In a quest to create more export opportunities to Asia for Alberta oil, the Alberta government is asking the federal government to get involved, suggesting the feds invest in oil tanker cars and locomotives.
It’s estimated the Canadian economy is losing $40 million per day due to heavily discounted product entering the United States. But while Albertans may want more value for its oil, the agriculture industry in Western Canada is standing in opposition to this solution proposed by Alberta Premier Rachel Notley.
Notley is holding up the government’s past experience in owning grain cars as an example of getting involved to ensure there is an adequate amount of infrastructure, in this case oil tanker cars and locomotives, to meet shipping demands. Notley suggests the stop-gap measure until pipelines can be built.
“The best and only long-term solution to the price gap is building new pipelines,” Notley stated to the Globe and Mail. “One of the things we can do in the short to medium term is increase rail capacity, and I think there is a role for the federal government to play in that effort.”
In a CBC story the official opposition leader Andrew Scheer disagrees with Notley’s short term solution. “The very fact that the premier is proposing this, I believe, is an indictment on where we’ve got to in this country. We don’t have the capacity we need to get our energy to market,” Scheer says.
With farmers not even being one year removed from a major grain backlog, Notley’s suggestion received a cold reaction.
“Putting more oil on rail is a direct threat to the efficient movement of grain in Western Canada,” says Tom Steve, general manager of the Alberta Wheat and Barley Commissions and a member of the national crop logistics working group. “Canada’s two major railways have demonstrated insufficient capacity to move the western Canadian crop in two of the last five years. Adding more oil cars to an already constrained system would be a step backwards when we are still recovering from the grain backlog of 2017-18.”
For many in agriculture, adding more oil movement by rail will only add to the congestion and displace other commodities.
“In a limited capacity rail system, government subsidy for one shipper can only have negative effects on the movement of other shippers eventually,” says Ward Toma, general manager of Alberta Canola Producers Commission. “As poor rail grain movement impacts farmers nearly every shipping season, Alberta Canola is very worried about this proposal.”
For its part, CN Rail says that it is accepting more crude business “as capacity allows” to support the energy economy in Alberta and Saskatchewan, but not at the expense of other commodities such as grain and potash. A spokesperson for the railway says that CN does not want to limit, and “will not restrain, business that will be long-lasting to replace it with crude. To the extent we have spare capacity, through our ongoing record investments, we will bring on crude without hurting grain, lumber, mining and those other long-lasting customers.”