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Alberta will buy rail cars to move 120,000 barrels of crude oil trapped, Notley said

OTTAWA – Alberta is in talks to buy a railroad car to transport 120,000 barrels per day (bpd) of crude and expects a deal to be concluded in a few weeks, Premier Rachel Notley said Wednesday, as the energy-rich province took action to move trapped oil. in the region due to lack of pipeline capacity.

Notley, which said cars were needed to help deal with stranded oil that had cut Alberta oil prices, told business audiences he was disappointed that the federal government had not helped finance the purchase.

Reuters revealed last week that Alberta had proposed joint purchases of two train units and estimated a one-time capital cost of around $ 350 million. Federal officials are calm about the idea, and say that when the first car starts operating late next year, supply problems will decrease.

Alberta estimates that producing around 250,000 bpd more than can be sent using pipes and existing rail capacity.

"Alberta will buy the railroad car itself to move this oil," Notley said in his remarks. "We have involved third parties to negotiate and the work is going well. We anticipate settlement of transactions within a few weeks. "

He then told reporters an agreement could be announced before the end of the year.

Alberta Premier Rachel Notley said the province was in talks to buy a railroad car to help move stranded oil.

John Woods / The Canadian Press file

The office of the federal natural resources minister, Amarjeet Sohi, was not immediately available for comment.

Based on initial talks, Alberta expects the first 15,000 bpd capacity to be online in December 2019, increasing to 120,000 full bpd by August 2020, with the agreement running for three years.

Additional transportation capacity is expected to increase Canadian crude oil discounts by around US $ 4 over a three-year period, the government said.

Below the expected time line, the first train carriage will be launched right when the Line 3 Enbridge Inc. oil export pipeline is set to begin operations. Two other main pipeline expansions are also underway, although the timing is unclear.

Notley, which repeated its demand for more pipeline capacity, said the cost of purchasing a car would be fully obtained through royalties and sales of shipping capacity.


Notley said there was "no reason" for Ottawa not to help and punish Prime Minister Justin Trudeau's government for proposing tougher environmental standards which he said would make it more difficult to build pipelines.

A glut of supply "happened because Canada deliberately held the economy of Alberta and the hostages of the Canadian economy," he said, estimating losses at $ 80 million per day.

Ottawa denied it was helpful, noting that earlier this year bought the Trans Mountain pipeline.

Canada deliberately holds the Alberta economy and Canada's economic hostage

Rachel Notley

Some Canadian crude producers have limited production and are asking Alberta to cut mandates for other producers. Notley did not mention this idea in his speech.

His spokesman said the province of Alberta did not consider "holiday royalties" to push for production cuts, but said a number of tools were being considered, including how royalties were applied. He gave no other details.

Last week federal Finance Minister Bill Morneau said business would be allowed to remove additional capital investments, something he said oil industry executives had pressed.

© Thomson Reuters 2018

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