Government ‘very likely’ to offer curtailment exemptions for companies that pick up crude-by-rail contracts

Speaking to Bloomberg’s editorial board in New York City on Monday, Kenney gave his strongest indication yet that Alberta may ease oil production curtailments on companies that offer to increase shipping by rail.
 
The premier said the province has already received 16 bids to offload the province’s crude-by-rail contracts onto the private sector and that it is “very likely” some or all of the oil producers that participate will receive allowances. 
 
Currently, producers ship approximately 150,000 barrels per day, which Kenney says could be doubled. Provincewide, total crude-by-rail shipping capacity is 500,000.
 
The previous NDP government planned to phase out the oil production curtailment it began at the beginning of the year by December, and signed a $3.7-billion crude-by-rail lease with CN Rail and CP Rail for 4,400 cars, slated to begin hitting the tracks in July.  
 
The contracts were supposed to move an additional 120,000 barrels of oil per day by mid-2020 to help deal with the glut in oil supply created by a lack of takeaway capacity.
 
The strategy was designed to close the oil price differential between Western Canadian Select and West Texas Intermediate, which had widened to nearly $46 per barrel in November 2018.
 
However, the UCP government instead decided to extend the oil production curtailment and hand over the rail contracts to the private sector.
 
On Monday, NDP Energy critic Irfan Sabir argued that if the rail contracts had been enacted, Alberta would have been in a position to fill the gap in demand left by the hit to Saudi Arabia’s production. Instead, Sabir said Alberta’s energy companies have been “left hamstrung.”
 
“Alberta’s treasury would have felt a boost today under Rachel Notley’s plan as energy producers would have been shipping more Alberta oil-by-rail to fill this gap in global supply,” Sabir said in a news release. “But now we’re not, simply because Jason Kenney decided his politics were more important than Alberta jobs.”
 
Sabir said the premier does have the opportunity to talk about Alberta’s security, but added he must “tone down his reactionary rhetoric.”