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Premier Jason Kenney said Alberta will lose $1.3-billion from the sale of oil-by-rail contracts signed by his predecessor as he announced that his government had agreements to offload them onto the private sector.

Mr. Kenney provided no additional details about the sale or which companies are involved, other than to say there are 19 contracts for railcars, loading and unloading, logistics and other services. The contracts have not been used.

The projected loss to the province is $200-million less than what the government forecast in its budget last year. He said the loss proves the plan was a bad deal to begin with.

“We knew that this was something the private sector would be willing to do and should be doing at its risk, not at the expense of taxpayers,” he said at an event in Calgary.

“Shipping crude by rail is something that the private sector is in the best position to be doing itself.”

The previous NDP government announced a $3.7-billion deal in February, 2019, to lease thousands of railcars as the province’s oil industry was suffering from persistently low crude prices – in large part because of a lack of export capacity. The rail deal, which would have eventually shipped 120,000 barrels a day by Canadian Pacific Railway and Canadian National Railway, was among a series of measures designed to stem the bleeding in the oil patch. Two months earlier, the government also announced production cuts designed to drive up prices.

Then-premier Rachel Notley said the plan would open up much-needed rail capacity while generating revenue for the province.

Mr. Kenney and his United Conservative Party were immediately critical and promised to rip up the contracts if they won the provincial election, which they did that spring.

The Premier has repeatedly said the NDP plan was risky and destined to lose money. He said the sale of the contracts would be finalized by the Alberta Petroleum Marketing Commission.

CN declined to comment, while CP did not respond.

Mr. Kenney noted rail shipments have significantly increased over the past 12 months without government intervention. While that is true, the increase was largely due to the fact that rail shipments plunged when production limits took effect in January of last year, as higher Canadian crude prices made rail shipments less economical. Those production cuts, which Mr. Kenney supported while in Opposition, have been relaxed several times since.

The latest data available from the Canada Energy Regulator show rail shipments have largely recovered, with nearly 300,000 barrels a day exported in November compared with record totals of between 300,000 and 354,000 in late 2018.

Statistics from CP and CN show that weekly shipments of petroleum this month are slightly higher than they were in late 2018.

The NDP’s finance critic Shannon Phillips, said she was skeptical of the Premier’s announcement and wanted to see more detail about the agreements. She defended the initial oil-by-rail contracts.

“We were combatting and taking seriously a record differential in oil prices and we had to take action or thousands of Albertans would have lost their jobs,” she said.

While the province isn’t saying which companies have agreed to buy the contracts, there has been speculation about possible buyers, including Texas-based Clover, a small, little-known company that confirmed in November that it was “very much involved” in the negotiations. CNRL was identified by analysts as a strong front-runner, but the company appeared lukewarm about the possibility. Imperial Oil said late last year it wouldn’t pursue the contracts because the business case simply wasn’t attractive.

Raymond James analyst Jeremy McCrea said interest in the contracts waned significantly over the past year, since price differentials began shrinking and more pipelines and refineries received approvals.

“You add it all up and there’s about 2.5 million barrels of capacity coming on-stream in the next few years, so … a lot of these companies are saying, ‘Why would we pay for overpriced rail contracts?’ ” he said Tuesday.

While signing a rail contract could help diversify an oil company’s offerings, Mr. McCrea said pipeline progress simply made the contracts less attractive for producers.

He added that recent derailments haven’t helped, notably one in in Guernsey, Sask., last week in which a train carrying crude jumped the tracks and erupted into flames, spewing thick black smoke into the air and leading to the evacuation of the 85-person hamlet. That led to the federal government cutting the speed limit in half for trains carrying crude and other dangerous goods, and Canada’s two largest rail companies limiting track space for those same trains.

“It seems like there’s more risks to having rail,” Mr. McCrea said. “If I’m shipping crude on this rail line, and suddenly this train has an accident and ends up killing people, do you want to be the company that was utilizing rail to ship oil? I think rail has that social [environmental, social and governance] risk potentially with it.”

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