Alberta expects $1.7 billion profit from crude-by-rail operation

Alberta expects $1.7 billion profit from crude-by-rail operation

Alberta expects $1.7 billion profit from crude-by-rail operation

Rachel Notley at the announcement of the rail deal between CPR, CNR and Alberta to move more oil by rail. Canadian National Railway Co and Canadian Pacific Railway Ltd will haul a combined initial volume of 20,000 barrels per day that will reach 120,000 bpd by mid-2020.

Alberta is preparing a giant crude-by-rail operation to help its oil-sands producers cope with a pipeline crunch, and it expects a big profit from the venture.

APMC's deal with the railroads includes train operations, crews and track capacity.

Alberta's government is spending $3.7 billion to connect the oilpatch to the prized U.S. Gulf Coast market via rail, as the province aims to lift prices amid a shortage of export pipelines. The exact destinations remain under negotiation.

"This is something that is fundamentally important to the return that all Albertans get for our energy resources", Notley said, while also dismissing suggestions that the oil-by-rail contracts should not have been signed so close to a provincial election.

The government did not provide details about the potential costs of cancelling the contracts.

Alberta is leasing 4,400 railway cars - more than three-quarters new and the rest retrofitted. Based on discussions, our understanding is that CN will [transport] 60% of the barrels.

In late November, Notley announced that within "a few weeks" her government would unveil a plan to buy as many as 7,000 tank cars to meet its goal of shipping an additional 120,000 barrels of oil a day by train.

Notley is holding a news conference Tuesday at 1 p.m. MT, which will be livestreamed here. "We are treating the safety of these railcars as though they are traveling through our own backyards", she said.

CN's Ruest said that the railroad "is now deploying important safety enhancing technologies, such as automated track inspection test cars, distributed air brake cars and automated train inspection portals".

The move is also forecasted to reduce the projected differential between Western Texas Intermediate (WTI) and Western Canada Select (WCS) - the benchmark value for crude oil coming out of the USA and Canada, respectively - by US$4 per barrel between early 2020 and late 2021, states the release.

The rail plan will net $2.2 billion for taxpayers, with the increased traffic expected to boost commercial, royalty, and tax revenue by $5.9 billion, she said.

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