Jason Kenney is promising to rip up crude-by-rail contracts signed by the NDP government if his United Conservative Party wins the Alberta election, as he seeks to turn the fate of the oil sands into a central issue of the spring campaign.
Mr. Kenney’s pledge to cancel the $3.7-billion rail plan marks a significant break in how his party and the governing New Democrats would manage the province’s oil patch. Until now, Mr. Kenney argued Premier Rachel Notley had mismanaged the file and he promised an aggressive strategy to challenge the federal government and oil sands opponents, but he has offered few specifics about how he would actually govern the industry. He also initially supported the NDP’s recent production cuts.
Ms. Notley announced plans this week to lease 4,400 rail cars over the next three years to transport up to 120,000 barrels a day, which the Premier said would alleviate a backlog caused by limited pipeline capacity and bring in revenue for the province. At first, Mr. Kenney was critical but said a UCP government would review the contracts before deciding what to do.
On Wednesday, he went further and promised to do everything in his power to cancel the entire plan.
“We believe the private sector can and will increase rail shipment capacity for Alberta oil when the market conditions are right," Mr. Kenney said Wednesday at a campaign announcement about health care. “With the NDP’s fiscal train wreck that has us headed for $100-billion in debt, we can’t afford $4-billion on a corporate welfare that is a risky venture.”
Mr. Kenney said he would contact Canadian National Railway and Canadian Pacific Railway to tell them they should “not spend a lot of money” on implementing their contracts. He said he would seek legal advice if elected and acknowledged the contracts likely include cancellation penalties.
“Whatever the penalties are, I’m sure they’re a heck of a lot less than $4-billion," he said.
Neither the Premier’s Office nor the companies would disclose details about potential cancellation penalties.
Ms. Notley defended the rail plan as sensible and profitable.
“I am shocked at how irresponsible a move this is and I honestly expected more from someone putting forth their name to lead the province,” Ms. Notley, who was in Grande Prairie, Alta., for an oil-related announcement, said in a video she posted to social media.
The election campaign, which must begin in the next two months, is expected to focus heavily on the economy and the province’s oil sector, which has struggled in the face of low crude prices and a lack of new pipelines. The province has yet to fully recover from an economic downturn that has dragged on throughout the NDP’s term in office, with roughly 170,000 people currently out of work, an increase in bankruptcies, a sluggish housing market and high vacancy rates in Calgary’s downtown office towers.
Prices for Alberta crude collapsed last year as the gap, or differential, between Western Canada Select and West Texas Intermediate topped US$50 a barrel. After the production cuts, the differential quickly narrowed to about US$10 a barrel, although it has since widened to about US$15.
The NDP government imposed mandatory production cuts on Jan. 1 to reduce a glut of oil in storage and boost prices. Mr. Kenney initially called for steeper cuts than what the NDP ultimately set.
Mr. Kenney has previously said he would aggressively “fight back” against the federal government, other provinces and environmentalists. He said he would threaten to cut off oil shipments to provinces that obstruct oil pipelines, call on the federal government to cut transfers to those provinces, target environmental groups’ charity status and hold a provincial referendum on the equalization. He would also cancel the carbon tax immediately upon taking office.
Duane Bratt, who teaches political science at Mount Royal University in Calgary, said Mr. Kenney is attempting to lay out a distinct change in the direction when it comes to the oil industry.
That includes the latest promise to scrap the oil-by-rail plan as well as Mr. Kenney’s pledge to kill the carbon tax and take on other governments and pipeline opponents.
“We’re starting to see two very different visions on managing the oil and gas sector in this province," Dr. Bratt said in an interview.
“The economy and pipelines have been the number one issue for a very long time.”