Rail cars await pickup in Winnipeg. In February, the NDP government signed a $ 3.7 billion contract with CN and Canadian Pacific Railway to lease up to 4,200 rail cars to transport crude oil.
Prime Minister Jason Kenney's new government will cancel the $ 3.7 billion oil-by-rail contract signed by the NDP government former prime minister Rachel Notley just weeks before summoning elections with CN Rail, CP Rail and several other railroad partners, members seniors from the prime minister's staff confirmed Friday night.
The source said, the government accepted legal opinions – both from the government and external lawyers – stating that the Alberta government could cut recent contracts through law, especially because Kenney warned the CEO of Canada's two largest railways in writing and openly that he would not consider the government bound by a contract made by the NDP in an effort to save the opportunity for his election.
Reached on Friday night, Kenney's press secretary, Christine Myatt, gave a written statement via email confirming the news disclosed by senior staff.
"We have been clear from the start: these contracts, which were carried out by a desperate government ahead of the election, should never have been signed – by the government or by the train," Myatt said.
"There is no reason why private companies cannot move to bring more oil by train. That's still our position. If this contract cannot be transferred to the private sector with acceptable conditions, our government will do what is needed to protect Alberta taxpayers. "
Kenney announced on February 1, the first day of Notley could officially hold an election, which was finally held on April 16, that if elected he would examine all contracts made by the province to ensure they were in the best condition of the interests of the province and its citizens value-for-money review. "
On February 19, Notley announced that it had signed a contract with Canadian Pacific and Canadian National to lease 4,400 rail cars to move crude oil and crude oil to the North American market. On the same day, Kenney reaffirmed his position that if elected – and he was 20 points ahead at the time of the vote – he would check the contract to ensure that it was a good deal for Albertans.
The next day, on February 20, Kenney sent a letter to the CEOs of the two companies to warn them that he would cancel the contract if it was found not to be in the public interest.
"If elected, the United Conservative government will do everything in our power to cancel the $ 4-billion dollar NDP from borrowed tax to disrupt the market," Kenney said.
He said oil companies would send more oil by train if it was profitable and pointed out, rightly, that Alberta could not afford the deal because the NDP had a multibillion-dollar annual deficit that led to debt that was expected to reach $ 96 billion by 2024.
The senior official said while he could not disclose details in the contract, he could say what was not there. In Notley's "to try to pass Salam Maria to buy an election victory," his now defeated government "has a very bad negotiating contract." The contract, said senior staff, does not appear to contain a "type of guarantee" and comes out of the clause that someone who signed a multibillion-dollar agreement will provide a graceful solution to the contract. This agreement really locked the government without an option other than the nuclear option if they wanted to leave.
"A thorough analysis shows that the government significantly pays more for the service, but the requirements are kept confidential," said the source. However, it was revealed that CN and CP signed $ 2.2 billion of the $ 3.7 billion plan.
"Parties – especially CP and CN, signed cynical and exploitative requirements – taking advantage of governments that would make deals for political reasons and any conditions," said the staff. "If (the railroad company) is careful, they will survive because Jason Kenney clarifies his intentions. He did not keep it a secret, they were told the day the agreement was signed and before they began taking steps to fulfill the contract. "
It is never good for investor trust when one government kills an agreement made by the previous government. Tim McMillan, president and CEO of the Canadian Petroleum Producers Association, often said in the past that the cancellation of the Northern Gateway pipeline by Prime Minister Justin Trudeau "is the most destructive thing that has been done to our economy."
Trudeau, which unilaterally killed the Enbridge Northern Gateway pipeline in July 2017, after surviving for years in a rigorous and expensive regulatory process passed in the House of Commons, shook investor confidence that never recovered and was tidier than before with towering bills. in Bill C -69, the Impact Assessment Act, which critics say is unchanged will make big energy projects and pipeline construction impossible.
But this cancellation is very different. The contract holder should be warned and a little time has passed.
Judging from a statement made by a spokesman for CN Jonathan Abecassis, it seems the railroad giant is planning to antagonize Kenney's new government.
"CN strongly supports the prime minister's desire to market Alberta oil to the market and we want to be part of that solution going forward." This is an unclear but generous statement.
CP does not reply to any messages or calls from Postmedia.
The hope of the Kenney government – which will hold a speech from the throne on Wednesday – is that if oil by train makes sense, the private industry will advance and make it happen.
Licia Corbella is a Postmedia columnist. email@example.com