta’s fiscal update Thursday earmarked another $1.25-billion to cover the cost of divesting the rest of the contracts.

The crude-by-rail deal would have seen the province lease thousands of railcars to help bolster consistently low prices for oil in Alberta by increasing export capacity, shipping 120,000 barrels a day by Canadian Pacific Railway and Canadian National Railway.

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The idea was to open up much-needed capacity for oil exports by rail while generating revenue for the province. But Jason Kenney – then the opposition leader – said the plan was risky and bound to lose money. He promised to rip up the contracts if the United Conservative Party won the provincial election, which it did that spring.

Energy Minister Sonya Savage told The Globe and Mail on Thursday that her government has so far handed off contracts covering 50,000 barrels a day of crude by rail capacity to the private sector, leaving 70,000 still to go.

“The NDP government should have never entered these deals and forced this type of risk onto the Albertan taxpayer. It was a terrible gamble with taxpayer dollars,” Ms. Savage said in an e-mail.

Canadian exports of crude oil by rail reached a record high of 412,000 barrels a day in February, but then plunged almost 90 per cent by June to an eight-year low, as North American fuel demand remained weak due to measures taken to control the COVID-19 pandemic.

Rail shipments of oil in June fell to about 42,820 barrels a day, down from 58,000 in May and 156,000 in April, according to the Canada Energy Regulator.

Ms. Savage said given that low, the program would have run at a loss of between $2.3-billion and $2.7-billion if the government had run it instead of offloading contracts onto the private sector.

Mr. Kenney said in February his government had reached agreements for 19 contracts for railcars, loading and unloading, logistics and other services. Those contracts cover the full 120,000 barrels of capacity.

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However, Ms. Savage said not all transfers of the contracts have actually been finalized, with delays due to COVID-19 and the international energy price war.

In February, Mr. Kenney said the province would lose $1.3-billion from the sale of oil-by-rail contracts. In Thursday’s fiscal update, that number ballooned to $2.1-billion.

NDP finance critic Shannon Phillips said Friday the loss amounts to “one of the worst management failures in Alberta history.”

She also accused Mr. Kenney of trying to mislead Albertans by claiming the contracts were all transferred in February.

“That is an astonishing failure of accountability, and I think shows the extent to which we need some better answers on what happened in 2019-20,” she said.

Alberta’s projected deficit for this year rocketed to a record $24.2-billion in Thursday’s fiscal update, with royalties stemming from non-renewable resources such as bitumen and natural gas expected to drop to their lowest point in more than four decades.

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